In April 2009, the EU Council of Ministers and the European Parliament adopted the Renewable Energy Directive (RED) as part of the EU Climate Package. It includes the 20-20-20 goals for the year 2020: a 20 percent reduction in greenhouse gas (GHG) emissions compared to the levels of 1990; a 20 percent improvement in energy efficiency compared to current forecasts for 2020; and a 20 percent share for renewable energy in the EU energy mix. Part of this 20 percent share is a 10 percent minimum target for renewable energy consumed in transport.
The EU requires that biofuel meet certain criteria to receive tax incentives and count toward the targets. The criteria include greenhouse gas (GHG) savings, land with high biodiversity value and high carbon stock, and effects on indirect land-use change (ILUC). Legislation requires that all biofuel used in the EU, whether produced in the EU or a third country, be certified by a control body adopted by the Member State (MS) authority or the European Commission (EC).
There are three different ways for biofuels, including those that are exported to the EU, to be certified and count towards the 2020 target. Those three options are:
- Voluntary schemes
- Certification approved by a MS competent authority to apply in that MS
- Bilateral or multilateral agreements
The U.S. preferred the third option, bilateral agreement, but no negotiations for bilateral agreements on biofuel certification have occurred. In April 2015, the U.S. Soybean Export Council submitted an application to DG Energy to recognize the U.S. Soybean Sustainability Assurance Protocol (SSAP) as a voluntary certification scheme, but they are still awaiting a response from the EC.
For more information see the EU-27 Biofuels 2015 Annual Report (coordinated by FAS The Hague).
NEW European Commission’s proposal on RED II for Post 2020
On November 30, 2016, the European Commission (EC) released the proposal on the Renewable Energy Directive post 2020 (RED II) as part of the comprehensive “Clean Energy for All Europeans” package, which includes initiatives on energy efficiency, the electricity market, the security of electricity supply, and governance rules for the EU Energy market.
The Commission proposal revise the RED for the period 2021-2030 and sets out a new framework for the promotion of energy from renewable sources by setting a binding 27 percent EU target for the overall share of energy from renewable sources in final consumption of energy in 2030. This target is expected to be achieved through the collective effort of Member States. Unlike the current RED, it does not establish binding national targets. The proposal also lays down rules on financial support to electricity produced from renewable sources, self-consumption of renewable electricity and renewable energy use in heating and cooling and transport sectors, regional cooperation between Member States and with third countries.
Furthermore, The EC plans to reduce the maximum contribution from liquid biofuels to the EU renewable energy target to 3.8 percent in 2030 from 7 percent in 2021 and it proposes a gradual reduction by 0.3 percentage points annually through 2025 and 0.4 percentage points for 2026-2030, putting the cap for 2025 at 5.8 percent and 3.8 percent in 2030. The EC’s proposal also includes a required minimum share of energy from advance biofuels which will grow from 1.5 percent on 2021 to 6.8 percent by 2030.
The Commission’s proposal also lays down, in Article 26, a set of sustainability criteria for biofuels, bioliquids and biomass fuels when used in installations with a fuel capacity equal or exceeding 20 MW for solid biomass fuels and 0.5 MW for gaseous biomass fuels.
For forest biomass, the EC proposes a risk-based approach to forest management to be demonstrated at the national or at forest level. The EC leaves Member States the possibility to have additional sustainability requirements for biomass fuel
The legislative process will take no less than 1 year and half, so a possible outcome is foreseen in the second half of 2018.
Commission publishes proposal on ILUC:
On July 16, 2015, the Agriculture and Fisheries Council of the European Union officially endorsed the European Commission’s (EC) proposal on Indirect Land Use Change (ILUC), which was originally submitted in 2012. The new directive amends the 2009 renewable energy directive (RED) and the 1998 fuel quality directive (FQD). The ambition is to limit global land conversion for biofuel production, and to increase the climate benefits of biofuels used in the EU. The directive places a 7 percent cap on conventional biofuels that can count towards the RED targets and includes a provision for double counting of feedstocks for advanced biofuels, in order to encourage a transition to advanced biofuels.
The proposal includes the following elements:
- Fuel suppliers must report to the EC and MS the estimated level of GHG emissions caused by ILUC, i.e. freeing up more land to grow food crops, in order to offset the switch to biofuel production;
- Seven percent cap contribution of first generation biofuels to the 10 percent target for renewable energy in transport by 2020. MS are free to set lower caps;
- Multiplication factor of 5 for electricity from renewable sources used for electric road vehicles and of 2.5 for renewable electricity used in rail transport;
- MS were given a target value of 0.5 percent for the share of advanced biofuels consumed in transport in 2020. Lower targets may be set based on certain grounds: a) limited potential for production, b) technical or climatic features of the national market for transport fuels, c) national policies putting particular emphasis on incentivizing energy efficiency and renewable electricity in transport. Advanced biofuel MS national targets are required to be set no later than 18 months after the EU Directive enters into force;
- Double counting of the contribution of advanced biofuels towards the 10 percent target;
- MS would be required to respect the waste hierarchy principle when incentivizing waste biofuels;
- The EC must report and publish data on ILUC-related emissions, and;
- The EC must report back to the European Parliament and the Council of Ministers on the scope for including ILUC emission figures in the existing sustainability criteria.
The proposal was initially met with heavy criticism by industry and environmental groups who believe this u-turn from the EC increases uncertainties in the industry and will even put the sector to an abrupt halt in some MS. The groups say the proposal is based on unfounded and immature ILUC science and the 7% cap in 2020 would destroy the biofuels industries as well as related sectors such as crushing and sugar facilities. Capping all conventional biofuels without distinction has led the biofuels sector to question whether policy makers can define objective and evidence-based biofuels policy in the future.
Agriculture and Greenhouse Gas (GHG) Emissions
On July 20, 2016, the European Commission (EC) put forth a legislative proposal for GHG emissions reductions in agriculture, transport and buildings (known as the ‘Effort Sharing Regulation’), along with a legislative proposal concerning GHG emissions and removals from land-use and forestry (known as Land Use, Land use change and Forestry (LULUCF) proposal). The new proposals are part of a series of legislative initiatives to enact the EU’s climate and energy policy for the period after 2020, based on the targets agreed by the European Council in 2014 and the EU’s international commitments under the Paris Agreement on climate change.
The proposed Effort Sharing Regulation (ESR) would set national limits on Member States’ GHG emissions for the 2021-2030 period in those sectors, such as agriculture, not covered by the EU regulation on Emission Trading System (ETS). The proposal also sets out how the annual emission allocations (AEAs) in tons for each year from 2021 to 2030 are to be calculated. There would be an annual linear reduction from the starting point to the emission targets for 2030. The starting point would be the average annual emissions in the 2016-2018 period.
The LULUCF proposal sets out a binding commitment for each Member State and the accounting rules to determine compliance and covers CO₂ from forestry and agriculture. The proposal requires each Member State to ensure that accounted CO₂ emissions from land use are entirely compensated by an equivalent removal of CO₂ from the atmosphere through action in the same sector. This commitment is referred to as the “no debit rule”. In essence, if a Member State cuts down their forests (deforestation), it must compensate the resulting emissions by planting new forest (afforestation) or by improving the sustainable management of their existing forest, croplands and grasslands. In this way the “no-debit” commitment incentivizes Member States to take actions that increase the absorption of CO₂ in agricultural soils and forests. Where a Member State generates net removals beyond their commitment by increasing forest area (i.e. afforestation) or through good practice in agriculture (i.e. managed grassland and managed cropland) a number of these credits can be used to comply with national targets in the Effort Sharing Regulation, although this amount is strictly limited to ensure the environmental integrity of these targets.