Europe, United States and others aim to boost biofuels, but obstacles remain

• DOI: http://doi.org/10.1111/oet.12728
• Date: 01 September 2019
• Published date: 01 September 2019

FOCUS

Europe, United States and others aim to boost biofuels,

but obstacles remain

Biofuels are an often-overlooked part of the energy mix, but

are rising in importance as climate change moves up the

agenda and the volumes involve grow. This summer saw the

United States remove restrictions on summer use of E15 gas-

oline (with 15% bioethanol), resulting in protests from oil

refiners, but also expanding the market for corn feedstock—

helping US farmers offset the impact of trade constraint with

China. Elsewhere, in Europe, policymakers are struggling to

push up the biofuel portion, although the Netherlands' recent

adoption of E10 could spur more widespread use. Without

such a move, the United Kingdom, for one, is likely to miss

its transportation decarbonization target for 2020. Elsewhere,

China is also likely to miss modest targets, while Brazil and

some other South American countries continue to lead the

pack with blends of up to 100%.

Bioethanol, together with biodiesel and other forms of

bioenergy (biomass, biogas, wood, and charcoal), represent

by far the largest proportion of renewable energy used

worldwide: “Modern bioenergy is [an] overlooked giant,”

the IEA's executive director Fatih Birol said in March this

year. “Its share in the world's total renewables consumption

is about 50% today, …as much as hydro, wind, solar and all

other renewables combined.”However, many biofuels add

carbon indirectly or compete with wilderness and food crops

for land—offsetting their green credentials; something Mr

Birol did not dwell on. Advanced biofuels, from sources as

diverse as used cooking oil and genetically modified algae,

are greener but more expensive and add to the complexity.

Ambitious carbon emissions targets are the most common

reason governments mandate greater use of biofuels in gaso-

line and diesel. However, other factors are also involved,

including availability of cheap and plentiful crops—as in

South America, where biofuel use is highest. In the United

States, energy security was initially the driver of biofuel pol-

icy, rather than carbon emissions. But now it is the agricul-

tural lobby that has taken over as the driving force, battling

it out with oil refinery lobbyists for the ear of lawmakers.

Another factor having an impact on adoption is the rela-

tive price of gasoline and other oil products compared to

biofuels. When oil prices fell from late 2014, biofuels were

put at a disadvantage, which held back their advance for sev-

eral years in some areas. Now that oil prices have recovered

somewhat, that commercial advantage has been eroded,

helping biofuels to gain ground once more. The price differ-

ential between biofuel feedstocks and the benchmark heating

oil futures contract is known as the “boho”spread or factor.

1

After turning positive in November 2014, it switched back

to negative recently. Farming interest in the United States

claim these relative price moves mean ethanol mandates

from the federal government are critical to ensure a stable

market.

In Europe the main motivation to add biofuels is environ-

mental (to reduce carbon emissions), but resistance has also

been largely on environmental and social grounds, with

critics claiming fuel feedstock crops impinge on both food

crops (pushing up prices) and unfarmed land. Nevertheless,

in a number of European countries, consumption of gasoline

blends with 10% ethanol is growing (see below), as individ-

ual states gradually implement legislation to meet EU-wide

targets. Problems remain, including the different way of

implementing biofuel directives across Europe.

1|EUROPEAN BIOETHANOL

EDGES UP

Biofuel demand in Europe is driven by EU-wide targets

under the Renewable Energy Directive and Fuel Quality

Directive, which are implemented differently in each mem-

ber state. Some countries have blending mandates on a vol-

ume basis, others on an energy basis, and some have opted

for a greenhouse gas reduction target. A few countries, such

as the Netherlands, allow for waste-based biofuels to count

double toward their obligation.

Most countries are currently at around a 5% bioethanol

blend, and while new higher blends are being introduced in

various European countries, they are becoming increasingly

difficult to comply with because of restrictions on the type of

feedstocks that can be used (see below). But, without higher

biofuel cuts, it is difficult to see how short-term (2020)

DOI: 10.1111/oet.12728

4© 2019 John Wiley & Sons Ltd Oil and Energy Trends. 2019;44:4–13.wileyonlinelibrary.com/journal/oet