The Political and Environmental Landscape for Biofuels in the EU Transport Sector

This brief provides an update of the environmental landscape and legislation surrounding biofuels. It considers the current controversies surrounding biofuel supply and outlines how this has impacted political support for the fuel at a national and EU level.

Report Highlights
Despite all EU Member States having set targets for biofuels consumption, they have generally been unsuccessful at meeting them. Indeed, in 2006 only seven of the 25 EU Member States met their targets: Germany, Austria, UK, Sweden, Romania, Denmark and Luxembourg. Bulgaria, Italy and Slovakia missed their targets by widest margins.

Controversies surrounding the production of energy crops have weakened enthusiasm for biofuels targets amongst politicians. The core criticisms surround the negative effects that the cultivation of energy crops is said to have on the environment and food prices. As a result many countries have called for the legislation to be reviewed.

Whilst biofuels consumption targets are expected to remain, efforts are being made to reduce the negative impact of biofuels production. It is most likely that legislation will require targets to be contingent on energy crops being produced from a sustainable source. As such, fuel retailers are likely to be required to certify the biofuels they sell.
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DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
SOURCES 1
ANALYSIS 2
Since 2003, the EU has introduced a number of measures to encourage the use of biofuels 2
The 2003 Biofuels Directive has been the main source of legislation encouraging the uptake of biofuels 2
The Energy Crop Premium has acted as a strong incentive for EU farmers to grow energy crops 3
Despite all EU Member States having set targets for biofuels, they have generally been unsuccessful at meeting them 4
Only seven Member States reached their biofuels consumption target in 2006 4
The majority of EU Member States have set their biofuels consumption targets to 2010 5
Excise duty exemption and blending obligations are the main tools used by governments to encourage the use of biofuels 6
A number of EU Member States use annual blending obligations to meet their targets 7
Tax exemptions for biofuels have been the traditional carrot used to encourage the consumption of biofuels 8
Sweden and France have been the most innovative with regards to offering additional incentives 9
Current controversies surrounding biofuel supply have weakened the political argument for biodiesel and bioethanol 10
International organizations have been particularly critical of the effect that biofuels have had on food prices 10
Studies have claimed that even when analyzed on a well-to-wheel basis biofuels emit more CO2 than fossil fuels 11
Reports outlining the negative effects of biofuels have provided a number of recommendations 12
While generally remaining committed to the Biofuels Directive, the enthusiasm of some of the main EU Member States has begun to wane 14
While targets will remain, efforts are being made to reduce the negative impact of the production of biofuels 15
A number of proposals have been put forward to decrease the harm done by the production of biofuels 15
In the longer term, politicians hope that second-generation technology will ultimately enable biofuels to be produced in a less damaging way 16
APPENDIX 17
Further reading 17
Forthcoming 17
Ask the analyst 17
Datamonitor consulting 17
Disclaimer 17
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Figure 1: In 2005, German farmers had 1.4% of the country's utilized farmland under the Energy Crop Premium 3
Figure 2: Germany surpassed its 2006 biofuels target by 4.3 percentage points 4
Figure 3: Most EU Member States have given themselves a target for biofuels to account for 5.75% of total road fuel by 2010 5
Figure 4: Almost all countries reduce excise duty on biofuels 6
Figure 5: Austria, Finland, the Netherlands and Slovakia have placed a legal obligation on fuel retailers to incorporate 5.75% biofuels in 2010 7
Figure 6: Only four EU Member States do not offer a complete or partial reduction on fuel duty for biofuels 8
Figure 7: One study has shown that when calculated on a well-to-wheel basis, ethanol vehicles emit 93% more CO2 than regular gasoline vehicles 11
Figure 8: 90% of the 25 industry executives interviewed believed that biofuels production causes food price increases 13
Figure 9: Of the EU Member States that have announced their stance on biofuels in 2008, many have voiced concerns about consumption targets 14
Figure 10: Three options are currently being discussed by EU Member States which are aimed at improving the sustainability of biofuels 15
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