Don't Fix What’s Not Broke

There is a fierce debate in Brussels taking place on what the post-2020 energy and climate policy should look like. The incumbent Commission is in a rush to get endorsement for what it has in mind before it will be replaced later this year. 

The rush is not entirely clear especially because what the Commission has in mind will raise lots of opposition. Not in the least by the European Parliament that is completely being sidelined. Also, some bigger member states have raised the flag about what the Commission is planning. 

The current rules, which the EU is on track to achieve, include a nonbinding target for 20 percent energy efficiency, a 20 percent greenhouse gas (GHG) reduction target and a 20 percent renewable energy target, with a subtarget for 10 percent renewable energy use in transport, of which biofuels are expected to be the main technology used to meet the target. The Commission wants to replace this policy by a nonbinding overall GHG emission reduction target. No more targets for renewable and no longer a subtarget for transport.

A weird decision, considering that the present policy delivers quite well. Also weird if one knows that GHG emissions from the transport sector still account for 25 percent of all GHG emissions in the EU.

The current climate and energy policy adopted in 2009 has been a success story: so why fix what is not broke?

On the contrary, the EU needs the current renewables- in-transport policy now more than ever. EU dependence on imported oil is increasing. The EU transport sector is 94 percent dependent on oil, 84 percent of which is imported. Reliance on such massive quantities of imported oil hampers Europe's current and long-term economic competitiveness. In 2012, the EU oil import bill was 315 billion euros ($430 billion), an astonishing and crippling amount of money. 

European ethanol helps address these challenges. With ethanol also proving cheaper at the pump in many EU member states, it is the No. 1 option to reduce transport emissions effectively and cheaply. 

However, it appears that, influenced by the failed and dysfunctional indirect land use change (ILUC) debates last year, EU policymakers are hesitant to set new rules for renewables in transport. The twisted irony of the EU’s ILUC debate is that the political fallout will mean the real losers are European producers who produce biofuels that are sustainable and do not cause negative ILUC effects. 

It seems that some people in the Commission have no memory. The first biofuel law from 2003 did not have mandatory targets: the entire policy was voluntary, indicative. It was five years later, under the same president that the Commission concluded that the voluntary measures did not deliver the intended result. And so it proposed a binding target for renewable energy in transport. Now it seems the Commission wants to reverse the policy once again. For an investor this is equal to unsound policymaking.

The companies I represent are anxious about the constantly changing policy rules. One day they are told to invest, but the next day the rules change. The typical ethanol plant takes about 15 years to depreciate on its initial investment. That means that many of the new plants built in Europe since 2009 will not pay back their investments until after 2020. If a different 2020 policy framework is put in place, these investments will not be fulfilled. Investments will dry up.

The Commission does not seem to realize how capital intensive building an ethanol plant is and that building a second generation plant is at least double the cost of a conventional one. Who will invest under these unclear conditions? Indeed, no one. Hurray for the fossil fuel industry because we will need more fossil fuel than ever before after 2020.

The Commission's proposals are the first steps in a process that is of vital importance. It is an opportunity to send clear signals to the market that there will be a stable, long-term vision for renewable energy use in European transport. With the European Parliament having already recognised the importance of sustainable biofuels in the EU fuel mix after 2020, the Commission must now reciprocate. 

An important lesson should be learned from the ILUC discussion: the perfect should not be the enemy of the good. It’s not too late. The Commission can still pick winners by backing those biofuels, like EU ethanol, which are truly sustainable more than any kind of fossil fuel. 

Author: Robert Vierhout
Secretary-general, ePURE
[email protected]