EU biodiesel output doubles in 2 years, may reach 2010 targets early

The European Biodiesel Board (EBB) announces its official figures [*.pdf] for the year 2006, which confirm that the overall biodiesel production the EU increased from 3.2 million tonnes in 2005 to nearly 4.9 tonnes last year. This represents a 54% yearly growth, which follows a 65% record high growth in the previous year 2005. But the EBB also warns that lack of clear standards and legislation may put a dent in this growth. It offers recommendations for much needed interventions. Finally, the board lashes out at the American "B99" export subsidy for biodiesel, which is disrupting EU biodiesel markets. This international trade violation will be disputed before the WTO.

Continued growth
EU biodiesel production has more than doubled in the last two years (from 1.9 million tonnes in 2004), marking a further acceleration in the continuous expansion of the European biodiesel sector. Growth rates in 2002, 2003 and 2004 were 30-35%. Biodiesel now makes up 80% of the EU's total biofuel output. European producers account for 77% of world-wide biodiesel production.

Germany remains by far the largest producer, accounting for more than half of the entire EU's output. France and Italy follow. In the UK, output is still relatively low, but tripled from 2005 to 2006. New entrants include Belgium, the Netherlands and Portugal (table 1, click to enlarge).

Today, in Europe, there are already 185 fully operational biodiesel plants. Over 58 are under construction. In 2007, capacities for biodiesel production reached 10.2 million tonnes (table 2, click to enlarge), setting the foundation for a further strong expansion of the sector, which will be able to meet the 2010 EU targets two years early. Thanks to the plants currently under construction, production capacities are expected to reach even much higher levels, growing by the same rate at least until the end of 2008.

In terms of industrial capacities, the EU biodiesel industry is ready to reach the 2010 EU target and will certainly be ready, well in advance, to fulfil the 10% biofuel targets endorsed by the EU heads of state last March at the Spring Summit (earlier post).

'Legislative desert'
However, the EBB warns that in the EU, biodiesel is still strongly hindered by the lack of appropriate market measures able to create a real market for the biofuel in member states. As a result, the important increase in industrial biodiesel capacity risks to remain very largely underutilized and production may start stagnating if not declining already from this year onwards, unless urgent action is taken. This would be a paradox, taking into account that such industrial capacity has been developed in order to respond to the EU biodiesel targets, which EU authorities recently doubled.

The EBB says this paradox needs to be avoided: the EU cannot on the one hand ask the biodiesel industry to undertake a long walk to reacht very high levels of production in the long run, and on the other hand leave this same industry alone to cross a legislative and standards desert over the next two years.

Urgent legislative and standardisation provisions need to be adopted in many member states and by the CEN in order to create a real market for the biodiesel quantities that will be needed to fulfil the 2010 and 2020 targets. The EBB suggests the following interventions:
energy :: sustainability :: ethanol :: biodiesel :: biofuels :: export subsidy :: WTO :: European Union ::

• Member States legislations and new EU law need to create the real conditions in order to sell biodiesel in the various countries: real conditions means not just only 'theoretical' targets or mandates with no practical impact, as so far occured in Italy, Spain, Poland and many other countries, but efficient legislations enabling the biodiesel capacities already present in these countries to produce and sell the high quality product that they are able to deliver;
• To this aim, the biodiesel incorporation rate in EN 590 diesel (with no labelling) needs to be increased quickly from the 5% to 10% and then again to a 15% biodiesel in diesel rate by 2015 if we are seriously aiming at a 10% minimum target in all Member States in 2020;
• In this sense, the EBB urges the CEN to accelerate its work in order to amend the European diesel standard EN590 to include a 10% biodiesel incorporation (the work is lagging behind because of the strong opposition of some vehicle manufacturers) and to start adapting technology and norms to incorporate 15% biodiesel by 2015; if conservatism and inertial logics will continue to prevail in the CEN, this could be achieved by way of legislation introducing once and for all these percentages under the EU definition of diesel fuel (i.e. with no separate labelling), detailed by the fuel quality Directive 98/70 currently under revision.

Diesel deficit, gasoline surplus
At the European level, biodiesel makes up precisely 80% of EU biofuels production (bioethanol output stood at 1.2 million tonnes in 2006) and is very likely to carry on being the biofuel most demanded in order to fill future ambitious EU targets. EU fuel markets are experiencing increasing diesel deficits and gasoline surpluses - we imported 24 million tonnes of diesel from Russia already in 2005 and the same year we exported 19 million tonnes of gasoline to the U.S. In 2006 and 2007 this trend is being amplified by the genereal dieselisation of EU vehicles. Biodiesel and diesel substitutes demand as a "security of supply" demand will be the main driver for future EU fuel distribution markets.

With its strong diesel demand, at the international level, the European Union continues to excel as "biodiesel land": the EU is the worldwide leader in biodiesel production, both in terms of biodiesel capacities and production. In 2006 we produced 77% of biodiesel produced world-wide. In the U.S., the world's second largest biodiesel producer, production amounted to around 250 million gallons (approx. 836,000 tonnes) in 2006.

American export subsidy
The international context is however perturbed by the continuing negative effects of the "B99" U.S. export subsidy, which is disrupting the EU biodiesel market. Through the B99 scheme - which the EBB deems 'unfair' -, American producers can access EU markets with a competitive advantage of roughly €200/m³ when compared to EU manufacturers, and they are able to sell U.S. originated biodiesel at the same or even at a lower price than the cost of the EU's industry's raw materials.

After having alerted EU authorities about urgent action to be taken at WTO level against this scheme, the EBB is now preparing a countervailing duty complaint to be filed against this international trade violation. Mostly due to the negative impact of B99 exports, EU biodiesel production is expected to stagnate in the year 2007, in spite of the 50-60% growth of the last two years and in spite of the fact that EU production capacities have reached more than 10 million tonnes in 2007.

Finally, the EBB notes that it is worth underlining that major EU agricultural organisations have recently officially indicated that the very largest part of future biodiesel demand, even in the perspective of 2020 targets, can be produced from raw materials originated in the EU thanks to the yield potential growth for EU oilseeds. (Biopact and others think this will not be the case and the EU will have to rely on imported feedstocks.)

The European Biodiesel Board, also known as EBB is a non-profit organisation established in 1997. It represents the voice of the EU biodiesel industry by gathering 55 companies and associations. It aims to promote the use of biodiesel in the EU. EBB members represent an 80% share of the EU's biodiesel output.

References:
EBB: 2006, 2007 production and capacity statistics [*.pdf] - July 17, 2007.