Jon Lovett picks over the prickles

The technology now exists to convert biomass into fuel, thereby bypassing the lengthy geological process of forming oil from vegetation.

Biofuels cover a range of products: from ethanol, which can be readily made from fermentation of sugars in brewing, to biodiesel, which is derived from vegetable oils or animal fats.

Expanding the use of biofuels to power transport in Europe would bring us many benefits. These include carbon savings to help limit global warming, enhancing security of our energy supplies, encouraging rural economic productivity and providing an export market for developing countries.

However, policies which subsidise biofuels inevitably introduce skew into the market, and these can create problems.

Advantages of biofuels

We need biofuels in Europe for two main reasons. First, security of supply. 98 per cent of the transport market is dependent on oil. If nothing is done, external energy dependence will reach 70 per cent before 2030, with 90 per cent external dependence on oil. Liquid biofuels provide the only direct substitute for oil.

Second, road transport generates 85 per cent of the transport sector’s carbon dioxide emissions and carbon dioxide has been linked to global warming. Biofuels will provide marked reductions in carbon emissions. They will also revitalise the European agricultural sector and provide an important export for developing countries.

European policy

European policy makers have responded to the issues by passing European Directive 2003/30/EC of 8 May 2003 on the promotion of the use of biofuels or other renewable fuels for transport.

The Directive paints an attractive picture of the potential that biofuels offer. To move the use of biofuels forward, the Directive set targets. Biofuels and other renewable fuels should make up 2 per cent of all petrol and diesel by 31 December 2005, with the proportion rising to 5.75 per cent by 31 December 2010.

Policy into practice

However, the problem is that biofuels are more expensive than oil and UK has not met the 2 per cent target. In Europe, only Germany and Sweden have met the target. These two countries got their biofuels programme off the ground early by implementing legislation in the form of tax exemption for biofuels, requirements for fuel suppliers to include biofuels in their products and the use of greener vehicles within government transport fleets. This meant that both countries had an established production and supply chain for biofuels before the EU Directive came into force.

This doesn’t mean to say that the UK government isn’t active. In 2004 the UK Energy Act became law, and granted the government primary powers to introduce a Renewable Transport Fuel Obligation. An RTFO scheme could have varying layers of complexity; from an obligation to simply supply a biofuel mix, to trading of Renewable Transport Fuel Certificates, to paying a buyout price rather than supplying the fuel. Of course, the more complex the system, the more expensive it is to administer.

So, rather than moving towards a market in which biofuels compete effectively with oil, the future costs of global warming are having to be internalised by the dead hand of government regulation.

Policy measures could include eco-labelling; price differentiation through emission charges and product levies; environmental quality promotion through education; tradable permits; environmental performance bonds, funds and environmental risk assessment in banking procedures; tax exemptions for vehicle fleets and a review of the Common Agricultural Policy, which is something of an ongoing and politically charged process.

Pros and cons

If the money was right, we could do it physically.
About 17 million hectares of EU agricultural land is needed to meet the Directive’s objective entirely from domestic production; this is from a total of 97 million hectares. In addition, 35 per cent of the annual growth of wood in EU forests is not used, and could be used for biofuel.  Countries such as Bulgaria and Romania, due to join the EU in 2007, have abundant agricultural land.

But our agreement with the World Trade Organisation means that we cannot create a ‘Fortress Europe’ against biofuel imports, and growth of biofuels could be an important source of income for developing countries. On the other hand, whilst this might be an economic boon to developing country agriculture, it has also raised concerns about biodiversity loss and replacement of food crops.

While there are many benefits from expanding the use of biofuels in Europe, the policies we need to get us there create their own practical difficulties. The way forward is to combine the technical solution of biofuels with insights gained from economic and social analysis of the impacts that a shift to biofuels will have.

Dr Jon Lovett is at the Centre for Ecology, Law and Policy at the University of York