Shifting biofuels goals could threaten industry development

According to consultancy firm GlobalData, the US Environmental Protection Agency (EPA) may cut some three billion gallons from 2014 targets; from 18.2 billion to 15.2 billion gallons.

Elsewhere, the EU has lowered its ceiling on food-based biofuels used in the transportation fuel mix from 10% to 7%, responding to claims that food crop biofuels are inflationary.

The US moves represent the first reduction to annual targets since 2007, potentially opening the floodgates for greater reductions and regulatory overhaul.

Economic sense

GlobalData’s managing analyst Carmine Rositano said: “While gasoline demand has declined over the past seven years, the approved annual use of ethanol in gasoline has not been adjusted to reflect this change, as increasing amounts of biofuels have been mandated to be blended into petroleum products each year through to 2020.

“The refining industry has warned that increasing ethanol use in gasoline would exceed the 10% mix that dominates car engine designs and the gasoline fuelling infrastructure, so revising the mandated amounts for biofuels in the energy mix would make economic sense.”

Nonetheless, US cuts seeking to mirror decreases in gasoline demand would still impact on the burgeoning biofuels sector. Elsewhere, “The EU’s new 7% biofuels ceiling comes in response to claims that using biofuels made from food crops increases inflation on food costs,” added Rositano.

“As the EU is still aiming to achieve 10% of transportation fuels made from renewable energy sources by 2020, the gap between this target and the 7% ceiling of food-based biofuels indicates a reliance on next generation biofuels made from algae, waste and other materials.”

Regulatory shift

These findings come as another recent report, under a new scenario recommended by the Low Carbon Vehicle Partnership (LowCVP), advocates the use of biofuels in the UK mix.

LowCVP data says maintaining the 10% goal will be crucial for both jobs and the UK’s overall green transport package, within overall goals to meet the Renewable Energy Directive transport target.

GlobalData’s head of oil & gas research Matthew Jurecky added: “It’s normal for agencies to review challenged policy. Ongoing analysis on the actual reduction of greenhouse gases, inclusive of the entire value chain, the impact they’ve had on food crops and prices, and the simple economics associated with producing them, underlies regulatory shift.”

His words hint biofuels advocates ought not panic, but crunch the numbers effectively before re-estimating the true impacts of any regulatory shift in the CO2 reduction arena on biofuels producers.

edie staff