European Parliament votes on a revised iLUC proposal

On 11^th September, the European Parliament voted on its first reading of a proposal from the European Commission to manage the risk of indirect land use change from the Renewable Energy and Fuel Quality Directives (RED and FQD). The proposal from the Commission was released in October 2012 (see http://theicct.org/revised-proposed-amendments-eu-fq-red-directives), and the key revisions it suggested were:

• Capping the contribution of food-based biofuels to meeting targets in the Renewable Energy Directive (though not the Fuel Quality Directive);
• Introducing reporting of iLUC emissions based on default iLUC factors for cereal, sugar and vegetable oil feedstocks;
• Introducing a category of advanced biofuels from wastes and residues that would be quadruple counted for compliance with targets in the Renewable Energy Directive.

During 2013, several Parliamentary Committees have discussed this proposal, led by the Environment (ENVI) Committee with a secondary role for the Trade (ITRE) Committee. Discussions have focused on the appropriate size for any cap on food based biofuels, whether a cap should also include energy crops, whether iLUC factors should be introduced for carbon accounting (as well as reporting) and how best to incentivize advanced biofuel technologies.

The Parliament in plenary session voted through several further amendments to the proposal that had been presented by the ENVI Committee’s rapporteur, former French Environment Minister Corinne Lepage, MEP. The final version that will be sent to the European Council for consideration by representatives of the EU Member States includes the following:

• A cap of 6% on the contribution of land-based biofuels to the 10% energy consumption target in the Renewable Energy Directive. This cap is higher than that originally proposed by the Commission but lower than counter-proposals that were discussed by the ITRE Committee. Additionally, it would apply not only to food crops but also to energy crops.
• This cap to be extended to the FQD so that only the volume of land-based biofuel eligible to count towards targets under the RED could be used for compliance with the carbon reduction target in the Fuel Quality Directive. Extending the cap to the FQD in this way would close what could be seen as a potential ‘loophole’, where food or energy-crop based biofuels beyond the limit in the RED could have been incentivised by the 6% carbon reduction target under FQD.
• The proposal would introduce a minimum renewable energy requirement for petrol of 7.5% in 2020. While this energy content could be supplied through drop-in fuels, in practice it is likely to provide market security to first generation ethanol suppliers, who will be competing with biodiesel suppliers for space under the cap on land-based fuels. The European Commission’s iLUC modeling found that first generation ethanol causes less iLUC than first generation biodiesel. Because of the relatively low energy content of ethanol, this target would imply an average ethanol blend above E10 if it was met only by ethanol blending.  
• iLUC factors to be introduced for accounting in the FQD from 2020, using the values proposed in the Commission proposal. Note that because the only binding target in the FQD is the 2020 target of a 6% carbon reduction, the iLUC factors would come into effect in the same year as the target.
• A sub-target to be introduced for 2.5% of transport energy to come from ‘advanced’ biofuels. In the Parliamentary proposal, advanced is defined based on feedstock by a list of specified wastes and residues. Most of these advanced biofuels would no longer be double counted towards the targets.
• That said, there would be a sub-category of advanced biofuels eligible for quadruple counting. These would include biofuel from autotrophic algae (algae that gets its energy by photosynthesizing, rather than for instance by consuming sugar) and fuel produced from industrial waste gases. The waste gas pathway would be likely to cover for instance the fuel production process being pioneered in the EU by Lanzatech.
• Biofuels from used cooking oil (UCO) or tallow would not be eligible to count towards the subtarget for advanced fuels. However, they would still be eligible for double counting towards the overall renewable energy target. These fuels would seem likely to contribute substantially to the 1.5% ‘gap’ between the cap onland-based fuels and the sub-target for advanced fuels. Thus far since 2010, this double counting has been effective in supporting the expansion of the UCO biodiesel industry in particular (although concerns have been raised about the quality of the chain of custody to demonstrate the waste status of UCO).
• A review of the legislation in 2016.

While the Parliament voted for this compromise position, it did not vote to give the ENVI rapporteur Corinne Lepage a mandate to negotiate the position with the European Council. The proposal will therefore go to the Council, which may choice to adopt it in full, but is considered more likely to adopt its own variant to be sent back to the Parliament for a second reading. This process, which is outlined graphically in this schematic from the Parliament, could take several months (in principle, this back and forth can take years), and there is some risk that the proposal might not be finalized by the end of the current Parliament. This would be a major setback to the advanced biofuel industry in Europe, which sees increased regulatory certainty as a vital precondition for investment in the coming years, and is therefore pushing strongly for resolution within the current Parliamentary period.

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