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12/12/2013
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Biofuels in Europe to Remain in Policy Limbo after EU Member States Reject ILUC Compromise

EU Member States on Thursday confirmed what many European biofuel watchers had assumed for many weeks: the issue of biofuels and their potential indirect effects (so-called Indirect Land Use Change) won’t be addressed until the next European Parliament and the next European Commission takeover in late 2014.

Member States, via their Energy Ministers, failed Thursday to agree on a compromise plan that would have, among other things, put a 7% cap on the use of conventional biofuels in Europe; they also couldn’t agree on what level of incentive is necessary to stimulate the production of more advanced biofuels to help Europe decarbonize its transport system.

The EP had already voted to slap a 6% cap on first generation biofuels earlier in the autumn; many Member States (like Hungary and Poland) today either thought a compromise 7% cap would hurt the biofuel industry and farmers.

Others member states (Netherlands and Belgium) rejected the compromise plan, feeling a 7% threshold wasn’t ambitious enough. They wanted more like a 5% cap and required industry to account for the assumed indirect emissions that environmentalists claim the EU biofuel mandate causes. This mix of more ambitious and less ambitious countries prevented the adoption of the Lithuanian compromise text.

This no-decision outcome keeps everybody waiting and prolongs final investment decisions for the advanced biofuels industry. EU’s Energy head, Gunther Oettinger, complained at today’s meeting: “Postponing this issue won’t help anyone at the end of the day, certainly not market participants and consumers.”

However, as I said previously, this could provide with a good occasion to work on a more balanced approach to the biofuels policy in Europe. The discussion on biofuels and ILUC over this last year, since the Commission published its proposal, has jeopardized biofuels policies in EU member states and undermined investments in new technologies.

What is needed is a more nuanced approach to the issue that takes into account the real environmental credentials of the different types of biofuels, in a technology-neutral way.

What next then? The Council will have to keep discussing the issue back at working party level and the process is delayed until a political agreement is found in the Council. At that point, probably in the second half of 2014, the Parliament would be able to start with the second reading. Positions will be again quite different and the Commission might have to draft a new proposal.

Let’s hope that a more shaded approach to EU biofuel policy materializes in the next round.

Géraldine Kutas

A seasoned professional specializing in international trade policy, Géraldine Kutas leverages over a decade of experience to strengthen UNICA’s activities across the European Union, the United States and Asia. She has a deep expertise in biofuels and agricultural policies, coupled with extensive exposure to multilateral and regional trade negotiations in agriculture. Ms. Kutas is the author and co-author of several international publications on these topics. Before joining UNICA, she was a researcher and a professor at the Groupe d’Economie Mondiale at Sciences Po(GEM), Paris, and coordinator of the European Biofuels Policy research programme (EBP). Ms. Kutas has also worked as a consultant at the Inter-American Bank of Development and for agro-business firms. Ms. Kutas has a Ph.D. in International Economics from the Institut d’Etudes Poliques de Paris and a Master degree in Latin American Studies from Georgetown University, Washington DC.