A Remarkable and Crucial Year

There are signs that the European Union this year will see an increase in fuel ethanol production that outpaces the growth we have had the previous three years. The expectation is that we will see around a 7 percent increase in output.  It’s still modest compared to the timeframe 2007 to 2010 when we had double-digit growth numbers.

It not necessarily a sign of getting back to the double-digit growth era but it is encouraging that under very difficult market and political circumstances industry output for this year might be above the average of the past three years.

Market circumstances are indeed difficult this year even though imports are lower and grain prices have come down considerably compared to previous years. There are basically two reasons for making it a difficult market. First, EU member states are slowing down the pace with which they increase the blending rate of biofuels. That is disappointing. Also, due to a number of reasons, gasoline consumption is decreasing. Less gasoline consumption means, in most cases, less ethanol consumption than expected.

The lower level of imports and relative low grain prices may play to our benefit but the market remains oversupplied. Even though my good friend Bob Dinneen, president and CEO of the Renewable Fuels Association, claims that Europe needs imports to be able to comply with demand, he seems to forget that the EU has around 7.5 billion liters of installed production capacity for fuel use. Demand is not even reaching 5 billion.

The oversupply situation has caused prices to come down for about the past year. Recently, the spread between the supply of T1 (imported, duty not yet paid) and T2 (imported/domestic, duty paid) became positive for the first time ever. Some European producers are now also exporting but others had to shut down some of their production lines. All in all, a rather mixed picture but a remarkable one.

2014 will also be a crucial year both at political and policy level. This month European elections for a new Parliament will result in an important shift in political powers. The expectation is that an influx of more nationalistic minded politicians could undermine the agenda of renewables.

In the second half of this year, the European Parliament will appoint a new European Commission. This new commission will propose a major set of bills that will determine the energy and climate policy for the 2020s decade.

The challenges for the industry are substantial, considering that the European Commission in force has already put plans on the table for how the post-2020s policy should look. These plans are not to our liking, as I already indicated two months ago. Even though the Commission proposes a renewable energy target of 27 percent by 2030, it has moved away from continuing a policy that has worked well in the past four years.

It is crucial that the industry succeed in convincing the new Parliament and the new Commission that no continuation of a renewable energy target for transport means more greenhouse gas emissions in the transport sector, no real investment and production of cellulosic ethanol and a missed opportunity to create more jobs, especially missed opportunities in the rural sector.

Finding new biofuel champions is what we need to do. And we had better find these champions sooner than later. Part of that exercise is a carefully orchestrated information campaign that needs to underline all the benefits of ethanol and will deal, once and for all, with all the myths that have been created around our industry.

The biggest challenge, however, is finding closure on the indirect land use change saga. If we are unable to do so, the European Commission, many members of the European Parliament as well as several nongovernmental stakeholders will keep pushing for ending support for biofuel use after 2020.

2014 could well turn out to become the year that determines the long-term future of biofuels in Europe.

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