10 years of EU fuels policy increased EU’s reliance on unsustainable biofuels

Key findings:

• Forests the size of the Netherlands wiped out
• An estimated 10% of the world’s orangutan habitats destroyed
• Up to 3x more CO2 emissions than the fossil diesel it replaced

Report Summary

In 2020, the EU recorded the lowest energy demand of the decade due to the Covid-19 pandemic. Despite this, the volume of biofuels consumed in the EU transport sector has not reduced, because some key countries like Germany and Italy have increased the shares of blended biofuels, while many others kept the shares in transport almost constant. This is most likely to meet the EU transport targets under the Renewable Energy Directive (RED) and the Fuel Quality Directive (FQD) for 2020. From 2019 to 2020, the bio components in transport diesel and gasoline rose from 7.4% to 8.1% and 6.1% to 6.8% respectively. Overall, we estimate the share of crop biofuels was in the range of 4.8% – 5.1% in 2020, a significant increase compared to 4.4% in 2019.

For biodiesel, virgin vegetable oils (rapeseed, palm oil, soy) make almost 80% of the feedstock used in EU production. Rapeseed oil makes the largest share (36%) of the feedstock, followed by palm oil (30%). Overall, the share of palm oil imports used for biodiesel production reached an all-time high in 2020, with 58% of EU palm imports used for biodiesel. Spain was the largest producer of palm oil biodiesel in 2020 (using 1.7 Mt), closely followed by the Netherlands (1.5Mt) and Italy (1.4 Mt). The absolute volume of soy oil used in biodiesel production increased by 17% (0.9 Mt to 1.1 Mt) from 2019 and in 2020 soy biodiesel represented 7% of the EU biodiesel production. The EU consumed 2.6 Mt of used cooking oil (UCO) for biodiesel production, of which around 73% was imported from third countries. Germany alone consumed around 43% of the total UCO destined for biodiesel. There is also a 0,7 Mt of animal fats used in the biodiesel feedstock mix, which is a 30%increase from 2019. Currently, the nominal capacity of Fatty Acid Methyl Ester (FAME) and Hydrotreated Vegetable Oil (HVO) production are 20.3 Mt and 5.1 Mt respectively, mainly processing virgin vegetable oils. But the HVO capacity is expected to double by 2025, and most of this additional capacity is proposed by oil companies like Neste, ENI, Total, Repsol and Preem. This brings the risk of a dramatic increase in demand for unsustainable biofuels feedstocks.

Similar to biodiesel, the ethanol production in Europe depends heavily on food crops like corn, wheat and sugar beet (based at least on the capacity of members of the trade association ePURE representing ~ 65% of the total EU capacity). According to the latest data, food/feed crops cover about 90% of the feedstock used by ePURE members. Corn being the largest feedstock (49%), followed by wheat (21%), sugar (19%) and the advanced ligno-cellulosic feedstock accounted for only around 4 %. The current ethanol production capacity of the EU is about 6 Mt per year, and a 0.3 Mt additional capacity is expected by 2025. Besides, the EU’s reliance on imported bioethanol is quite significant. In 2020, the EU’s ethanol import reached an all-time high 1.3 Mt, and a large fraction of this import came from the countries with duty-free access. This is mainly because of the EU’s recent trade agreements with third countries (e.g. EU-Mercosur trade and the Comprehensive Economic and Trade Agreement (CETA)) for ethanol imports. Around 93% of the supplied ethanol comes from food crops (based on Stratas Advisors).

Since 2011, EU drivers have burned around 39 Mt of palm and soy biodiesel together, which emitted around 381 Mt CO2eq (including ILUC emissions from the GLOBIOM model). This is three times more than what would have been emitted if EU drivers would have used fossil diesel instead. The significant increase in the share of crop based biofuels in 2020 shows the negative impacts of 10 years of EU fuels policy and highlights the need to adopt stricter safeguards in EU policy. Given the frightening trend observed in the past years, it is important for the EU to ensure the upcoming revision of the RED includes measures to immediately stop using palm and soy biodiesel and phase out all crop based biofuels by 2030.