On The Road: EU Goes For Efficient & Electric, Ponders Biofuels

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Originally published on EnergyPost.
by Sonja van Renssen

The European Commission’s strategy for decarbonising the road transport sector is finally taking shape: Brussels wants efficiency first, electrification second. But it doesn’t know what to do about biofuels. “There is no appetite for [new] targets”, says Commission Director Marie Donnelly. Sonja van Renssen takes us on the bumpy road to a climate-friendly European transport sector.

Credit: Matthias Ripp (via Flickr, Creative Commons license)

On 18 June, the European Commission held a conference on decarbonising road transport. It had a star Brussels line-up with no less than three Commissioners (plus one Vice President on video), MEPs, national officials, CEOs, NGOs, the Mayor of the City of Gothenburg and the Chairman of the Management Board of Daimler AG. This was the day on which Brussels formally kicked off debate on a new climate policy for road transport for 2030.

Because so far the new Commission has not mapped out the road ahead. Although the situation is urgent. Road transport accounts for about a fifth of Europe’s greenhouse gas emissions (and all of transport together for about a quarter, second after energy). While greenhouse gas emissions from other sectors fell by 15% from 1990-2007, those from transport grew by 36%. This growth stopped in 2008 – the year of the crisis – but in 2012 (the most recent year for which Eurostat data is available) transport emissions were still 20% above 1990 levels. In other words, they would need to fall by 67% by 2050 to meet the EU target (set in 2011) of a 60% reduction by 1990.

Patchy progress

It’s not as if the EU has done nothing. Transport – and indeed road transport – was part and parcel of the first climate and energy package for 2020. This led to CO2 emission standards for cars and vans, a target for renewables in transport, and a target for emission reductions from road transport fuels. The EU also tried to put aviation into the EU ETS and has since issued emission monitoring requirements for ships.

But there are plenty of gaps and uncertainties. Trucks for example remain unregulated. Indeed, the Commission has backed away from emission standards for them, referring in its Energy Union package only to a monitoring and reporting system. (The US meanwhile, is embarking on a second round of truck standards.) New cars and vans beat their emission targets with disturbing ease, implying that they are too low. There is unease too over how big the gap is between real world emissions and those reported by carmakers based on lab tests.

Meanwhile, the transport sector is barely halfway to its 10% renewables target for 2020 (see the Commission’s latest renewables progress report, with a special section on biofuels) with few prospects for accelerated progress: the first generation biofuels that made that possible have now been capped due to concerns over indirect land-use change, while the roll-out of electric vehicles will probably only really start in the middle of the next decade. An attempt to impose the roll-out of an alternative fuel charging infrastructure was plucked of specific targets when agreed last year.

No EU ETS for transport

So there is plenty still to do and the big question is: how will the Commission proceed? The Commission will come out with an overall strategy for decarbonising road transport in the first half of 2016. This will be done alongside a proposal for a new “Effort-Sharing Decision” for 2030 (the existing 2020 Decision is currently under review). This Decision sets binding emission reduction targets per member state for the sectors that are not included in the EU Emission Trading Scheme (ETS). In practice, this covers transport, buildings and agriculture. To get to its 40% greenhouse gas emission reduction target, Europe needs to deliver a 30% emission reduction in the non-ETS sector, relative to 2005.

So far, while the EU ETS reached its 2020 emission reduction target six years early, member states have struggled to deliver on the non-ETS sector and transport in particular. At the event on 18 June, Energy and Climate Commissioner Miguel Arias Cañete gave some clues on the thinking within the Commission. These fit well with what he said on the subject earlier this year.

First and foremost, the Commission is a strong believer in vehicle emission standards and does not plan to abandon these after 2020. “Let me be clear: there will be new standards post-2020. These targets will be ambitious but achievable,” Commissioner Arias Cañete told the conference. He pointed out that a new car today is 22% more efficient than in 2007. Then added: “I don’t think personally inclusion in the EU ETS can replace emission standards. It can be a complement but not a substitute.”

This is important. The Commission has never promoted the inclusion of road transport in the EU ETS, but others have and some (German) carmakers still do. This stems from a calculation that it costs considerably more to decrease emissions in road transport than in other sectors. In other words, it would be cheaper for carmakers for buy emission reductions from other parties than be forced to make reductions due to sector-specific standards.

Still, Arias Cañete made it clear that the Commission is treating transport as part of Europe’s “non-ETS” emissions, in line with what European heads of state and government decided at their energy and climate summit back in October. He also recalled that although member states are currently free to include transport in the EU ETS, not one of them has done so.

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Electrification strategy

If greater engine efficiency is top of the Commissioner’s agenda, electrification is in second place. Arias Cañete talked about Europe becoming a leader in electromobility back in February. Vice President for the Energy Union Maroš Šefčovič tweeted just this week: “Electrification of transport is key to reduce dependence on oil & other fossil fuels. Visit #BMW production #i3 #i8”. He makes the link to smart grids and a new opportunity for European competitiveness.

At the 18 June conference, André Weidenhaupt, head of the environment department at the Ministry for sustainable development and infrastructure in Luxembourg – set to assume the EU presidency in July – called for a “concept for the electrification of transport”, including a shift of freight from roads to railways. Campaign group T&E director Jos Dings said: “For us the future is clear: there is a sustainable electricity revolution going on and transport needs to be a part of it, to accelerate it.” Before the full-scale transition to electrification, Dings sees “enormous untapped potential” to further improve the efficiency of conventional engines.

The car industry itself now says electrification is essential. Dieter Zetsche, Chair of the Management Board at Daimler AG, told the 18 June conference that the existing 95gCO2/km emission standard for cars for 2020 cannot be met without some electrification: “Given physics and the time left, it’s not possible without introducing a certain percentage of more or less hybrid cars.” Yet although the car industry has invested some €20 billion in electric cars, “unfortunately customers are not buying them”. He concluded: “It’s not a given the 95gCO2/km will be accomplished.” And yet, he also believes this is exactly what’s needed for the car industry to deliver for 2030: “With the achievement of 95gCo2/km in 2020, the replacement of the fleet will lead to a 30% reduction of CO2 by the end of the next decade.”

Reviving biofuels

Where does that leave EU fuels policy, which up to now, alongside vehicle standards, has been the EU’s main instrument for decarbonising road transport? The Commission has two polices in place that promote a switch to renewable fuels: a target for 2020 of 10% renewables in transport and a 6% greenhouse gas emission reduction target from road fuel suppliers. But Brussels now proposes to abolish both of them.

“The Commission does not think it appropriate to establish new targets for renewable energy or the greenhouse gas intensity of fuels used in the transport sector or any other sub-sector after 2020,” it said in its 2030 climate and energy proposals back in January 2014. Marie Donnelly, the Commission’s Director for new and renewable sources of energy, energy efficiency and innovation, confirmed as much at a biofuels event in Brussels on 23 June: “It is clear we will not have a sub-target in the transport space.”

But if there are no targets, how then will the Commission deal with fuels? Whatever electrification strategy may come, two facts help make biofuels indispensable to decarbonising transport, Donnelly said on 23 June. One, electrification won’t start in earnest till 2025 and two, energy demand in transport will grow with the economy – it always has, despite efficiency gains. Pete Harrison, Director of the European Climate Foundation’s transport programme (and formerly a Reuters’ journalist who covered EU biofuels policy extensively) summed it up nicely: “There will still be a lot of liquid fuels in 2030.”

In Europe, this means diesel. And the carriers most dependent on it are trucks and airplanes.

“How will we tackle the decarbonisation of diesel?” Raffaello Garofolo, Secretary General of the European Biodiesel Board (EBB), asked Arias Cañete on 18 June. Boeing pointed to biofuels as a key investmentwhen it presented its 20-year market outlook in Brussels this week. And yet, biofuels got scant mention in the opening debate with Arias Cañete at the 18 June conference. Indeed T&E’s Dings referred to them as an example of an “ineffective policy” that had delivered “hardly any emission reductions” at “high cost”.

Biofuels have suffered at the hands of the acrimonious debate around indirect land-use change (ILUC), i.e. their impact on how land is used and what this means for climate change. Many doubt that most biofuels used today are really beneficial to the climate. Donnelly said quite bluntly that ILUC is the reason there is no target for transport under consideration. “The ILUC debate poisoned that space,” she said on 23 June. “There is no appetite for targets. I blame sustainability for this mess.”

And yet she is quick to add that Europe has the “best” sustainability criteria in the world for biofuels. If the lesson from ILUC is to put sustainability first, it’s in a wide, systemic sense. For Donnelly, the priority is greening the energy system (for example, by encouraging a broad shift to bio-based materials) not the ins and outs of every biofuel. “ILUC is not my primary concern right now,” she said. The issue should also diminish with the switch to advanced biofuels, made from residues and waste.

The non-expert’s guide

For biofuels, it’s all about clawing back some credibility. “We should have pushed sustainability,” said Ilmari Lastikka, EBB Board Member and Sustainability and regulatory affairs manager at Neste (formerly Neste Oil) at an EBB event in Brussels on 17 June. “Now half thinks biofuels are bad and the other half thinks they’re way too complicated.” For Harrison, strong sustainability criteria are a “prerequisite” for investor security going forward.

It is precisely to set this record straight that four companies this week launched a new website called “Biofuels for Europe”. BP, Novozymes, Scania and Shell commissioned a consultant – biofuels expert Meghan Sapp – to lead the work. It’s supposed to be “the non-expert’s guide to understanding the facts behind the biofuels debate”. Six academics specialised in different facets of the issue have trawled the literature in an attempt to provide a “science-based” portal that addresses everything from food vs. fuel and ILUC to energy security and cost. Stakeholders can even put questions straight to the contributing academics.

Will it work? Certainly the atmosphere at all these biofuels events was less hostile than in the heyday of the ILUC storm. The Commission recognises that biofuels have a role to play and will need policymaker support – including financing, emphasised Donnelly. An advanced biofuel refinery can cost €400 million. “Price certainty is the number one obstacle we face,” said Shell’s Matthew Tipper, Vice President for alternative energies, on 23 June. Shell has four advanced biofuels projects on the go, but not one of them is in Europe. Nor does it have any immediate investment plans for Europe.

Biofuels proponents meanwhile have not let go of targets. They tend towards decarbonisation rather than renewables targets. Some suggest a sector-by-sector approach. On 17 June, Lastikka proposed uniting vehicle and fuel standards under a single decarbonisation target for the transport sector. The idea is to move to a “well-to-wheel” approach that sees engines and fuels develop in unison. This is not a new idea: in late 2013 a coalition of six automotive and fuel companies – Daimler, Honda, Neste, OMV, Shell and Volkswagen – launched an “Auto-Fuel biofuel roadmap for the EU to 2030”. Is this coalition about to be revived?

EU targets would push member states to put in place the hard measures biofuels ultimately need to succeed, such as tax breaks. Over the next two years, the Commission will develop a new renewable energy directive including a biomass and biofuel sustainability policy. In parallel, it will prepare an action plan for second and third generation biofuels. The debate over targets has not ended yet.

And this is just one piece of the puzzle. In its exploration of “policy frameworks” for decarbonising the road transport sector ahead of its policy paper in the first half of 2016, the Commission will also address – in addition to vehicle CO2 emission standards, electrification and biofuels – congestion and infrastructure, intermodal shift and air pollutants other than CO2, overhauling energy taxation, doing more to mobilise investment (including via the Juncker plan), and thinking about how to get the most out of state aid rules, handle imports and ensure sustainability. The journey has only just begun.

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