Communication from the Commission to the Council and the European Parliament - Biofuels Progress Report - Report on the progress made in the use of biofuels and other renewable fuels in the Member States of the European Union {SEC(2006) 1721} {SEC(2007) 12}
Date: 2007-01-10
Institutions: European Commission
Subjects: EU Member State, energy policy, environmental protection, renewable energy, report, substitute fuel

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 10.1.2007 
COM(2006) 845 final 

COMMUNICATION FROM THE COMMISSION  
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT 

Biofuels Progress Report 

Report on the progress made in the use of biofuels and other renewable fuels in the 
Member States of the European Union 

{SEC(2006) 1721} 
{SEC(2007) 12} 

EN 

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COMMUNICATION FROM THE COMMISSION  
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT 

Biofuels Progress Report 

Report on the progress made in the use of biofuels and other renewable fuels in the 
Member States of the European Union 

1. 

INTRODUCTION – THE POTENTIAL BENEFITS OF BIOFUELS 

Biofuels are transport fuels made from organic material. The most common biofuels today are 
biodiesel  (made  from  vegetable  oils)  and  bioethanol  (made  from  sugar  and  starch  crops). 
Research is under way to commercialise “second-generation” production techniques that can 
make biofuels from woody material, grasses and some additional types of waste. 

Biofuels have a unique role to play in European energy policy. They are today the only direct 
substitute for oil in transport that is available on a significant scale. Other technologies, such 
as hydrogen, have enormous potential. However, they are far away from large-scale viability 
and will require major changes to vehicle fleets and the fuel distribution system. Biofuels can 
be  used  today,  in  ordinary  vehicle  engines  (unmodified  for  low  blends,  or  with  cheap 
modifications to accept high blends). 

Changing  the  fuel  mix  in  transport  is  important  because  the  European  Union's  transport 
system  is  almost  entirely  dependent  on  oil.  Most  of  this  oil  is  imported,  much  of  it  from 
politically  unstable  parts  of  the  world1.  Oil  is  the  energy  source  that  represents  the  most 
severe security of supply challenge for Europe.  

Biofuels  have  a  second  great  advantage:  the  fact  that  their  production  and  use  leads  to 
greenhouse  gas  savings.  They  are  not  the  cheapest  way  to  get  greenhouse  gas  savings.  But 
they are one of the few measures – alongside improvements in vehicle efficiency – offering 
the practical prospect of large-scale savings in the transport sector in the medium term. As the 
chart  shows,  there  is  a  particular  need  for  greenhouse  gas  savings  in  transport  because  its 
annual emissions are expected to grow by 77 million tonnes between 2005 and 2020 – three 
times as much as any other sector. 

Thus,  biofuel  promotion  offers  benefits  both  for  security  of  supply  and  for  climate  change 
policy. However, it is important to note that it is possible to produce biofuels in ways that do 
not  deliver  greenhouse  gas  savings  or  that  cause  significant  environmental  damage  –  for 
example, through the use of land converted from high-diversity natural environments. To be 
effective, biofuel policy needs to ensure that this is avoided. 

1 

In  2000,  Europe's  oil  imports  stood  at  9  million  barrels  per  day  (mbpd):  2  from  Africa,  3  from  the 
Middle East and 4 from Russia and the CIS. By 2030, imports are expected to grow to 14 mbpd – with 
the Middle East accounting for 80% of the increase, and Russia/CIS for the other 20%. (International 
Energy Agency (2004): World Energy Outlook, 2004.) Data relate to OECD Europe. 

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Forecast change in greenhouse gas emissions, 2005-2020 
(MT per year, CO2 only, EU25). Source: PRIMES

126

77

27

24

19

TOTAL

transport

residential

tertiary

industry

-8

-12

electricity and
steam
production

energy
branch

2. 

DEVELOPMENT  OF  EU  BIOFUEL  POLICY;  THE  REQUIREMENTS  OF  THE  BIOFUELS 
DIRECTIVE 

Biofuels have been around for a long time. In fact, the model T Ford was originally designed 
to run on bioethanol. But oil-based fuels established a dominant position in road transport by 
the 1930s. This remained the case across the world until, with an active policy of government 
support, bioethanol took off in Brazil in the 1970s. There it has now reached 11% of the road 
transport fuel market2. 

In  Europe,  a  few  countries  began  to  take  an  interest  in  biofuels  during  the  1990s.  The  EU 
began to pay serious attention to the subject in 2001, when the Commission brought forward 
the legislative proposals that were adopted in 2003 in the form of the biofuels directive3 and 
Article 16 of the energy taxation directive4. 

The  debate  on  these  proposals  took  place  under  conditions  that  were  rather  different  from 
today’s.  

At  that  time  biofuels  were  a  marginal  fuel.  Their  EU  market  share  in  2001  was  only  0.3%. 
Only 5 of the then Member States had significant direct experience with the use of biofuels: 
for most of the rest they were an unknown quantity. Meanwhile, as the chart shows, real oil 
prices had fluctuated around the $20-$30/barrel band for more than 15 years. 

2 
3 

4 

2005, by energy content. 
Directive  2003/30/EC  on  the  promotion  of  the  use  of  biofuels  or  other  renewable  fuels  for  transport 
(OJ L 123, 17.5.2003, p. 42).  
Directive 2003/96/EC restructuring the Community framework for the taxation of energy products and 
electricity (OJ L 283, 31.10.2003, p. 51). 

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Average annual oil price ($/barrel, real terms, $2005). 
Source: inflationdata.com

70,00

60,00

50,00

40,00

30,00

20,00

10,00

0,00

1
9
8
7

1
9
8
8

1
9
8
9

1
9
9
0

1
9
9
1

1
9
9
2

1
9
9
3

1
9
9
4

1
9
9
5

1
9
9
6

1
9
9
7

1
9
9
8

1
9
9
9

2
0
0
0

2
0
0
1

2
0
0
2

2
0
0
3

2
0
0
4

2
0
0
5

2
0
0
6

p
a
r
t
i
a

l

In the light of this, it is perhaps not surprising that the Union decided to proceed in a cautious 
manner, step by step. The biofuels directive expressed the clear intention of “promoting the 
use  of  biofuels…  in  each  Member  State,  with  a  view  to  contributing  to  objectives  such  as 
meeting  climate  change  commitments,  environmentally  friendly  security  of  supply  and 
promoting renewable energy sources”5. However, while the Union’s other renewable energy 
targets  (for  renewable  energy’s  overall  share  and  for  electricity  generation)  are  for  2010 
alone, the biofuels directive includes not only a target for 2010 (5.75% share of the market for 
petrol and diesel in transport) but also an interim target for 2005 (2%). Member States were 
required to set indicative targets for 2005, taking this reference value into account.  

These  national  indicative  targets,  once  adopted,  are  not  mandatory.  While  they  constitute  a 
moral  commitment  on  behalf  of  Member  States,  there  is  no  legal  obligation  for  them  to 
achieve  the  levels  of  biofuel  use  they  have  chosen  to  target.  The  step  by  step  approach  to 
European biofuel policy is reflected in the fact that, unlike the directive on renewable energy 
in  electricity6,  the  biofuels  directive  did  not  at  this  initial  stage  contain  any  requirement  for 
Member States to “take appropriate steps” to achieve their 2005 targets.  

5 

6 

As well as biofuels, the directive applies to "other renewable fuels". At present, national targets for the 
use  of  renewable  energy  in  land  transport  are  addressed  entirely  through  the  use  of  biofuels.  It  is 
assumed  that  this  will  remain  the  case  in  future.  For  simplicity,  the  terms  "biofuel"  and  "biofuels 
directive" are used in this report; they should be understood as referring to other renewable fuels where 
appropriate. 
Directive 2001/77/EC on the promotion of electricity produced from renewable energy sources in the 
internal electricity market (OJ L 283, 27.10.2001, p. 33). 

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Instead,  and  crucially,  the  directive  contains  a  “review  clause”  (Article  4.2).  By  the  end  of 
2006, the Commission is required to report on progress in the use of biofuels. “On the basis of 
this  report”,  the  directive  continues,  “the  Commission  shall  submit,  where  appropriate, 
proposals to the European Parliament and to the Council on the adaptation of the system of 
targets… If this report concludes that the indicative targets are not likely to be achieved for 
reasons that are  unjustified  and/or  do not relate to new  scientific evidence, these proposals 
shall  address  national  targets,  including  possible  mandatory  targets,  in  the  appropriate 
form”.  

Thus, when adopting the directive, the EU recognised that a strong system of targets, perhaps 
even mandatory ones, might be necessary to ensure that the 2010 objective is attained. But it 
preferred  to  defer  a  decision  on  whether  such  a  strong  system  is  needed  until  the  EU 
institutions  could  consider  a  report  -  this  report  –  on  whether,  without  such  a  system,  the 
interim 2% objective had nevertheless been achieved. 

Because the function of this report is to report on progress up to 2006, it does not cover the 
states  that  acceded  to  the  Union  in  2007  (Romania  and  Bulgaria).  These  states  are  due  to 
make their first national reports under the biofuels directive by 1 July 2007. They have good 
potential  to  produce  bioenergy7;  their  accession  will  facilitate  the  development  and 
implementation of Community biofuel policy. 

While  the  report  focusses  on  progress  towards  the  objectives  in  the  biofuels  directive,  it  is 
important  to  note  that  these  objectives  are  supported  by  measures  under  the  Common 
Agricultural  Policy,  especially  following  its  reform  in  2003.  By  breaking  the  link  between 
payments made to farmers and the particular crops they produce, the reform allowed them to 
take  advantage  of  new  market  opportunities  such  as  those  offered  by  biofuels.  In  addition, 
while  farmers  cannot  cultivate  food  crops  on  set-aside  land,  they  can  use  this  land  for  non-
food  crops  including  biofuels;  an  energy  crop  credit  is  available  for  biofuels,  and  will  be 
extended to all Member States in 2007; the forest action plan8 sets out measures in favour of 
wood energy; and the new rural development policy includes measures to support renewable 
energies.  Finally,  the  "cross-compliance"  system  makes  payments  to  farmers  conditional  on 
respect  for  Community  environmental  legislation  and  on  keeping  agricultural  land  in  good 
environmental  condition.  It  ensures  that  crops  used  for  biofuels  as  well  as  for  food  meet 
standards of environmental sustainability.  

3. 

ASSESSMENT OF PROGRESS 

Since 2003, the price of oil has doubled. The EU has had several reminders of the disruptible 
nature of its energy supplies – for example, the effects of Hurricane Katrina on oil supplies in 
August/September  2005  and  the  temporary  shortfall  in  gas  supply  via  Ukraine  in  January 
2006.  Meanwhile,  biofuels  have  proved  themselves  a  credible  alternative  to  oil.  In  most 
Member States, the diesel that motorists buy already includes biodiesel in low blends; major 
oil companies have announced biofuel investment programmes worth hundreds of millions of 
euros;  and  vehicle  manufacturers  have  begun  marketing  cars  capable  of  running  on  high 
bioethanol blends. 

7 
8 

For example, they each have 0.7 hectares of agricultural land per capita, compared to 0.4 in the EU-25. 
COM(2006) 302 on an EU forest action plan 

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As the table in Annex 1 shows, by 2005 biofuels were in use in all but 4 of the 21 Member 
States for which data are available. Their market share reached an estimated 1%9. This figure 
represents a good rate of progress – a doubling in two years. Nevertheless, it is less than the 
2%  reference  value,  and  less  than  the  1.4%  share  that  would  have  been  achieved  if  all 
Member  States  had  met  their  targets.  Moreover,  progress  was  very  uneven.  Only  Germany 
(3.8%) and Sweden (2.2%) reached the reference value. While biodiesel achieved a share of 
about 1.6% of the diesel market, ethanol achieved a share of only 0.4% of the petrol market. 

Between  Member  States,  this  unevenness  is  diminishing.  Since  the  beginning  of  2005, 
13 Member States10 have received state aid approval for new biofuel tax exemptions. At least 
8 Member States have brought biofuel obligations into force or announced plans to do so.  

As Annex 2 shows, 19 Member States have already set targets for 2010. If they all achieve the 
shares  they  have  targeted,  biofuels’  share  in  these  Member  States  will  reach  5.45%  -  a 
shortfall of 0.3% compared to the objective. The experience of 2005 suggests that in practice 
the  shortfall  will  be  rather  greater.  In  2005,  among  21  Member  States  for  which  data  are 
available,  only  two  achieved  the  targets  they  had  set.  The  average  Member  State  achieved 
only 52% of its target. Even if the shortfall is only half as much as this in 2010, the Union 
would only achieve a biofuels share of 4.2% in 2010. The Commission considers that this is a 
reasonable estimate of the likely outcome on existing policies and measures. (Estimates used 
in recent modelling exercises are lower: the business-as-usual scenario of the PRIMES model 
depicts  a  share  of  3.9%  in  2010,  while  the  Green-X  model  depicts  a  share  of  only  2.4%11). 
This  judgement  is  also  in  broad  accord  with  the  view  expressed  in  the  public  consultation 
exercise on the review of the biofuels directive: the vast majority of respondents said that they 
did  not  expect  the  5.75%  share  to  be  achieved12.  The  Commission’s  conclusion  is  therefore 
that the biofuels directive’s target for 2010 is not likely to be achieved. 

To understand what measures are needed to get biofuels moving, it is useful to look at the two 
Member  States  that  have  made  most  progress  –  Germany  and  Sweden.  While  Germany's 
success  has  rested  mainly  on  biodiesel,  Sweden  has  concentrated  on  bioethanol13.  In  other 
respects,  however,  their  policies  have  several  common  factors.  Both  countries  have  been 
active in the field for several years. Both promote both high-blend or pure biofuels (giving the 
policy  visibility)  and  low  blends  compatible  with  existing  distribution  arrangements  and 
engines  (maximising  the  policy's  reach).  Both  have  given  biofuels  tax  exemptions,  without 
limiting  the  quantity  eligible  to  benefit.  Both  have  combined  domestic  production  with 
imports  (from  Brazil  in  the  case  of  Sweden,  from  other  Member  States  in  the  case  of 
Germany). Both are investing in biofuel RTD and have treated first-generation biofuels as a 
bridge to second-generation.  

9 

10 

11 

12 

13 

Biodiesel  accounted  for  about  80%  of  this,  bioethanol  20%  (about  15%  in  the  form  of  the  additive 
ETBE). 
Austria,  Belgium,  Czech  Republic,  Denmark,  Estonia,  Hungary,  Ireland,  Italy,  Latvia,  Lithuania, 
Netherlands, Sweden and UK 
For  information  on  these  models  see  the  impact  assessment  for  the  renewable  energy  roadmap, 
SEC(2006) 1719. 
A summary of responses can be consulted on 
http://ec.europa.eu/energy/res/legislation/biofuels_consultation_en.htm. 
Sweden is also the European leader for biogas use in transport. 

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Tax  exemptions  are  a  longstanding  form  of  support  for  biofuels.  In  2005  and  2006,  several 
Member  States  announced  the  introduction  of  a  new  form  of  support:  biofuel  obligations14. 
These are legal instruments requiring fuel suppliers to include a given percentage of biofuels 
in  the  total  amount  of  fuel  they  place  on  the  market15.  Some  Member  States  are  using 
obligations as a complement to tax exemptions, others as an alternative. 

There is good reason to believe that in the long run, biofuel obligations will bring down the 
cost  of  promoting  biofuels  –  in  part  because  they  ensure  large  scale  deployment  -  and  will 
prove the most effective approach. The Commission encourages their use.  

France and Austria are the only Member States to have operated a biofuel obligation for more 
than a few months. The French obligation, introduced in January 2005, laid down a biofuel 
share of 2%. However, fuel suppliers often chose to make an extra tax payment instead – an 
option provided for by the law; the 2% share was not achieved. The Austrian obligation was 
introduced  in  October  2005.  It  laid  down  a  biofuel  share  of  2.5%.  The  obligation  had  an 
immediate effect. The share of biofuels rose to 3.2% in the last quarter of 2005, compared to 
less than 0.2% during the first three quarters. Both obligations are due to rise to higher levels 
in future years. 

No data are available on the cost impacts.  

The Commission will follow progress on biofuel obligations closely. 

4. 

SENDING A SIGNAL OF THE UNION’S DETERMINATION TO REDUCE DEPENDENCE ON 
OIL USE IN TRANSPORT 

In  the  light  of  sustained  high  oil  prices  and  the  evidence  that  biofuels  provide  a  credible 
alternative fuel for transport, it is an appropriate moment to review the legal framework of the 
Union’s biofuels policy. There is a pressing need for the Union to send a clear signal of its 
determination  to  reduce  its  dependence  on  oil  use  in  transport.  Biofuels  are  the  only 
practical  means  of  doing  this  today,  and  need  to  complement  the  importance  of  energy 
efficiency and model shift in transport. A commitment to the promotion of biofuels is a means 
of  insuring  against  high  oil  prices  and  reduces  the  consequences  of  supply  disruptions.  It  is 
also  a  way  to  reduce  the  likelihood  of  oil  prices  staying  as  high  as  they  are  today  –  by 
showing actors in the oil market that oil-consuming countries have the will to develop a real 
alternative.  

Legislative  action  in  favour  of  biofuels  will  give  support  to  national,  regional  and  local 
authorities working towards the objective of reducing dependence on oil use in transport; give 
confidence to companies, investors and scientists who are working on more efficient ways to 
do  this;  and  give  pause  to  those  who  believe  that  European  consumers  will  always  remain 
hostage to oil prices, whatever the price. 

14 

15 

France  and  Austria's  obligations  came  into  force  in  2005,  Slovenia's  in  2006.  The  Czech  Republic, 
Germany and the Netherlands have announced the introduction of obligations in 2007, the UK in 2008.  
Biofuel mandates, under which each litre of fuel sold must contain a given percentage of biofuel, are 
not compatible with the EU fuel quality directive (directive 2003/17/EC amending directive 98/70/EC 
relating to the quality of petrol and diesel fuels - OJ L 76, 22.3.2003, p. 10). 

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A  signal  in  the  form  of  legally  binding  targets  is  stronger  than  a  purely  voluntary 
commitment. 

A signal in the form of the adoption of a new legislative framework by the EU as a whole, 
with its annual market for more than 300 million tons of oil in transport, is more likely to be 
heard, believed and acted on than signals sent only by Member States working individually. 

A collective effort by 27 Member States to develop biofuel technologies and markets is more 
likely  to  succeed,  and  to  bring  costs  down,  than  efforts  only  by  Member  States  working 
individually. 

The Commission took the first steps towards sending such a signal in the biomass action plan 
of  December  2005,  the  biofuels  strategy  of  February  2006  and  the  energy  Green  Paper  of 
March  2006.  In  their  responses  to  these  papers,  the  Council  and  European  Parliament 
generally endorsed the proposed approach.  

With a view to sending a clear signal of the Union’s determination to reduce its dependence 
on oil use in transport, the next step should be to set minimum targets for the future share of 
biofuels. As set out in the renewable energy roadmap16, an appropriate level for these would 
be 10% in 2020. 

5. 

THE NEED FOR EFFICIENCY IN BIOFUEL POLICY 

As  biofuel  consumption  increases,  there  is  a  need  to  ensure  that  biofuel  policy  operates 
with a high level of efficiency. This means: 

- 

- 

- 

creating a framework which gives investors the confidence they require to invest in 
better,  capital-intensive  forms  of  biofuel  production,  and 
informs  vehicle 
manufacturers  of  the  fuels  for  which  vehicles  should  be  designed  (it  is  therefore 
necessary to set minimum biofuel targets for 2015 and 2020); 

keeping the administrative burden on all parties to a minimum; 

encouraging  the  production  of  biofuels  in  ways  that  contribute  the  most  to  the 
directive’s  objectives  of  greenhouse  gas  savings  and  environmentally  friendly 
security of supply. 

The  Commission  is  aware  that  before  taking  the  next  step  in  the  promotion  of  biofuels, 
Member  States  and  members  of  the  European  Parliament  will  wish  to  be  certain  that  the 
promotion  of  biofuels  is  indeed  a  desirable  objective.  Does  biofuel  use  really  lead  to  a 
reduction in greenhouse gas emissions? Will biofuels ever be commercially viable? Is biofuel 
promotion  compatible  with  protection  of  the  environment,  including  biodiversity,  soil 
conservation, water quality and air quality?  

The  biofuels  directive’s  review  clause  requires  this  progress  report  to  address  these  issues. 
Responses to the public consultation exercise on the review of the directive underline the need 
to do so. These are the questions that are addressed in the next section of this report. Fuller 

16 

COM(2006) 848. 

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information,  addressing  all  the  technical  issues  defined  in  Article  4(2)  of  the  biofuels 
directive, is in the accompanying staff working paper. 

6. 

THE ECONOMIC AND ENVIRONMENTAL IMPACT OF BIOFUEL PROMOTION 

Inaccurate  information  has  circulated  about  the  economic  and  environmental  impact  of 
biofuels. 

For example, during the 1990s, there was a tendency to evaluate the greenhouse gas impact of 
biofuel  production  purely  in  terms  of  carbon  dioxide  emissions.  Nitrous  oxide  emissions 
caused by fertiliser use and by the cultivation of land were not taken into account. The global 
warming  potential  of  nitrous  oxide,  weight  for  weight,  is  about  300  times  that  of  carbon 
dioxide. The omission of these emissions tended, therefore, to lead to an exaggeration of the 
greenhouse gas benefits of biofuels. 

A  more  recent  example  is  the  widely  disseminated  claim  that  Europe’s  consumption  of 
biodiesel  has  caused  deforestation  and  destruction  of  natural  habitats  in  Indonesia  and 
Malaysia  to  clear  the  way  for  the  production  of  palm  oil.  In  fact,  insignificant  amounts  of 
palm  oil  have  been  used  in  biodiesel  production  –  an  estimated  30  000  tons  in  200517.  By 
contrast,  global  palm  oil  production  grew  by  nearly  10  million  tons  between  2001/02  and 
2005/06. This increase has been driven by the food market, not the biofuel market.  

While it does not look as if past biofuel expansion has contributed to deforestation in these 
two regions, it is clearly essential to design biofuel promotion policies so that they continue to 
contribute to sustainability in future, in particular if biofuel use is to increase by an order of 
magnitude beyond today's levels. 

For  the  purposes  of  this  report,  the  Commission  therefore  sought  to  draw  up  a  balanced 
account of the economic and environmental impacts of biofuel use. It is set out in detail in the 
accompanying staff working paper. Drawing on this paper, the following conclusions on the 
economic and environmental impact of biofuel promotion can be drawn:  

Costs 

- 

The extra cost of using biofuels depends on the cost of oil, the share of imports and 
the competitiveness of agricultural markets. With an oil price of $48/barrel, as in the 
Commission’s  baseline,  the  extra  direct  cost  of  reaching  a  14%  market  share  for 
biofuels (compared to the cost of conventional fuels) is estimated at €11.5-€17.2 bn 
in 2020. With an oil price of $70/barrel this would fall to €5.2-€11.4 bn. However, 
even  using  the  most  modern  technologies,  the  cost  of  EU-produced  biofuels  will 
make it difficult for them to compete with fossil fuels, at least in the short to medium 
term.  According  to  the  EU  Strategy  for  Biofuel  COM(2006)  34,  with  the 
technologies  currently  available,  EU-produced  biodiesel  breaks  even  at  oil  prices 
around €60 per barrel, while bioethanol becomes competitive with oil prices of about 
€90 per barrel. According to the Staff Working document adopted together with this 
Communication, which is based on the JRC Well to Wheel analysis, the break even 
points for biodiesel and for bioethanol are €69-76 and €63-85, respectively. 

17 

Stéphane  Delodder  (Rabobank),  Increased  demand  for  EU  rapeseed,  presentation  to  Agra  Informa 
conference, Brussels 24-25th October 2006. 

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- 

Second-generation biofuels are not yet commercially available (they are expected to 
be commercialised between 2010 and 2015) and are likely to be more expensive than 
first-generation.  Their  costs  are  expected  to  fall  by  2020.  In  that  year,  both  first-
generation and second-generation biofuels can be expected to be in the market. 

Security of supply 

- 

- 

- 

Biofuels contribute to short-term security of energy supply by reducing the need to 
keep oil stocks to protect against disruptions. The value of this can be estimated at 
about €1 bn per year (under the hypothesis of a 14% biofuel share). 

The best way to promote long-term security of supply is to diversify energy sources. 
In  transport,  energy  diversity  is  rather  low.  Biofuels  add  to  energy  diversity  by 
increasing  the  diversity  of  fuel  types  and  of  regions  of  origin  of  fuels.  It  is  not 
obvious how to place a monetary value on this benefit. 

Biofuels can be made from many raw materials. To achieve the greatest security of 
supply benefit, it is desirable to keep the range of raw materials wide. A product mix 
that  includes  domestically  produced  biofuels  as  well  as  imports  from  a  variety  of 
regions will contribute more than one that relies entirely on the lowest cost producers 
(Brazil  for  sugar  cane,  Malaysia  and  Indonesia  for  palm  oil).  It  is  also  desirable  to 
bring  second-generation  biofuels  onto  the  market,  so  that  an  even  wider  range  of 
feedstocks can be used.  

Other economic impacts 

- 

- 

- 

18 

Achieving a 14% share of biofuel by 2020, if primarily through domestic production, 
would lead to employment in the EU being up to 144 000 higher, and EU GDP being 
up to 0.23% higher than they would otherwise have been18. 

European  demand  for  biofuel  imports  can  contribute  to  improving  trade  relations 
with  the  EU's  trading  partners,  and  provide  new  opportunities  for  developing 
countries  which  have  the  potential  to  produce  and  export  biofuels  at  competitive 
prices.  

Trade  policy  measures  to  facilitate  access  to  a  growing  EU  biofuels  market  could 
contribute  to  finding  a  successful  conclusion  to  on-going  free  trade  negotiations.  

The  EU  maintains  significant  import  protection  on  some  types  of  biofuels,  notably 
ethanol which has a tariff protection level of around 45% ad valorem. Import duties 
on  other  biofuels  -  biodiesel  and  vegetable  oils  -  are  much  lower  (between  0  and 
5%). It is at this stage unclear whether any worldwide liberalisation will take place in 

Employment  increases  of  190 000  in  agriculture,  46 000  in  biofuel  production  and  distribution  and 
14 000  in  the  food  industry  would  be  offset  by  reductions  of  35 000  in  services,  21 000  in  the 
conventional fuel sector, 16 000 in transport, 14 000 in the energy sector and 22 000 in other industrial 
sectors. These estimates depend on assumptions about technology exports and the functioning of the oil 
market. If, instead, the volume of EU biofuel technology exports is independent of the volume of EU 
biofuel  consumption,  the  employment  figures  would  fall  to  77  000  and  111  000  respectively.  If  the 
price  of  oil  is  unaffected  by  changes  in  demand  for  oil,  they  would  fall  to  13  000  and  minus  32  000 
respectively. (The figures quoted assume that reduced demand for oil would lead to its price falling by 
1.5% and 3% respectively.) 

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the near future that would reduce this protection, due to the uncertainties surrounding 
the  World  Trade  Organisation  Doha  Round.  Free  Trade  Area  negotiations  are 
ongoing in parallel, inter alia with Mercosur, where the question of increased access 
to our  markets  for  certain competitive ethanol producers is under negotiation. ACP 
(Africa,  Caribbean  and  Pacific)  and  least  developed  countries  as  well  as  countries 
benefiting  from  the  EU's  "GSP+"19  schemes  have  unlimited  duty-free  access  to  the 
European market already. If it would appear that supply of sustainable biofuels to the 
EU is constrained, the EU should be ready to examine whether further market access 
would be an option to help the development of the market20. 

- 

The  development  of  second-generation  biofuels,  through  RTD  and  other  measures, 
would  help  boost  innovation  and  maintain  Europe's  competitive  position  in  the 
renewable energy sector. 

Greenhouse gas emissions 

- 

- 

- 

- 

- 

First-generation biofuels, produced in Europe using the most economically attractive 
production  method,  result,  on  a  well-to-wheel  basis21,  in  greenhouse  gas  emissions 
35-50%  lower  than  the  conventional  fuels  they  replace.  Other  production  methods 
lead  to  larger  or  smaller  greenhouse  gas  savings.  One  production  pathway  (the 
production  of  ethanol  in  coal-fired  plant,  with  by-products  used  for  animal  feed)  is 
estimated  to  lead  to  higher  greenhouse  gas  emissions  than  the  conventional  fuel  it 
replaces. 

The production of ethanol from sugar cane in Brazil leads to greenhouse gas savings 
of  about  90%.  The  production  of  biodiesel  from  palm  oil  and  soya  leads  to 
greenhouse gas savings of about 50% and 30% respectively.  

Second-generation  biofuel  production  processes,  when  ready  to  enter  the  market, 
should bring savings of the order of 90%. 

The  draining  of  wetlands  to  produce  any  type  of  biofuel  would  produce  a  loss  of 
stored  carbon  that  would  take  hundreds  of  years  to  make  up  through  the  biofuels' 
annual greenhouse gas savings. 

If  biofuels  achieve  a  14%  market  share,  greenhouse  gas  savings  of  101-103  MT 
CO2eq per year can be expected compared to the amount saved by biofuels today.  

Other environmental impacts  

- 

19 
20 

21 

If the growing of feedstock for biofuels takes place on land that is appropriate for the 
purpose,  the  environmental  impact  (other  than  greenhouse  gas)  of  a  14%  biofuel 
share will be manageable. 

GSP: Generalised system of preferences 
In any event, the key EU trade policy challenge is to find ways to promote those international exports of 
biofuels that unambiguously contribute to greenhouse gas reduction and avoid rain forest destruction. In 
this respect, complementing the incentive/support system described in point 4) of section 7, certification 
schemes elaborated together with exporting trading partners or producers could be a way forward. But 
this requires further study and discussion. 
Well-to-wheel  calculations  for  transport  fuels  resemble  lifecycle  analysis  but  exclude  emissions  from 
the construction of manufacturing plant and equipment. In practice these are negligible. 

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- 

- 

- 

If increased biofuel use leads to feedstock being grown on land that is inappropriate 
– such as rain forest and other habitats of high nature value – it will cause substantial 
environmental  damage.  There  is  no  need  to  use  this  land  to  achieve  a  14%  biofuel 
share.  

The  high  fuel  quality  and  vehicle  emission  standards  in  force  in  the  EU  mean  that 
changes in the volume of biofuel use will not have a significant impact on pollutant 
emissions. 

The  EU  fuel  quality  directive  needs  to  be  revised  to  set  a  step  by  step  approach 
towards the use, by 2020, of significantly higher biofuel blends in ordinary vehicle 
engines. 

7. 

THE WAY FORWARD 

The conclusions of this review of the evidence are as follows: 

1) 

2) 

3) 

4) 

5) 

In relation to the test defined in Article 4(2) of the biofuels directive, the reasons that 
the  biofuels  directive’s  target  for  2010  is  not  likely  to  be  achieved  cannot  be 
described as “justified” or as “related to new scientific evidence”. 

Council  and  Parliament  can  be  confident  that  increased  biofuel  use  will  bring 
substantial  security  of  supply  and  greenhouse  gas  benefits.  Increased  biofuel  use  is 
the  only  means  at  present  available  to  reduce  the  transport  sector's  near-complete 
dependence  on  oil  ,  and  one  of  the  few  ways  to  make  a  significant  impact  on 
transport’s greenhouse gas emissions.  

To send a clear signal of its plans to reduce its dependence on oil use in transport, the 
Union needs to take a new step forward in its policies for biofuel promotion. 

The  greenhouse  gas  benefits  of  biofuel  policy  can  be  further  increased,  and 
environmental  risks  minimised,  through  a  simple  system  of  incentives/support  that, 
for instance, discourages the conversion of land with high biodiversity value for the 
purpose  of  cultivating  biofuel  feedstocks;  discourages  the  use  of  bad  systems  for 
biofuel  production;  and  encourages  the  use  of  second-generation  production 
processes.  The  system  should  be  designed  to  avoid  any  discrimination  between 
domestic production and imports and should not act as a barrier to trade. Its impacts 
should be assessed and its operation should be monitored with a  view to  making it 
more sophisticated in future. 

This  system  should  be  designed  in  a  way  that  does  not  reduce  security  of  supply 
benefits.  These  flow  from  diversity  of  energy  sources,  biomass  types  and  import 
regions. Therefore, the system should not favour one biofuel type or crop rather than 
another.  Instead,  it  should  encourage  environmentally  benign  biofuel  production 
practice across all biofuel types and crops, including in third countries. 

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To move from the current biofuel share of 1% to a share of 10%, the following steps will be 
needed: 

•  Staged modifications of the fuel quality directive and the diesel standard22, taking account 
of technological development while respecting air quality objectives, permitting the routine 
use of biofuel blends of a significantly higher level than at present. 

•  The  inclusion  in  new  vehicles  of  the  (cheap23)  adaptations  they  need  to  cope  with  these 

higher blends. 

•  The  putting  on  sale  by  the  oil  industry  of  a  low  vapour  pressure  petrol  basestock  –  or  a 
modification of the fuel quality directive to take into account the vapour pressure changes 
caused by the inclusion of low blends of ethanol in petrol. 

•  Availability of second-generation biofuels (if the EU car fleet continues to shift from petrol 

to diesel, the commercialisation of BTL will be particularly important). 

•  The introduction of wood farming, and further development of rape seed cultivation, in the 

EU and its neighbours to the east. 

•  Measures  to  guarantee  the  environmental  credentials  of  biofuels,  including  discouraging 
the  use  of  biofuels  that  create  more  greenhouse  gas  emissions  than  they  save  or  lead  to 
major biodiversity loss; regular monitoring and reporting, by the Commission, of the well-
to-wheel environmental impact of biofuels' production and use. 

•  The continuing implementation of the balanced approach to international trade in biofuels, 
so that both exporting countries and domestic producers can invest with confidence in the 
opportunities created by the growing European market. 

As shown in the impact assessment for the renewable energy roadmap, a 10% biofuel share in 
2020  can  be  achieved  with  limited  reliance  on  second-generation  biofuels.  Development  of 
second-generation biofuels will, however, improve the greenhouse gas and security of supply 
impact  of  achieving  this  share;  and  it  will  make  it  easier  to  achieve  shares  that  are  even 
higher. As well as support from Community and national RTD programmes, the development 
of second-generation biofuels also needs market-based incentives and the establishment of a 
medium term framework for biofuel promotion. 

The amendment of the biofuel directive will not in itself make these things happen. They will 
require sustained effort on the part of industry, agriculture and Member States as well as the 
EU. But without the framework that amendment of the directive would create, there is little or 
no probability of these steps taking place. 

22 
23 

Standard EN590. 
For example, cars capable of coping with ethanol blends of up to 85% are sold in Sweden at comparable 
prices  to  ordinary  cars.  Cars  capable  of  coping  with  ethanol  blends  between  0  and  100%  are  sold  in 
Brazil at similar or identical prices to ordinary cars, and accounted for about 80% of the new cars sold 
there in 2006. 

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8. 

PROPOSAL FOR REVISION OF THE BIOFUELS DIRECTIVE 

The EU needs to revise the biofuels directive to: 

- 

- 

- 

send a signal of its determination to reduce its dependence on oil use in transport and 
move to a low carbon economy; 

set minimum standards for the share of biofuels in 2020 (10%) ; 

ensure  that  the  use  of  poor-performing  biofuels  is  discouraged  while  the  use  of 
biofuels with good environmental and security of supply performance is encouraged. 

The Commission will bring forward a proposal to do this during 2007. 

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Annex 1: Progress in the use of biofuels in the Member States, 2003-2005 

Member State 

Biofuel share 
2003 (%) 

Biofuel share 
2004 (%) 

Biofuel share 
2005 (%) 

National 
indicative target 
2005 (%) 

Austria 

Belgium 

Cyprus 

Czech Republic 

Denmark 

Estonia 

Finland 

France 

Germany 

Greece 

Hungary 

Ireland 

Italy 

Latvia 

Lithuania 

Luxembourg 

Malta 

The Netherlands 

Poland 

Portugal 

Slovakia 

Slovenia 

Spain 

Sweden 

UK 

EU25 

0.06 

0.00 

0.00 

1.09 

0.00 

0.00 

0.11 

0.67 

1.21 

0.00 

0.00 

0.00 

0.50 

0.22 

0.00 

0.00 

0.02 

0.03 

0.49 

0.00 

0.14 

0.00 

0.35 

1.32 
0.02626 

0.5% 

0.06 

0.00 

0.00 

1.00 

0.00 

0.00 

0.11 

0.67 

1.72 

0.00 

0.00 

0.00 

0.50 

0.07 

0.02 

0.02 

0.10 

0.01 

0.30 

0.00 

0.15 

0.06 

0.38 

2.28 

0.04 

0.93 

0.00 

0.00 

0.05 

no data 

0.00 

no data 

0.97 

3.75 

no data 

0.07 

0.05 

0.51 

0.33 

0.72 

0.02 

0.52 

0.02 

0.48 

0.00 

no data 

0.35 

0.44 

2.23 

0.18 

0.7% 

1.0% (estimate) 

2.50 

2.00 

1.00 
3.7024 

0.10 

2.00 

0.10 

2.00 

2.00 

0.70 

0.60 

0.06 

1.00 

2.00 

2.00 

0.00 

0.30 
2.0025 

0.50 

2.00 

2.00 

0.65 

2.00 

3.00 
0.1927 

1.4% 

Source: national reports under the biofuels directive. 

24 
25 
26 
27 

2006. 
2006. 
0.03% in volume terms, equating to 0.26% in energy content, assuming 100% biodiesel. 
0.3% in volume terms, equating to 0.19% in energy content, assuming 50:50 split between biodiesel and 
bioethanol. 

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Annex 2: National indicative targets for the share of biofuels, 2006-2010 

2006 

2.50 

2.75 

1.78 

0.10 

2.00 

2.00 

2.50 

1.14 

2.00 

2.75 

2.75 

2.00 

1.50 

2.00 

2.50 

1.20 

% 

Austria 

Belgium 

Cyprus 

Czech Republic 

Denmark 

Estonia 

Finland 

France 

Germany 

Greece 

Hungary 

Ireland 

Italy 

Latvia 

Lithuania 

Luxembourg 

Malta 

The Netherlands 

Poland 

Portugal 

Slovakia 

Slovenia 

Spain 

Sweden 

UK 

EU 

2007 

4.30 

3.50 

2008 

5.75 

4.25 

2009 

5.75 

5.00 

2010 

5.75 

5.75 

1.63 

2.45 

2.71 

3.27 

5.75 

3.00 

4.00 

5.00 

1.75 

2.00 

3.50 

2.00 

2.30 

3.00 

3.20 

2.00 

2.24 

3.00 

4.25 

28 

5.75 

4.00 

3.00 

4.00 

5.00 

29 

5.75 

4.90 

4.00 

2.0030 

2.8031 

5.75 

7.00 

5.75 

5.75 

5.75 

5.00 

5.75 

5.75 

5.75 

5.75 

5.75 

5.75 

5.75 

5.00 

5.75 
3.5032 
5.4533 

Source: national reporting under the biofuels directive except France: response to public consultation on review 
of the biofuels directive. 

28 
29 
30 
31 
32 
33 

Will be set by 17 June 2007. 
Will be set by 17 June 2007. 
2.5% in volume terms, assuming 100% biodiesel. 
3.75% in volume terms, assuming biodiesel at 66% of total biofuel sales. 
5% in volume terms. 
Share for those Member States that have reported a target for 2010. 

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