Low ILUC-risk; high loophole risk?

Posted Thursday, 19 February 2015, 12:25

Producing first generation biofuels requires feedstock. When that feedstock comes from supplies of food crops (wheat, maize, rapeseed, soy etc.) then using it for biofuel production means it cannot be used for food or other previous uses. Various studies released over the last six years have shown that displacing existing food commodities for biofuels will cause land use to expand elsewhere in the agricultural economy, and this leads to indirect land use change and emissions from the reduction of soil and biomass carbon stocks (Al-Riffai et al. 2010; Laborde, 2011; Malins 2012; Malins et al. 2014; Searchinger, 2008; Edwards et al. 2011, etc.).

However, proposed amendments to the Renewable Energy Directive (RED) would lead to the creation of a new category of ‘low-ILUC’ biofuels from food feedstocks. One amendment would lift such low-ILUC out of the expected cap on the use of food-based biofuels under the RED. Others would place an impetus on the European Commission to assess the potential of such pathways before action is taken. If low-ILUC feedstock can be identified, then there is a clear case to incentivize such pathways. However, until robust and implementable systems have been defined to distinguish between low-ILUC feedstock and business as usual supply chains, there is an equally clear risk that giving regulatory recognition to the low-ILUC idea could create a loophole in regulation. In the worst case, rather than driving the creation of a new market in responsible biofuel feedstock, exempting biofuels from the cap that are identified as low-ILUC on paper but which are high-ILUC in practice could make the cap meaningless. Worst of all, such measures could fatally undermine incentives for investment in a new generation of sustainable biofuels from wastes and residues. Below, I explore what exactly low-ILUC biofuels are, and discuss some of the measures that would need to be in place for a successful implementation of the idea.

In short, the idea of low-IUC feedstock is that if it would not have been produced in the absence of biofuel demand, then there will be no need to take feedstock away from food and other applications, and hence no ILUC. The Gallagher Review called more than six years ago for the identification of these types of project, and in 2009-10 the consultancy Ecofys developed a methodology for identifying biofuel projects that avoided ILUC with a group of collaborators including the UK Renewable Fuels Agency, the Shell Oil Company and the International Union for the Conservation of Nature. The methodology, accompanied by a set of case studies, focused on creating a robust operational definition of what it meant for production to be additional to what would be achieved in a business as usual scenario.

One case study was palm oil on imperata grassland. This land category, typically resulting from the takeover of previously deforested land by invasive grass, has potentially high productivity, but is systematically under-utilized due to various barriers to cultivation. New plantations replacing imperata would produce additional palm oil with no harm to biodiversity or carbon stocks. A second case was using integration of cattle ranching with sugarcane production in Brazil to reduce the need for extensive cattle pasture. Because overall beef production would not be reduced, the sugarcane production is considered additional.

Key to the Ecofys methodology is a requirement that it must be demonstrated at the project level that action and investment to produce the additional feedstock is driven directly by biofuel feedstock demand. The Ecofys methodology was later developed into a certification concept in collaboration with the Roundtable on Sustainable Biomaterials, called the Low Indirect Impact Biofuels module.

Ecofys sought answers at the project level, but the latest report to revive the idea of ILUC avoidance is a study from Utrecht University that looks to step up to ILUC avoidance at the regional level. The idea of regional ILUC avoidance has great appeal because it would take the emphasis away from individual biofuel producers and individual farmers, and base a verdict of low-ILUC-risk status on actions taken at a higher level. That would mean less burden of audit on businesses, and a potentially much larger supply of low-ILUC fuel than could be supplied by isolated projects.

The idea sounds appealing, but what would it mean in practice? The Utrecht study, like earlier ILUC avoidance work, is grounded in cases studies. Unfortunately three of the four studies are still being finalized and were not yet available at the time of writing, having missed the ‘end of January’ due date announced on the University website. Still, the fourth (a study of low-ILUC energy grasses in Poland) is available for download, and is an interesting read.

Much of the Polish case study is given over to identifying what Utrecht call ‘ILUC mitigation potentials’. These potentials say less about biofuel than they do about inefficiency in the agricultural system. Saying that there is high ILUC mitigation potential in a region is the same as saying that agriculture in that region is not as efficient as it could be. For Eastern Europe, much of this inefficiency dates back to the break up of the Soviet Union. Reversing the pattern of low productivity in these regions would require some fairly major interventions. The authors write that, “an integrated perspective on the agricultural and bioenergy sectors in planning and implementing policies on ILUC prevention specifically (as well as on land use in general) is essential.” The policies that are suggested for Poland include some measures proposed to directly stimulate miscanthus production, and the following more general measures:

  • Evaluate options for land ownership reforms and provide financial support to facilitate it
  • Provide alternatives for employment in the agricultural sector
  • Stimulate sustainable intensification of the agricultural sector
  • Increased food chain efficiency - Improve insight in size and causes of food losses

This is a menu for a transformative government intervention in local agricultural systems and governance. And it’s a pretty interesting menu, but clearly enormously challenging. Land ownership reform is a difficult and sensitive task. The same can be said of diversifying agricultural employment. Stimulating sustainable intensification of agriculture is something that most governments would support – but if it isn’t already happening, there are generally reasons why it isn’t.

To implement incentives for these types of government action through the RED, you would need a European framework that identifies the actions that could reduce ILUC, that requires implementation plans to be submitted by the appropriate regulatory authorities, that would ideally also require explicit buy-in from local stakeholders, that involves ongoing monitoring to ensure that productivity goals are being successfully delivered, and that has systems in place to deal with any failure to deliver on yield targets.

At the project level we have a vision through the RSB of how to certify low-iLUC fuels. The new study from Utrecht provides a high level outline of what certifying fuels as low-ILUC at the regional level might look like, but I haven’t yet seen a detailed proposal for how this could be implemented in practice. Crucially, it’s very unclear how it could be guaranteed that legislating for low-ILUC fuels wouldn’t create loopholes to allow the continuation of business as usual. Certainly, it would not be enough to do all of the certification through productivity measurement. A region could have a few years of better than normal weather and seem to be achieving above-baseline productivity growth, but simply taking biofuel from countries that have had good growing seasons would do nothing to avoid ILUC globally.

An ‘ILUC proposal’ is going to be agreed between the European Parliament and Council over the coming months. The twin goals of this proposal are reducing the iLUC and food security implications of EU biofuel policy. Currently, the two primary instruments to achieve this are a cap on the contribution of food-based biofuels, and a sub-target for ‘advanced’ biofuels. Promoting iLUC avoidance could be a third string to the bow, if done right. However, exempting low-iLUC biofuels from the cap without first putting the definitions and monitoring requirements in place could render the cap meaningless, and would undermine the incentive to transition to biofuels from wastes and residues. Better to provide incentives for low-iLUC fuels within the cap, or to require the Commission to assess the options before concrete action is taken. Low-ILUC feedstock could be a key plank of the post-2020 approach to biofuel in Europe, but only if implementation is robust and credible.