Kein cap? There’s more than meets the eye with the EU’s waste fats and oils limit

A recent ICCT study found that Germany will likely meet its obligation for the transport sector under the recast of the Renewable Energy Directive (RED II) with renewable electricity alone. Meanwhile, industry seeking to increase opportunities for financial support for certain advanced biofuels has pressed before for the government to lift a ban on certain feedstocks. If they press again and succeed, it would jeopardize the greenhouse gas (GHG) savings that could be achieved from RED II.

To understand, let’s examine how Germany supports alternative fuels. Currently, Germany penalizes fuel suppliers €470 per metric ton of CO₂e GHG savings not achieved under a GHG quota. However, suppliers are allowed to use much cheaper first generation fuels like corn ethanol to avoid this penalty. If the circumstances of the penalty were amended and advanced alternative fuels, which are more expensive, were instead incentivized, the figure below projects the volumes that could be used by the transport sector in Germany to 2030 (based on Figure 4 in this paper). The left-hand axis shows the total quantity of fuel production in million metric tons of oil-equivalents (mtoe), and use of these volumes in the transport sector would mean large GHG savings for Germany.

The feedstocks in the figure are listed in RED II’s Annex IX, Part A, and are used to meet RED II’s advanced fuel sub-target of 3.5%. There is one exception, used cooking oil (UCO), which falls under Part B of this list. Part B fuels are capped at 1.7%. Both Part A and Part B fuels also double count toward the 14% target for the transport sector, but multiple counting is not illustrated, in order to provide a depiction of the actual volumes that could be achieved. Though animal fats also fall under Part B, they’re excluded from the chart because they aren’t currently allowed in Germany.

The cap on Part B feedstocks sends a policy signal to member states that they should limit financial support for the production pathways that use this feedstock. However, according to Article 27, paragraph 1(b) in RED II, this cap is “soft,” and governments are able to remove it, with European Commission approval. Late last year, the cap was described as “unfortunate but harmless” by a representative of Waste-to-Advanced Biofuels Association, who also noted it can be modified.

UCO and animal fats are processed into biofuel via the same pathways as virgin vegetable oils. Compared to vegetable oils, which are associated with high indirect land use change (ILUC), they seem like a much better option for biodiesel production. So why does Germany only allow UCO, and not animal fats, in its advanced fuel policy? Because using these materials for biofuel displaces them from uses in industry and leads to indirect GHG emissions.

An ICCT-commissioned study details this displacement problem. Animal fats are divided into three categories based on their risk for spreading disease. Only category 1 and 2 animal fats can be used in biodiesel production, and they are also used for heat and power at rendering facilities. Some are also used in oleochemicals. Category 3 fats have the lowest risk of disease and therefore the most alternative industrial uses: feed for pets and other animals, which is the biggest use; oleochemicals, e.g., soap, the second biggest use; and food.

If animal fats are diverted from use in soap, for example, a substitute material with similar properties is needed to make the soap. Cheap vegetable oils such as palm and soybean oil are often used, and increased demand for these drives deforestation and high GHG emissions from land conversion. Additionally, fossil fuels are likely to replace animal fats diverted from use for power, at least in the short term, and this will create unwanted indirect GHG emissions. With these considerations in mind, animal-fat derived fatty acid methyl ester biodiesel has indirect emissions of approximately 19–100 gCO₂e/MJ. Note, though, that this varies depending on the lifecycle methodology utilized.

Further, increased demand for animal fat categories 1 and 2 would likely result in down-classification of edible, category 3 animal fats to categories 1 and 2. This is easy to do because if a little bit of category 1 is mixed into category 3, the whole batch gets categorized as 1. Thus, there are likely to be displacement emissions associated with diverting all three categories of animal fats from their current uses.

Germany processes the highest volume of all three categories of animal fats in the European Union—118,000* metric tons of categories 1 and 2 alone. It also exports the largest amount of animal fat in the world, although how much is in each of the three categories is unclear. Most likely these high volumes of animal fat come from German meat production, which is the second largest in the European Union behind France. Should the German government allow animal fats to be included in its advanced fuels sub-target—the aforementioned representative of the Waste-to-Advanced Biofuels Association said he hopes Germany will reconsider the ban—it should consider only allowing domestically available feedstocks, to limit displacement issues, and keeping the 1.7% cap, to limit the risk of down-classification.

What about the limit on UCO? The ICCT study on advanced fuel potential shows that domestically produced UCO in Germany is well below the 1.7% cap. That’s a problem because other EU states demand UCO for use in biofuel as part of their advanced fuel strategies. So if Germany, one of the most populous EU states, were to import a large amount of UCO, it would increase competition for this scarce resource at a time when exports of UCO from the United States are decreasing. Finally, a chunk of the UCO in the European market is likely fraudulent. Such fraud could increase if demand increases.

If animal fats are allowed as part of Germany’s advanced fuels policy and there is no cap on either UCO or animal fats, there will be considerable unintended consequences. Displacement emissions associated with diverting all three categories of animal fats from their current uses will weaken the GHG benefits of the advanced fuels policy and downgrading, which will be difficult to prevent, will exacerbate this problem.

In October, Germany adopted its Climate Action Programme 2030, which outlines its responsibility and plan to mitigate GHG emissions. Why undermine this progress by allowing animal fats to count as an advanced fuel feedstock? Let’s hope the German government is aware of the potential consequences of doing so, or at least considers a sensible cap on both UCO and animal fats.

*An earlier version of this blog post incorrectly stated that Germany processed 1 million metric tons of categories 1 and 2.

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