Original publication: February 2015
Authors: Luisa Marelli, Monica Padella, Robert Edwards, Alberto Moro, Marina Kousoulidou, Jacopo Giuntoli, David Baxter, Veljko Vorkapic, Alessandro Agostini, Adrian O’Connell, Laura Lonza and Lilian Garcia-Lledo (European Commission, Joint Research Centre, Institute for Energy and Transport, Sustainable Transport Unit)
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The Impact of Biofuels on Transport and the Environment, and their Connection with Agricultural Development in Europe

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The use of biofuels in transport is being promoted as a means of tackling climate change, diversifying energy sources and securing energy supply. Biofuels production also provides new options for using agricultural crops. However, it also gives rise to environmental, social and economic concerns which are the subject of intense debate worldwide.
This study provides a detailed overview of biofuels production and consumption and of related policies worldwide. It also contains comprehensive analysis and discussion of key aspects affecting the overall sustainability of biofuels. These include, in particular, their impact on agricultural markets, emissions from indirect land-use change, and greenhouse gas emissions.

Executive Summary

Biofuels are liquid or gaseous fuels produced from biomass. Their use in transport is promoted as a means of tackling climate change, diversifying energy sources and securing energy supply.

In the EU, the Renewable Energy Directive (RED) requires 10 % of all transport fuels to be delivered from renewable sources by 2020 in every Member State. In addition, the Fuel Quality Directive (FQD) introduces a mandatory target of a 6 % reduction in the greenhouse gas (GHG) intensity of fuels used in road transport and non-road mobile machinery by 2020 (compared with the EU-average 2010 level of emissions from fossil fuels). Both directives define sustainability criteria that must be met if biofuels are to count towards national targets and be eligible for support.

According to the trajectories declared by the Member States in the National Renewable Action Plans (NREAPs), more than 85 % of the RED transport target is expected to come from biofuels[1] (mainly biodiesel), which therefore increases the demand for biofuel feedstocks obtained predominantly from agricultural crops. Although biofuels production provides new options for using agricultural crops, it gives rise to environmental, social and economic concerns which are the subject of intense debate worldwide. This report contains comprehensive analysis and discussion of key aspects affecting overall biofuel sustainability.

General information on biofuels

Bioethanol and biodiesel are the most common biofuels used in transport. Other biofuels are also in use, such as pure vegetable oil and compressed biomethane, although with a more limited market penetration.

Biofuels are normally referred to as first-, second- or third-generation biofuels.

First-generation biofuels include well-established technologies for the production of bioethanol from sugar and starch crops, biodiesel from oil crops and animal fats, and biomethane produced by anaerobic digestion.

Second-generation biofuels encompass a broad range of biofuels produced from feedstock that is not used as food or feed, e.g. lignocellulosic materials (such as short-rotation forestry or coppice), the organic part of municipal solid waste, and forest and agricultural residues. They may also include bioethanol and biodiesel produced by conventional technologies but based on novel starch or energy crops such as jatropha. The hydrotreatment of vegetable oils, animal fats or waste cooking oils has also been gaining ground as a solution to the increasing pressure to find alternatives to fossil fuels for transport.

Production technologies are usually more complex and expensive than for first-generation biofuels, but second-generation biofuels are generally considered to be more sustainable, with the potential for greater GHG emission savings compared with first-generation biofuels[2].

Third-generation biofuels generally include biofuel production routes which are in the earlier stages of research and development or are significantly further from commercialisation (e.g. biofuels from algae, hydrogen from biomass, etc.).

From 2005 to 2010, the EU experienced a rapid expansion in biodiesel and bioethanol fuels production[3]. The share of biofuels as a proportion of liquid transport fuels reached 4.7 % in 2011. Biodiesel is the main biofuel in the EU transport sector, with a 78.2 % share of total consumption (by energy) as against 20.9 % for bioethanol (EU-27)[4].

At the moment the EU is the largest producer of biodiesel worldwide, accounting for approximately 40 % of global production, with Germany and France being the top European producers (the other main biodiesel producers are the USA, Argentina, Brazil, Indonesia and Malaysia). In 2011 EU biodiesel production amounted to 339.6 petajoules (PJ), while consumption in transport came to 445.6 PJ. According to the biofuels projections presented in this report, global biodiesel production is expected to increase from 776 PJ in 2011 to almost 1 400 PJ by 2021 (with the EU remaining the largest producer and user of biodiesel).

As regards bioethanol, the USA and Brazil are the main producers and exporters. Exports are directed mainly towards the EU, Canada, Japan and South Korea. In 2011 EU bioethanol production amounted to 73.3 PJ, and consumption in transport came to a total of 121.1 PJ. Global bioethanol production is projected to increase from 1844 PJ in 2011 to over 3 800 PJ in 2021. The three major producers are expected to remain the USA, Brazil and the EU, followed by China and India.

The number of large-scale operations purifying biogas to biomethane is also increasing; the EU is in the lead with 69 % of world capacity. However, the use of biomethane in transport is still very limited (0.5 % of transport fuel in 2011) and is confined to a few Member States, notably Sweden and Germany.

Impact of biofuels on agricultural markets

The impact of biofuels on agriculture depends not only on the crops which go directly to biofuel factories but also on the consequences for overall commodity markets in terms of production, trade and prices. Economic models are needed in order to understand these processes properly, but in the case of biodiesel the effects are so significant that historical analysis gives some robust indications.

It is important to consider vegetable oil in all its forms: oilseeds, oil and finished biodiesel.

Analysis shows that European biodiesel has had a major impact on world vegetable oil markets. Biodiesel is wholly responsible for the increase in European vegetable oil demand from 2001 to 2011. More than half of that increase was supplied by increased net imports, about half of which were palm oil. It is particularly important to look at the effect of biofuel on palm oil imports, given the very high emissions from oil palm expansion onto tropical peatland. In addition to the palm oil used directly for biodiesel, part of the (mostly rapeseed) oil diverted to biofuel from other uses in the EU was replaced by palm oil imports. In other developed countries without biodiesel policies, the percentage increase in palm oil imports was actually much lower.

EU ethanol production is much more limited than EU biodiesel production, and total cereals production far exceeds vegetable oil production. Accordingly, cereals used for ethanol in the EU represent only a small part of the total market, so it is not possible to distinguish the market effects of bioethanol by means of simple historical analysis. Almost all the feedstock used by EU ethanol factories is produced domestically.

In terms of prices, biofuels may have a role in the shift towards higher agricultural commodity prices. Forward-looking studies suggest that in 2020 EU biofuel policy is likely to have some impact on future commodity prices, in particular on world prices for oilseeds and vegetable oils, and to a lesser extent for cereals and sugar. On the other hand, food security is more sensitive to cereal prices than to vegetable oil prices. However, there is a considerable range in the estimates.

Different economic models all show that the effect of biofuels on the EU livestock industry is roughly neutral. This is because biofuels have by-products which are used for animal feed, thereby compensating the part of biofuel feedstock that is diverted from the animal feed market.

Indirect land-use change emissions (ILUC)

Land-use change is one of the main concerns relating to the impact of first-generation (and to lesser extent of second-generation) biofuels: increased EU demand has an impact on land use in both EU and non-EU countries. If biofuels crops are grown on uncultivated land, this will cause direct land-use change. If biofuels crops are grown on existing arable land instead of crops for food, indirect land-use change (ILUC) occurs because of the necessity of maintaining food production: the ‘hole’ in the food supply is filled partly by the expansion of cropland around the world.

The main agro-economic models used to estimate ILUC agree that extra biofuels demand in the EU would result in significant land-use change[5], most of it outside Europe. The models derive only a part – often a small part – of the extra feedstock needed for biofuel from land-use change. Usually more feedstock comes ILUC-free from other sources: reduced food consumption, price-driven yield increases, and use of by-products.

Alternative methods developed by the authors in order to make rough estimates of ILUC confirm the magnitude of the ILUC effects, and also confirm that EU bioethanol has lower ILUC emissions than EU biodiesel.

ILUC cannot be avoided by means of fixed sustainability criteria. It could, however, be avoided by approving biofuels only on a project basis (e.g. as part of a suitable voluntary scheme), where the project specifies how it would ensure extra carbon sequestration in biomass, for example by replanting abandoned or degraded land, or through additional yield improvements linked to biofuels.

Yields, fertilisers and marginal emissions

Some of the extra feedstock needed for biofuels production is expected to come from additional yield increases generated by the rise in crop prices (driven by growth in feedstock demand); the more yields respond, the lower the ILUC area becomes. Logically, one expects yield to respond to price, but the response is very difficult to detect. In recent years, yields have stagnated in north-west Europe despite large increases in crop prices, and recent research suggests that yields may respond less to price than is assumed in economic models used to estimate ILUC.

Increasing the use of nitrogen fertilisers is just one way for farmers to increase yields in response to crop price rises. However, the extra production deriving from extra nitrogen comes at a high price in terms of GHG emissions[6]: if even a small part of the extra yield comes from additional fertiliser, the emissions (per tonne of extra crop) are higher than average. These extra intensification emissions are rarely taken into consideration in models estimating ILUC emissions. Neither are the extra direct cultivation emissions which arise from spreading cultivation onto land with lower yields.

Biofuels and biodiversity

The use of biofuels can potentially have a positive impact on biodiversity thanks to climate change mitigation resulting from the substitution of fossil fuels. However, the immediate impact, relating primarily to the production of biofuel feedstock, including habitat loss and fragmentation and the use of agrochemicals, can be significant. The net impact varies considerably, ranging from negative to positive, depending on the feedstock used, the previous land use and the management practices applied. Using annual crops for biofuels causes habitat loss through indirect land-use change. Biofuels from perennial crops can perform better because their production uses fewer agrochemicals and they can be grown on less productive land, although this implies lower yields and often reduced profitability. The use of biomass residues does not require additional land, but removing forest residues may cause significant loss of forest biodiversity. Harvesting semi-natural grassland can benefit biodiversity by preventing succession of these habitats.

Different management practices could improve biodiversity on agricultural land. However, consideration has to be given to the trade-off between reducing management intensity and minimising land-use requirements. ILUC impact on biodiversity as a result of biofuels production on productive agricultural land is significant. Nevertheless, some biofuels crops could improve biodiversity by helping to reclaim certain categories of degraded and marginal land.

 

[1] With the rest coming from renewable electricity (10 %) or from hydrogen and other sources (2.3 %). Hydrogen use from renewable sources is expected to be negligible.

[2] Dedicated energy crops such as miscanthus and switchgrass could also be grown on marginal/degraded land. However, this may often require intensive use of water/fertilisers. Sometimes energy crops are also grown on agricultural land, thus competing with food/feed crops and possibly causing indirect land-use change (ILUC).

[3] Biodiesel production is expected to contract slightly by 2020 according to the trajectories presented by the Member States in their National Renewable Action Plans (Banja et al, 2013).

[4] Eurostat (2013).

[5] The increase in land-use change due to biofuels is small in absolute terms, for example in comparison with cropland expansions projected to feed an increasing world population. However, the authors consider it significant that such a small area is responsible for considerable CO2 emissions‘’.

[6] Emissions from fertiliser production and the extra nitrous oxide emissions it generates from farm soils.

 

Link to the full study: http://bit.ly/513-991

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