An integrated assessment of the European policy on biofuels

Several environmental, economic and geopolitical factors are driving the European Union interest on alternative energy sources and in particular on biofuels which are transport fuels obtained from agricultural crops. Biofuels are being promoted as a form of energy that can at the same time contribute to global warming mitigation, diversify energy supply out of oil decreasing EU’s dependence on imports, contribute to the revitalization of the European agricultural sector with positive consequences on rural development and in addition, contribute to the economic and social development of developing countries that have a comparative advantage in feedstock production. In 2003 the European Commission established an indicative target of 2% biofuel share of all the petrol and diesel placed on the market for transport use by 2005 and 5.75% by 2010. The biofuel market is currently dominated by biodiesel and ethanol, so called first generation biofuels and obtained from crops traditionally used in the food chain. Biofuels are not cost-competitive with fossil fuels so, in order to be commercially viable they require huge support from governments. Europe is supporting biofuels through agricultural subsidies, tax reductions or exemptions, and biofuel obligations. Because of high costs of European feedstocks and lack of sufficient land, Europe is also supporting biofuel production in developing countries. The main objective of this report is to assess the likely economic, environmental and social impacts of the European strategy on biofuels. The report mainly reviews existing studies, thus relying on secondary data. Is it worthwhile spending public financial resources to support biofuels? The main findings are that a 5.75% replacement of fossil fuels with biofuels gives a small contribution to GHG emissions reduction and cannot protect Europe from high energy expenditure because the whole production chain of biofuels require the use of fossil fuels. Even meeting the 2010 target would not allow Europe to substantially increase its energy security. Moreover, to meet the biofuels target, the requirement of land is enormous (15-18% of total European arable land) and the cultivation of energy crops on set aside land means an extension of the area used for intensive farming with negative
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consequences on soil, water and biodiversity. The overall environmental impacts in developing countries could be even worse because of lack of serious environmental regulation and bioenergy could threaten forests and other natural ecosystem with likely GHG emissions rather than savings. In addition, the fast growth of the biofuel industry is pushing up the prices of food and feed because land and other resources are being diverted from food to energy crops production. Biofuels have in fact the potential to increase global food insecurity. The only clear benefit of European promotion of biofuels is rural development in Europe: biofuels can revitalize the agricultural sector with positive consequences on rural areas. The positive contribution to rural development in developing countries is less straightforward. The reports concludes that considering the whole picture, biofuels are not the best solution to solve the problems related to GHG emissions and energy security in Europe and financial resources would be better spent in the research of alternative, more environmentally and socially friendly options.