EU report signals U-turn on biofuels target: palm oil at the centre of debate

Pete Harrison and Charlie Dunmore Reuters 25 Mar 10;
* EU biofuels paper assumes 5.6 percent target in 2020
* Environmental risk seen above that target level

BRUSSELS, March 25 (Reuters) - The European Union appears to be backtracking on its biofuels policy with a new study showing that more than 5.6 percent of biofuel in road fuels can damage the environment.

EU leaders agreed in 2008 that 10 percent of transport fuels should come from renewable sources by 2020 -- mostly biofuels as electric cars would still be in their infancy.

But environmentalists criticised the target, saying it would affect the way land is used around the world, forcing up food prices and encouraging deforestation.

The EU's most comprehensive biofuels modelling exercise yet was made public on Thursday, but is based on having just 5.6 percent of biofuel in road fuels.

Experts say the 10 percent figure was shaved to 5.6 percent partly by exaggerating the contribution of electric cars in 2020, forecasting they will represent 20 percent of new car sales. That figure is between two and six times the car industry's own estimate.

They also say the study exaggerates to around 45 percent the contribution of bioethanol -- the greenest of all biofuels -- and consequently downplays the worst impacts of biodiesel.

Bioethanol's contribution is around 19 percent today.

But it was not clear if the Commission had intentionally given unrealistic data to the consultancy that handled the project, or whether it was preparing for a policy change.

"The 5.6 percent figure is not based on an honest reflection of reality, or else the Commission is preparing to backtrack on its target," one EU official said.

POLICY REVIEW

At the centre of the debate is an issue dryly referred to as "indirect land use change", which has put palm oil producers in Malaysia and Indonesia in the cross-hairs of environmentalists.

Critics say that regardless of where they are grown, biofuels compete for land with food crops, forcing farmers worldwide to expand into areas never farmed before -- sometimes by hacking into tropical rainforest or draining peatlands.

Burning forests and draining wetlands can pump vast quantities of climate-warming emissions into the atmosphere, cancelling out any theoretical climate benefit from the fuel.

But the study found the effects were not significant until EU biofuel use reached a certain point.

"Indirect land use change effects do indeed offset part of the emission benefits, but are not a threat at the currently estimated volume of 5.6 percent of road transport fuels required," a European Commission statement said.

The report said that if the amount of biofuels were raised above 5.6 percent, "there is a real risk that indirect land use change could undermine the environmental viability of biofuels".

"The EU is gambling with the future of tropical forests and with climate-damaging greenhouse gases," said campaigner Adrian Bebb of Friends of the Earth Europe. "This demands an urgent review of EU biofuels policy."

Vegetable oils can be used in biodiesel, which has led to worries of increasing food prices as food crops get diverted to feed Europe's growing car fleet. But the study found little impact at 5.6 percent.

"The effect of EU biofuels policies on food prices will remain very limited, with a maximum price change on the food bundle of plus 0.5 percent in Brazil and plus 0.14 percent in Europe," it said. This finding contradicts other studies by the Commission, which showed that EU biofuel targets could raise the price of cereals and vegetable oils by 10 percent and 35 percent respectively, creating food shortages in the developing world. [ID:nLDE6241OC]

The European Biodiesel Board said its members faced tougher scrutiny than other vegetable oil buyers in the food industry, power generation or oleochemicals.

"Once this directive is in place, EU biofuels will be the most monitored and scrutinised product in the world," said secretary general Raffaello Garofalo. (Reporting by Pete Harrison, editing by Dale Hudson and Anthony Barker)