Rising food and fuel costs due to the conflict in Ukraine have led several European Union (EU) to freeze or lower current biodiesel blending mandates, according to an industry analyst quoted in an Energy Post report.
The trend would be likely to lead to a rise in emissions, but only in the short-term, Cornelius Claeys, manager (biofuels) at Stratas Advisors, said in the 23 May report.
In the longer term, the ongoing crisis would be likely to accelerate the energy transition in Europe, he said.
In contrast, Claeys said a policy response to increasing prices in the USA had been to strengthen biofuel incentives by allowing year-round E15 use.
Europe had taken the opposite approach, he explained, albeit with the same intended outcome, with EU and national policymakers indicating an intention to (temporarily) waive or freeze biofuel blending to reduce prices.
This could be partly explained by the European debate having focused more on food than on fuel prices, he said, but another factor was that relatively expensive biomass-based diesel was mainly used in Europe, while in the USA, cheaper corn ethanol was the primary biofuel.
In March, the European Commission (EC) published a statement saying it “supports Member States in using possibilities to reduce the blending proportion of biofuels which could lead to a reduction of EU agricultural land used for production of biofuel feedstocks, thus easing pressure on the markets for food and feed commodities”, the report said.
Although countries still needed to comply with the minimum obligations under the EU RED and FQD directives, Claeys said this had opened the door for a series of reductions in national blending mandates.
In Finland, for example, the 2022 and 2023 blending obligations were reduced by 7.5%, while Sweden was looking at freezing 2023 obligations at this year’s levels.
“These Nordic countries can afford to reduce their blending mandates while still complying with EU directives, because they generally over comply,” Claeys added.
Meanwhile, the German government published a working paper on 17 May proposing to cap crop-based biofuels at 2.5% in 2023 and phase them down to 0% by 2030.
“Despite these short-term bearish signs for (crop) biofuels, legislative incentives in the longer term appear to be strengthening as an indirect result of the Ukraine war,” Claeys said.
“This is exemplified by Finland; despite being the first country to reduce short-term blending obligations and by the largest margin, it simultaneously announced an increase in its 2030 blending obligation from 30% to 34%.”
Although uncertainty in the sector was likely to continue while the conflict in Ukraine remained unresolved, previous periods of recession combined with elevated fossil oil had generally accelerated rather than slowed down the shift towards alternatives, Claeys said.
“In the medium- to long-term however, a wide variety of European lawmakers share the view that climate objectives and energy independence should be accelerated by firm legislative action,” he added.
