March 27, 2018
BRUSSELS INSIDER #1 by Sonja van Renssen
While truck makers turn electric, biofuels fight for their survival in Europe
March 27, 2017
Even trucks are likely to go electric in the long-term. Post-Dieselgate, VW and its truckmaking subsidiary Scania are fully focused on e-mobility, with a role for biofuels “only as long as the internal combustion engine is still around”. The biofuel industry is having to fight for space in a new EU renewable energy directive. It might get some help from the EU’s first ever CO2 emission standards for trucks, to come out on 2 May.
Much like natural gas, biofuels in Europe today are increasingly seen as a bridging, not final, solution to climate change. They can help decarbonise transport – and trucks in particular – while the internal combustion engine is still prevalent, but the long-term future is electric. That was the message from representatives for Volkswagen and Scania (the Swedish truck maker that is part of the Volkswagen group) at the latest event on biofuels in Brussels last week.
In a presentation setting out the car company’s “Together 2025” vision – effectively a response to the Dieselgate scandal – Julian Herwig from Volkswagen’s Brussels office said the company’s ambition is to become “number one in e-mobility worldwide”. He talked about electric cars, connected cars, autonomous driving, robotaxis, shared driving, CNG vehicles and e-fuels – but hardly mentioned biofuels. Volkswagen wants electric cars to make up a quarter of its sales in 2025 and half by 2030 – when there should be an electric version of each of its 300 models.
“The internal combustion engine will remain important for many years,” Herwig did add. And “as long as that is the case… biofuels will also play a big role”. But he had little else to say on the subject.
More surprisingly perhaps, Urban Wästljung from Scania had a similar message for trucks.
On the one hand he emphasised that vehicle makers have to use all available options to cut CO2 “here and now”. He highlighted potential emission reductions of up to 90% with biofuels such as hydrotreated vegetable oil (HVO) and ethanol, and, controversially, argued that Europe could use a much greater quantity of “sustainably produced crop-based biofuels” than it does today. But he noted that “we can do a lot with electric on heavy duty vehicles too”, including making battery-powered trucks.
By 2050, Wästljung expects that “there will still be a market for internal combustion engines” but that trucks will be “heavily hybridised” i.e. running on electricity at least part of the time. He suggested that the internal combustion engine would primarily serve for the “last mile”.
Both Herwig and Wästljung were cautious about the prospects of fuel cells and hydrogen. Herwig said it is “not a focus for now”, while Wästljung said he thought it would be “too expensive”.
Trucks are next up on the European Commission’s climate agenda too. A Commission official at the biofuels event confirmed that proposals for the EU’s first ever CO2 standards for trucks and buses are due out on 2 May. They will be the centrepoint of the third and final part of an EU clean mobility package.
The decarbonisation of transport is a key priority for the Commission, the official said: it consumes one-third of Europe’s energy and emits a quarter of its CO2. Emissions are still higher than in 1990. Europe’s renewables success story is in spite of rather than because of the transport sector.
The first part of the Commission’s mobility package came out in May 2017 and included a proposal to introduce CO2-based tolling for trucks; the second part, in November 2017, included post-2020 CO2 standards for cars and vans. These are expected to deliver a 22% cut in Europe’s overall road transport emissions by 2030. On 5 March, EU climate and energy commissioner Miguel Arias Cañete told an EU environment council in Brussels that trucks should deliver the missing 3% to make up the quarter cut that road transport is expected to deliver for the EU’climate targets.
At the 5 March meeting, it was already clear how divided countries are over the proposed CO2 standards for cars and vans, however. Don’t expect an easier ride for trucks: 3% may not sound like much but every effort carries a cost and as Wästljung said: “You buy a truck to make money.” (And you buy a car to lose money, he joked.)
First generation phase-out
While the CO2 standards should provide a push for low-carbon fuel options such as biofuels, a parallel piece of legislation on renewable energy is threatening to severely restrict them. In the run-up to a second “trilogue” meeting of MEPs, Member States and the European Commission to negotiate a new EU renewable energy directive (REDII) on 27 March, biofuel trade associations have intensified their calls to maintain – and not phase down – a 7% cap on crop-based biofuels.
In the short term, i.e. 2030, conventional biofuels are indispensable to decarbonise the transport sector, argued Stefan Schreiber, Vice President of the European Biodiesel Board, at the event last week. In Germany, conventional biofuels have delivered 7.3 million tonnes of CO2 savings versus just 580 tonnes from electric vehicles, he said. Green MEP Claude Turmes countered with the argument repeatedly made by NGOs such as Transport and Environment (T&E) that scientific studies show that biodiesel will actually increase not decrease greenhouse gas emissions because of indirect land-use change (ILUC). Schreiber said the California Air Resources Board (CARB) had data to the contrary.
“Leave conventional biofuels the space to deliver today,” Schreiber urged. “They do save CO2 especially if you talk about European feedstocks.” Turmes insisted that in the current negotiations, the Parliament is protecting existing investments by proposing to cap first generation biofuels at current levels, with a 7% ceiling. But he cautioned: “You cannot develop second generation when competing with first generation.” Schreiber argued that the opposite is true: his employer Verbio would not have developed the production of biomethane from straw without first generation biofuels buying it the necessary time and investment capital.
Both Parliament and Council foresee the phase-out of food-based biofuels, but how fast this happens and how to stimulate alternatives (advanced biofuels, e-mobility, gas) remain open questions. Each institution has its official position, but deep splits remain within as well as between them (that goes for the Commission too by the way – think of DG Agri vs. DG Envi for example). At last week’s event Christofer Fjellner, a Swedish MEP from the Parliament’s biggest political group, the centre-right EPP, echoed Schreiber’s arguments for example, with the simple statement: “We need it all.”
Over a fifth of Sweden’s transport mix is biofuels and the country aims to reduce its emissions from transport by 70% by 2030 relative to 2010. “The REDII directive risks making it impossible or very expensive to meet our goals,” Fjellner warned.
Some warn that the same might be true for the EU’s overall renewable energy and climate targets, if bioenergy is curbed too much. Bioenergy experts still tend to agree that bioenergy is a must for the Paris climate goals and at the biofuels event, Birka Wicke from the University of Utrecht also presented evidence that bioenergy can support multiple UN Sustainable Development Goals (SDGs).
Struggle over palm oil continues
The one feedstock that is easy to point the finger at is palm oil. European biofuel producers don’t like it because it’s a foreign import that competes with homegrown feedstocks. The NGOs don’t like it because it’s so closely linked to deforestation.
Several industry stakeholders at an event on biofuels in Brussels last week suggested that solving the palm oil issue would solve the first generation biofuels issue. “Don’t throw the baby out with the bathwater,” pleaded Stefan Schreiber, Vice President of the European Biodiesel Board (EBB), the baby being all non-palm oil first-generation biofuels.
European first generation producers desperately need the market space that a ban on palm oil would create. NGOs see problems around all land-based biofuels, but do single out palm oil for particular criticism.
As a result of this rare alignment among lobby groups (especially on an issue as bitterly contested as biofuels), the Parliament has proposed to ban palm oil-based biofuels from 2021. Or rather, disallow these biofuels from counting towards an EU renewables in transport target for 2030, which amounts to roughly the same thing.
Member States, which immediately faced threats of a retaliatory boycott on EU products from top palm oil exporters Indonesia and Malaysia, are not so keen. Especially France, which is trying to sell warplanes to Malaysia.
“It [the palm oil ban] won’t be easy,” admitted Christofer Fjellner, a centre-right Swedish MEP who works on energy, environment and trade issues. “But WTO dispute settlements do not always work. Trump might save us!” The Trump administration has questioned the effectiveness of the WTO and its dispute resolution mechanism and recently imposed tariffs on steel and aluminium imports. If the WTO is sidelined, a European palm oil ban would not be impossible.
The EU has used trade tools to protect its biodiesel producers in the past, notably through anti-dumping duties on Argentine (soy) and Indonesian (palm oil) biodiesel. Those have since been overturned by the EU’s second-highest court and Argentina also won a case against the EU at the WTO.
These legal defeats have not deterred the EU, however. On 31 January 2018, the European Commission launched a new investigation into whether Argentine biodiesel exporters benefit from unfair subsidies. Like before, the investigation is in response to a complaint from the EBB.
Palm oil producers meanwhile insist that their product can be sustainable. There are projects to reduce methane leakage from palm oil mills, engage on-the-ground stakeholders in a dialogue (e.g. the Oil Palm Adaptive Landscape project) and help independent smallholders get certified. These were just a few of the initiatives presented at the 8th ISCC Global Sustainability Conference in Brussels on 20 February. The ISCC is one of 16 voluntary schemes that exist to certify that biofuels comply with EU sustainability criteria. They check that production did not take place on high-biodiversity or high-carbon stock land, and that it delivers sufficient greenhouse gas emission reductions.
“Why do you not implement a level playing field by capping all vegetable oils?” asked a representative from Indonesia at the ISCC conference. The problematic answer is that the rationale for limiting vegetable oils would boil down to using a life cycle emissions metric incorporating indirect land-use change (ILUC), and ILUC has been excluded (for now at least) as a basis for lawmaking.
Just like EU legislation, schemes such as ISCC do not take ILUC into account. But they are criticised for several other reasons. A European Court of Auditors report in 2016 called them “not fully reliable”. NGOs warn that the schemes only cover a fraction of supply and have included plantations built on formerly forested land.
BRUSSELS INSIDER #2 by Sonja van Renssen
EU leaders call for climate strategy – should we be impressed?
March 27, 2017
NGO’s welcomed a surprise move by the European Council to ask the European Commission to produce a long-term climate strategy by the first quarter of next year, but Sonja van Renssen writes that its significance must not be exaggerated. Meanwhile, the original plan to discuss a strategy paper on energy and climate, including nuclear power, was postponed by the Council until June.
Energy and climate were on then off the agenda of the spring summit of European leaders on 23 March. The initial idea was that heads of state and government would discuss a new European Commission strategy paper on energy and climate policy “with a 2025 perspective” and a focus on the future of nuclear power.
That strategy paper, announced by Commission President Jean-Claude Juncker in a letter last September, will now only be issued in the run-up to the summer summit of 28-29 June. It will be a “Communication on the future of EU energy and climate policy, including on the future of the Euratom Treaty”, according to Juncker’s letter. It is listed under “Initiatives to be launched with a 2025 perspective”.
With no paper to discuss and climate and energy not on the final agenda – which was heavy enough with notably US tariffs on aluminium and steel to talk about – there was no expectation for the subject to make a reappearance.
Yet European leaders slipped a short sentence into the “Other Items” part of their traditional council conclusions – adopted unanimously – that reads: “The European Council invites the Commission to present by the first quarter of 2019 a proposal for a Strategy for long-term EU greenhouse gas emissions reduction in accordance with the Paris Agreement, taking into account the national plans.”
NGOs jumped to welcome it. EU Climate and Energy Commissioner Miguel Arias Cañete responded on Twitter: “EU steps up climate action as we forge ahead with the low-carbon transition. No time to lose, EU Commission will deliver.”
Some read a lot into this, such as Wendel Trio, Director of Climate Action Network (CAN) Europe, who said in a press release: “This is an important step that will set the wheels in motion for raising the EU’s climate target. The new strategy needs to outline what efforts the EU will pursue to keep temperature rise within the 1.5 degree limit set in the Paris Agreement. This will prove beyond doubt that the current climate target for 2030 is insufficient and trigger its review and increase.”
This seems an optimistic reading, although the 2025 framing of the Commission paper now due in June suggests that the Commission will launch a debate on higher climate ambition for the EU, also for 2030.
It is not news that the Commission intends to draft a new 2050 climate strategy for Europe. The last strategy dates back to 2011. With €2.9 billion shaved off the estimated cost of meeting a renewables target of 27% in 2030 in just one year (when the Commission updated its 2016 impact assessment in 2017), you can expect significant changes from 2011 to today.
What is news, is that the Commission has now been called upon to deliver that new strategy a year from now. Some thought it would prefer to wait until after Brexit in March and European Parliament elections in May, and indeed pass the buck to a new European Commission in November 2019.
The Council’s call helps lay the foundations for a stronger EU position at the next UN climate conference (COP24) in Katowice, Poland, this December. The EU is required to draw up a 2050 strategy under the Paris Climate Agreement after all. It also opens a door at least to talking about greater climate ambition.
That said, there is little appetite among many Member States right now for a debate about greater emission cuts and it seems hard to imagine a serious discussion any time soon. Perhaps the “taking into account the national plans” phrase is to pre-empt the top-down imposition of an (overly ambitious) EU-wide target. It implies more of a Paris-style bottom-up approach.
Quentin Genard from think tank E3G also points out that the European Parliament has issued a call for an EU – and national – 2050 strategies in a new energy governance regulation for 2030 that is currently being discussed by EU lawmakers. This is part of the EU’s Clean Energy Package.
It is this regulation, led by Green MEP Claude Turmes on the Parliament’s side, that many are looking to, to provide a legislative backstop for EU climate and energy policy. In it, Turmes wants a long-term “net zero emissions” goal for the EU. Member States are resisting this.
Some suggest that European leaders did not realise what they were signing off on at their summit last week. But the opposite could also be true: it’s easier signing off on a call to develop a new 2050 strategy for next year than a net zero emissions goal before the summer break (see trilogues update below)
Clean Energy Package trilogues update
The second governance trilogue – negotiation between MEPs, Member States and the European Commission – scheduled for 21 March did not take place, Energy Post understands. It was replaced by two technical meetings. The next governance trilogue is now scheduled for 26 April.
Separately, a second energy efficiency trilogue did take place on 20 March, but with little progress. There is agreement on some of the more technical points, but a lot of work to be done still. The next trilogue, originally scheduled for April, has been moved to 16 May. The informal energy council planned for 16 April in Sofia could be an opportunity for EU energy ministers to discuss how to find a political compromise with the Parliament.
Bulgaria, holder of the rotating EU presidency until 1 July, is still aiming to broker deals on governance, energy efficiency and renewables before the summer break, but the timing is starting to look tight.
Other 2050 initiatives to come
Think tank Bruegel is planning an event for 18 April at which it will present a “roadmap” to guide the development and delivery of a new long-term EU climate strategy. Separately, the European Climate Foundation is reportedly also undertaking some kind of modelling work around 2050. The European Chemical Industry Council (CEFIC) is working on an update of its own 2050 roadmap for delivery in February next year.