After the stalemate at the December Council where a blocking minority of Member States prevented the adoption of a Council common position on ILUC, Member States’ Permanent Representatives finally agreed today on a compromise text proposed by the Greek Presidency after two Ad Hoc Working Party meetings took place in April and May. The compromise text was discussed already last week by the COREPER but there were still some concerns on the legal nature of the advanced biofuels targets and the text could not be agreed. The Council position will still need to be officially endorsed by EU Energy Ministers on 13 June.

The compromise text – which didn’t really introduce any ground breaking changes compared to the text proposed by the Lithuanians in December 2013 – proposes a non-binding 0.5% reference number for the use of advanced biofuels (with plenty of options for Member States to actually adopt an even lower target) and keeps a cap for conventional biofuels at 7%.

In the spirit of traditional European compromises, this low number bridges the gap between the more ambitious Member States wishing to develop advanced biofuels and those who don’t want to be bound by a commitment. Bottom line for the biofuel sector is that the compromise doesn’t offer any incentives to invest in second and third generation biofuels. Worse still, in its attempt to square the circle on the topic the Council is even likely to block any substantial investments.

Developing advanced biofuels requires considerable R&D efforts and their market uptake is necessarily slow before they reach commercial scale. Greater clarity on the policy environment is an essential parameter for such investments to take place. It is no wonder why “the need for regulatory certainty” have become such buzzwords in Brussels in the past few years.

I repeat: biofuels, despite all the discussion on ILUC, currently represent the only economically viable way to decarbonise transport, provided that the EU manages to find a way to guarantee they are produced in a sustainable way.

Despite this, EU decision-makers continue to overlook the economic parameters within which the biofuels industry operates. First of all, there is no legislative clarity and there will not be any until the whole legislative process is finalised, which isn’t likely to happen before 2015. Second, the current measures on the table would harm the conventional biofuels industry even though it is precisely from this part of the industry that investments in more sustainable production are likely to come from. Third, the EU is not providing any truly interesting incentive for the development of advanced biofuels. On which premises is the biofuels industry supposed to invest in more sustainable production solutions?

Outside Europe, the Brazilian Sugarcane Ethanol (BSCE) industry demonstrates that conventional biofuels can be produced sustainably, alongside advanced biofuels. UNICA member companies produce second generation biofuels from waste and residues (i.e. bagasse and straw) as well as bio-electricity (by 2020 bioelectricity produced from BSCE can cover 18% of Brazil’s electricity needs).

As a matter of fact, by 2015 Brazil will have four commercial plants producing cellulosic ethanol (GranBio, Raizen, Odebrecht Agroindustrial e Petrobras) with a production for the first year foreseen at 168 million liters according to BNDES. The EU would be an interesting market for Brazil, if only the legislative framework was a bit clearer.

But the game isn’t over yet. The second reading in the European Parliament is just around the corner. One can only hope that the new MEPs adopt a more balanced approach to the file once they reopen it in the second half of the year.

Géraldine Kutas
Géraldine Kutas

A seasoned professional specializing in international trade policy, Géraldine Kutas leverages over a decade of experience to strengthen UNICA’s activities across the European Union, the United States and Asia. She has a deep expertise in biofuels and agricultural policies, coupled with extensive exposure to multilateral and regional trade negotiations in agriculture. Ms. Kutas is the author and co-author of several international publications on these topics.

Before joining UNICA, she was a researcher and a professor at the Groupe d’Economie Mondiale at Sciences Po(GEM), Paris, and coordinator of the European Biofuels Policy research programme (EBP). Ms. Kutas has also worked as a consultant at the Inter-American Bank of Development and for agro-business firms.

Ms. Kutas has a Ph.D. in International Economics from the Institut d’Etudes Poliques de Paris and a Master degree in Latin American Studies from Georgetown University, Washington DC.