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Is the EU Abandoning Biofuels?

In Brussels, a draft proposal is under consideration in the EU to eliminate food-crop subsidies for biofuels production by 2020, and cap crop-based biofuels to 5 percent of EU transportation fuels.

At present, biofuels represent 4.5% of the EU’s transportation fuel consumption, with essentially all of this coming from food crops – so, essentially, food crop-based fuels would be capped at not much above existing levels – not much room for growth.

Long-time coming or new trend? Threat or opportunity? Those are the questions being asked around the EU today — and across the globe amongst EU trading partners and fuel developers.

Here are the knowns and unknowns. The questions come down to five.

1. Will this proposal become law?

We believe this is a “yes”, but with modifications to carefully define crop-based feedstock. After all, you can eat algae – and petroleum comes, ultimately, from food-based feedstocks, just produced over millions of years instead of minutes or seconds. Simply banning any fuel made in any way related to a crop, or biomass that can be grown as a crop, could lead to a ban on all transportation fuels, including natural gas-fuel vehicles or electric cars powered by coal, gas-based power. The devil is in the detail, as Mies van den Rohe was wont to observe.

2. What is the impact on EU biofuels targets, pegged by statute at 10 percent by 2020?

The targets are law, and law as hard to unwind as it is to pass in the first place. We think the targets will not be altered – but, rather, we’ll see fuzzy math employed. There’s already a proposal to quadruple count algae-based biofuels. That means you could meet the EU 2020 target with half the fuel produced today, if algae was employed as a feedstock. Future shortfalls will simply be addressed by amping up the bonus on advanced biofuels. Quintuple, sextuple counting? It could start to look at 1923-style German inflation before it is all over.

3. What’s the impact for advanced biofuels, utilizing non-food feedstocks?

First of all, let’s refer to #2 – depends on the extent to which the EU doubles, triples, or quadruples the value of advanced biofuels – and the extent to which the EU will tolerate non-food feedstocks grown, for example, on the same land once used for food-crops.

At some stage, someone might take the point of view that replacing an acre of, for example, 160-bushel per acre of corn, which would provide nearly 500 gallons of fuel and 1.3 tons of animal feed with a 40 bushel per acre non-food crop, which provides 120 gallons of fuel and some inedible lignin, is not exactly the goal of policy.

Long-term, algae looms as a major beneficiary, if hybid systems as developed by the likes of BioProcess Algae make the grade – or solar fuels of the type produced by Joule. In the nearer term, highyield energy crops that can be grown on marginal land – that is, not currently in production (i.e. made marginal by food crop economics, not by the ability of the land to support agriculture) – well, the impact could be material.

One other matter we will hope to discover – the extent to which aviation biofuels – not just road transport – will count in the overall calculations.

At Raymond James, energy analyst Pavel Molchanov writes, “There is no question that the new policy would meaningfully support adoption of energy crops. This can be segmented into two separate trends. First, we would expect to see actual cultivation of energy crops in EU members with large agricultural sectors (such as France and Poland). Second, in countries where population density or other factors result in small agricultural sectors, imports of energy crops (from, say, Brazil or North America) would be the realistic solution.”

4. What’s the impact for food crops?

It’s not all bad – look for a shift from biofuels to higher-value biobased products and renewable chemicals, which are generally unsubsidized and un-mandated anyway, and offer good returns on investment for selected crops, such as maize.

5. What’s the impact for biofuels producers and their existing plants?

To the extent that they can support different feedstocks, such as renewable sugars made from waste, or waste-based fats, oils and greases, not much of a change. For others, look for bolt-on technologies like we see with corn ethanol plants in the uS, that foster a switch from producing fuel ethanol to the production of isobutanol or n-butanol for the chemicals markets.

The bottom line.

It won’t be business as usual – far from it – but the technologies and feedstock options have been sufficiently advanced over the past 5 years that the impact will be far from dire. It’s payback time for all the far-sighted developers that fostered alternative technologies and feedstocks.

This article was originally published on Biofuels Digest and was republished with permission.

Lead image: Biofuels via Shutterstock

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