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The new EU directive on fuel quality standards and its implications

Feature

Even though the rather technical fuel quality directive (FQD) has taken a back seat in recent months, overshadowed by the much politicised Renewable Energy Directive, it is nevertheless a crucial piece of legislation for the EU bioethanol industry. There are three key reasons for this: a) it introduces a decarbonisation mechanism with a view to reducing greenhouse gas (GHG) emissions of fossil... fuels; b) it allows – under certain conditions – direct blending of ethanol in warmer parts of Europe; and c) it makes E10 blends possible by increasing the maximum ethanol content and oxygen content in petrol. The new directive will amend, rather substantially, a 10-year old directive that sets technical specifications based on health and the environment for fossil fuels. It was first changed in 2003 and then had to be reviewed two years later partly due to biofuels.1 Contrary to the existing provisions of Directive 98/70, in which biofuels are merely mentioned as one of several fossil fuel components, the amended text gives the strong impression that the directive is now a law on biofuel quality standards.2 This is mainly due to the fact that the new directive introduces a mechanism to monitor and reduce GHG emissions, the so-called decarbonisation mechanism. Decarbonisation mechanism The EU committed itself under the Kyoto Protocol to reduce GHG emissions by at least 20% unilaterally by 2020 and by 30% if a global agreement can be reached. All sectors will need to contribute to these goals. The combustion of road transport fuel is responsible for around 20% of community GHG emissions. Therefore the new FQD requires fuel suppliers to reduce life cycle GHG emissions3 of the fuel they put on the market. By 2020 they need to achieve a (mandatory) reduction of at least 6% compared to the EU-average level of GHG emissions in 2010 with possible interim targets of 2% by 31 December 2014 and 4% by 31 December 2017. The fuel suppliers are free to choose how to achieve these targets. They can either decrease their emissions by reducing flaring and venting at production sites (upstream) or by using more biofuels or alternative fuels (downstream). These instruments are not mentioned in the body of the law; they are mentioned in a recital. Biofuels used for compliance with the GHG reduction target need to comply with the sustainability criteria, which are defined by the Renewable Energy Sources Directive (RESD) and have been entirely copied into the FQD.4 An additional (indicative) 4% reduction may be obtained through the use of carbon capture and storage technologies and electric vehicles (2%) and the purchase of credits under the Clean Development Mechanism of the Kyoto Protocol (2%). The total required reduction by 2020 could therefore be increased to up to 10%. The strong link between the RES-D and the FQD is not only demonstrated by having the sustainability criteria in common but also through the fact that a review of this decarbonisation mechanism needs to take place in 2014. The new law states that: ‘At the latest in 2014, the Commission shall submit a report to the European Parliament and the Council relating to the achievement of the GHG emission target for 2020 referred to in Article 7a, taking into account the need for consistency between this target and the target referred to in Article 3(3) of Directive 2009/.../EC [on the promotion of the use of energy from renewable sources], concerning the share of energy from renewable sources in transport, in the light of the reports referred to in Articles 20(6) and 20(7) of that Directive’. [read more]

Mixed emotions

Feature

The most talked-about change in the last few weeks has been the European Parliament’s decision to approve the Renewable Energy Directive in mid-December. The industry welcomes this decision, and unsurprisingly the key European associations, the European Biodiesel Board (EBB) and the European Bioethanol Fuel Association (eBIO) are particularly pleased. The decision calls for the adoption of a 10%... mandatory target by 2020 for renewables in the transport sector, and confirms biofuels as one major tool for mitigating climate change, while securing the industry’s commitment to sustainable production. The target, which includes comprehensive sustainability criteria for biofuels and bioliquids, will allow the EU to move away from a fossil fuel-based economy and face challenges posed by climate change and energy security, while diversifying its energy sources. ‘This Directive will assure that only those biofuels that comply with unprecedentedly strict environmental and social sustainability standards can be used. Those arguing that this is bad legislation are not serious and disqualify themselves,’ says Ramón de Miguel, president of eBIO. EBB agrees: ‘This is giving a strong signal to the biodiesel industry in Europe, which, with 16 million tonnes of production capacity, has already achieved a high degree of maturity and committed considerable resources and investment to reach the 2020 target.’ In times of economic recession when different economic sectors are being hit by declining investment, the confirmation of the European target as a mandatory one is essential in order to pave the way for even more ambitious developments of renewable energy in the transport sector. The industry also welcomes the decision to introduce reasonable greenhouse gas (GHG) saving thresholds as part of the target. These gradually increase the requirements for GHG emissions savings compared to fossil fuels, from 35% when the Directive enters into force in 2010, to 50% by 2017 and 60% for new projects launched as of 2017. The new legislation will safeguard the current production capacity that required capital investments of over €5 billion as well as thousands of jobs that are indispensable in this time of global economic crisis. Moreover, this mandate will set the scene for new investments to further improve the technological profile of the European ethanol production, says eBIO. The associations and their members also fully support the agreement on indirect land use change (ILUC) effects. The decision to deliver a report on ILUC by the end of 2010 is in line with what the industry has constantly advocated, they say. Penalising biofuels producers across the board without studying ILUC first would have been senseless. eBIO is confident that the positive impact of European bioethanol production on ILUC due to its animal feed co-product, as well as the use of vast set aside areas and strong crop yield increases will be eventually recognised. ‘In the view of the European biodiesel industry, the confirmation of the 10% target for renewable energy in transport is a very important move but it will be equally important to ensure that the future implementation of the Directive does not undermine its content,’ says Raffaello Garofalo, EBB’s secretary general. He stresses that ‘as part of the long road ahead, the need is now to elaborate a new and transparent EU scientific reference for assessing the GHG savings of the different biofuels pathways and of the fossil fuels comparators’. [read more]

India’s first biodiesel producer

Feature

‘Integration is the key to our success,’ says Chalasani Bhaskar, CEO of India’s first and only up and running biodiesel producer Naturol Bioenergy. The company currently produces 30 million gallons a year of biodiesel, making it one of the top three global producers. Bhaskar largely attributes the company’s accomplishments to its state-of-the-art integrated complex at the port of Kakinada, Andhra... [read more]

India’s bold new targets

Feature

As the world’s biggest democracy, with a population of 1.1 billion people, a complex system of federal and state government, massive levels of inequality and burgeoning economic growth, few things are straightforward in India’s political or economic life. Biofuels are proving no exception. The Indian government has now announced ambitious plans to expand its biofuels production, by setting a new... 20% target for biofuels in the country’s overall transport fuel needs. Such a target will be exceptionally tough to meet. In fact it looks more like wishful thinking rather than practical policy. The only thing that might convert the target into a reality is if India’s disparate and divided political class can agree on some practical steps. This will require more self-denial than has ever before been achieved in the corridors of power in New Delhi, but equally, the country’s pressing energy problems might just focus attention as never before. India’s consumption of crude oil has risen strongly since the start of the current century. By 2007 it was consuming 2.72 million barrels per day or almost 1 billion barrels/year, putting it in the top 10 oil-consuming countries in the world. The bulk of this, some 70%, is imported, and this proportion will inexorably rise, simply because the country’s domestic oil production is not expected to increase in line with growing demand. Greater prosperity has resulted in motor vehicle ownership tripling between 1991-2004 to almost 73 million; its continued growth is expected to lead to demand for petrol rising by some 20% from today within four years. The resulting vulnerability to oil supply and price shocks is plain. Yet India has been slower off the mark than other major economies, such as the US, Brazil, the EU or China, in developing biofuels. This is surprising, given India’s vast arable land mass, some 162 million hectares, more than 50% of the total area. As much as 40 million hectares of arable land lies uncultivated, according to data from the Federation of Indian Chambers of Commerce and Industry. India’s relative foot-dragging over biofuels production has partly been due to its early decision not to base biofuel production upon food crops, because of India’s difficulties in feeding its own population, as well as the political backlash that such a move would invoke. [read more]

Biofuels throughout Asia

Feature

Biofuel production and consumption in Asia is expected to grow at an accelerating rate in the next few years as government regulations in many countries come into effect requiring the use of biofuels for road transportation. Although oil prices have dropped with the threat of an imminent global recession, most governments in Asia have already mandated the introduction of petrol and diesel blended... [read more]

Algae-powered plane takes flight

Feature

Based on the findings from the recent study Algae 2020, there are three key challenges facing commercial and aviation industries in the next few years. The first comes from petroleum-based jet fuel also known as JP8. As airline industries prepare for increasing growth from emerging market nations, they are also facing decreasing supplies of cheap oil and affordable jet fuel from petroleum. Most... [read more]

The green grid

Feature

The EU has set ambitious targets for reducing carbon emissions by 2020, and one of the key ways of doing this is to use biomass for power generation, rather than fossil fuels. But biomass is typically three to five times more expensive than coal, once all factors are considered. So producers are not always able to embark on major investment schemes to set up solely biomass-fuelled plants. Some... [read more]

Price analysis

Feature

Corn was trading at almost $8 (€5.7) / bushel of corn on 27 June, and has now fallen all the way back down to slightly higher than $3/bushel, as of 12 December. On the way up, ethanol producers were vociferously complaining about the high cost of corn; on the way down, the same producers have been complaining that their product is struggling to compete with the plunge in crude oil prices and,... [read more]

R&D gathers pace

Feature

Biofuel R&D has never been more important given concerns about greenhouse gas emissions, reduction of oil dependency and the urgent need for energy self-sufficiency and security of supply. The drive to create second and even third generation biofuels is hotting up, with exciting pilot plants in the offing. The EU Directive call for 10% biofuels in final energy consumption by 2020 makes an... [read more]

Preparing for multiple blends

Feature

As the demand for biofuels increases, so does the need for dedicated storage and blending facilities at terminals. Leading Italian storage provider Decal is one which is putting a special emphasis on expanding current facilities to keep up with this demand. Decal was founded in Italy in 1961 and in 1963 the company’s first marine terminal for the storage of oil and petrochemical products was set... [read more]

The need for flexibility

Feature

Petrochemical terminals began storing biofuels less than a decade ago but are now increasingly dedicating more space to renewable fuels as demand grows. However the biofuels market is not as stable and consistent as the oil products sector. Legislation is still being developed and targets introduced, so storage terminals cannot guarantee that this space will always be required. The... [read more]

Biodiesel storage tanks: are they properly covered?

Feature

In these tough economic times, tank farm owners and operators will be reviewing all areas to identify more cost-effective and benefi cial ways in which they can extend the operational lifetime of their facilities. This, coupled with the onset of more and more biofuels to meet increasing demand for environmentally-friendly solutions, is fuelling the drive towards the development of ever better and... [read more]