European Union Renewable Energy Directive

Aside from the U.S. Renewable Fuel Standard (RFS), which I’ve described in several previous blog posts starting here, another important government program elsewhere in the world to promote renewable fuels is the Renewable Energy Directive (RED) of the European Union. The RED, adopted in 2009, was put in place to ensure that all the 27 member states of the European Union achieve specified targets for use of renewable fuels and reduction of greenhouse gas (GHG) emissions across all energy sectors, with specific requirements for the subset of fuels used for transportation. A companion directive, the Fuel Quality Directive (FQD), has additional, complementary requirements for GHG reductions within the transport sector. These directives place certain obligations on EU member states, but also create certain requirements with which developers or producers of renewable fuels must comply in order for their fuels to qualify as “renewable” under the regulations. In this blog post, I’ll describe these EU directives and their implications for biofuel companies. In a companion post on Biofuel Policy Watch, I’ll discuss a recently proposed revision to the RED and FQD that has generated substantial controversy within the fuels community.

The Renewable Energy Directive

The Renewable Energy Directive, formally known as Directive 2009/28/EC of the European Parliament And of the Council, dated April 23, 2009, addresses the adoption of renewable energy within overall energy markets in EU member states (i.e., electricity, heating and cooling, transport). European Union legislation takes the form of “Directives”, which are adopted centrally by the European Commission and which are binding upon all EU member states, which must then adopt national laws that conform with the provisions of the directive. The Renewable Energy Directive sets targets for the use of renewable fuels which member states must meet, by enacting national laws consistent with the Directive. These targets are as follows:

  • Derive 20% of overall energy consumption, across all sectors, from renewable sources by 2020.
  • Derive 10% of energy consumption within the transport sector from renewable sources by 2020.
  • Achieve greenhouse gas emission reductions of at least 35%, relative to fossil fuels, by mid-2010, with this target rising to 50% in 2017 and 60% in 2018, for fuels produced in 2017 or later. However, fuel production plants that were in operation as of January 2008 had until April 2013 to meet the 35% GHG reduction requirement.

The Renewable Energy Directive is implemented by the European Commission Directorate General for Energy (DG Energy). As noted above, member states were required to adopt national legislation to reflect the requirements and standards set forth in the Directive. Although many countries did not meet the specified deadline of June 2010 to adopt such laws, I think that, as of this writing, most of the major EU states have complied. The June 2012 report from USDA’s Global Agricultural Information Network said that, as of that month, 20 of the 27 member states had adopted national laws to fully implement the RED while the other 7 had partially complied. A good resource for tracking EU member state compliance with both the RED and the FQD can be found here.

The Fuel Quality Directive

The Fuel Quality Directive (FQD), formally known as Directive 2009/30/EC of the European Parliament and of the Council, and which amended Directive 98/70/EC, was also adopted on April 23, 2009. It establishes the specifications (standards) for transportation fuels to be used across the EU. The Directive also requires that all fuel suppliers (e.g. oil companies) must meet a 6% reduction of GHG emissions by 2020, relative to 2010 baseline levels, across all fuel categories. This reduction in emissions could be achieved using any low-carbon fuel options, such as hydrogen or electricity, but it is generally expected that the use of biofuels will account for most of the targeted reductions. The target of 6% is designed to be consistent with the use of 10% biofuel with an average 60% carbon saving to comply with the Renewable Energy Directive, as described  above. The FQD also establishes that ethanol may be blended into gasoline (petrol) up to a limit of 10% v/v, although this is subject to national laws in the member states.

Obligations of the RED and FQD on Fuel Producers

Although the obligations in the Directives to meet the specified targets are placed on national governments, these obligations are passed down to the entities that sell fuel to the public, as well as the companies that manufacture or import fuels for eventual sale in the EU. Specifically, there are defined requirements that a fuel and its production pathway must meet in order for the fuel to be considered a “renewable fuel” that qualifies to count towards fulfillment of the targets set in the Directives. Just as the U.S. Renewable Fuel Standard defines renewable fuels as those derived from “renewable biomass”, the RED specifies that “renewable fuels” are not to be produced from raw materials obtained from land having a “high biodiversity status” or “high carbon content”. These terms are defined in the Directive (see also the BioEnergy Wiki page for a useful summary). In addition, if agricultural crops are used to produce the fuel, they must be grown in compliance with EU environmental regulations governing agriculture.

Furthermore, in order for a fuel to be considered as “renewable”, it must show a reduction in GHG emissions over the lifecycle of its production, such that the carbon intensity of the fuel is known and can be applied towards the national targets. (When used in the context of regulations such as the RED, “carbon intensity” is defined as the net mass of carbon dioxide gas or its equivalent that is released over the life cycle of the fuel, taking into account the energy and materials needed to produce the fuel). The European Commission calculated default carbon intensities for a number of specific biofuel production pathways, which can be found in Annex V of the RED, and these can be used in reporting by regulated entities without providing any additional information to any national government. However, for fuel production pathways not included within this list, carbon intensities must be calculated using acceptable methods for developing life cycle analyses (LCAs).

More importantly, renewable fuels must be produced sustainably: that is, in order for a fuel to be considered as “renewable” under the RED, it must be analyzed and certified to be in compliance with sustainability criteria established in the Directive. The required sustainability analysis incorporates, but goes well beyond, considerations addressed in typical LCAs. There are twelve different factors which must be considered in these analyses, including Local Food Security, Human and Labor Rights, Rural and Social Development, and others including lifecycle GHG emissions. The requirements to conduct these analyses are quite complicated, and for this reason the EU has established a requirement that any proposed scheme or methodology for conducting sustainability analyses under the RED must be certified by the EU before any fuel provider can rely on such a scheme to establish its eligibility. As of this writing, there are 13 such schemes that have been approved, which are listed here. Several of these are specific to certain feedstocks, such as sugarcane or palm oil, while others are more general. Perhaps the best known general scheme is that of the Roundtable on Sustainable Biofuels. Fuel producers can conduct these analyses themselves, or have them done by third parties, but in either case the regulations require that the analysis be verified by competent, independent auditors that follow international standards.

Impact on Biofuel Developers

Companies that are producing fuels that are included within the “look-up table” within the RED can rely on the carbon intensities specified in the regulations. However, companies developing a new pathway must not only conduct an LCA to establish the carbon intensity but must also have the fuel pathway certified as sustainable. Because the EU sustainability criteria go beyond technical issues and encompass social issues, this imposes a requirement that is broader in scope than what is required in the U.S under the Renewable Fuel Standard (for example), and so this may be somewhat burdensome to biofuel producers, especially smaller, newer companies. However, several companies have announced successful completion of these requirements. To give two recent examples:

  • Agro2 S.A., located in Veraguas, Panama, says it is the first company in Panama to be certified under the EU’s Renewable Energy Directive by the International Sustainability and Carbon Certification. This certification confirms the compliance of Agro2’s production and processing of ethanol using a cassava feedstock with the sustainability criteria set out in the EU RED.
  • Argos Oil has become the first European company to introduce sustainable certified sugarcane ethanol into the European market. The certification was granted by Bonsucro, one of the international organizations whose sustainability criteria meet the requirements of the EU Renewable Fuels Directive. The Solaridad network, a specialized organization for sustainable development, assisted in obtaining this certification.

The adoption of the RED seems to have stimulated the growth of the biofuel industry in Europe, although it seems likely that biofuel use is not growing as rapidly as might be needed to meet the directive’s goals for later this decade. Although the comprehensive sustainability analysis required under the directive would seem to be a deterrent for companies wishing to enter the EU market with renewable fuels, there is ample evidence that many companies, large and small, have taken the steps to have their products certified under one of the approved schemes mentioned above.

On October 17, 2012, the European Commission proposed a revision to the RED and the FQD that embodies some substantial changes to the EU’s approach to certain biofuels, specifically in proposing to institute incentives for the use of second generation biofuels that are not derived from food crops. This proposal, which has generated significant controversy both within the industry and also from other interested parties, is discussed in a posting on my Biofuel Policy Watch blog. It will be interesting to see how the amended directive, if adopted, affects the future development of the biofuels industry and markets in Europe.

D. Glass Associates, Inc. is a consulting company specializing in government and regulatory support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. Dr. Glass also serves as director of regulatory affairs for Joule Unlimited Technologies, Inc. More information on D. Glass Associates’ regulatory affairs consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation,  are available at www.slideshare.net/djglass99 and  at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of Joule Unlimited Technologies, Inc. or any other organization with which Dr. Glass is affiliated. Please visit our other blog, Biofuel Policy Watch.

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