Since 2006, when the EU member states established an agreement to cut carbon emissions by 95% by the year 2050 (compared to 1990 levels), much legislation has been passed to promote biofuel industries across the continent. The most favoured methods are laws that force petrol companies to blend their products with biofuel additives. As time has passed, most countries have steadily raised the limits in an attempt to edge closer towards the EU’s goal of 10% consumption of biofuels in land transportation by 2020.
Recently, however, the Spanish government has decided to implement policies that put into question the region’s future relationship with biofuels. But are these plans really at loggerheads with other countries?
Ron Kotrba, Editor in Chief of Biodiesel Magazine, thinks that they are. He writes that, “Spain is currently one of the European countries with lower relative consumption of biofuels. The overall objective currently in force in Spain is between 45% and 35% lower than those prevailing in the two major markets for biofuels in the EU (France and Germany), while it stands 20% below the EU average (5.15%).” Clearly concerned about the state of the sector he adds that, “In fact, it is one of the lowest objectives of the EU since of the twenty five EU countries that use this mechanism to support biofuels, only three had a minimum target for 2014 lower than the Spanish, according to a recent comparative analysis by APPA biofuels.”
Kotrba continues to voice his concern, by making comparisons with other EU countries. “If Spain does not begin to raise the goal, it will fall even further behind in the European ranking next year, as many countries have adopted higher targets for 2015, for example, Finland has announced it will increase its overall objective of biofuels from the current 6% to 8%.
Portugal will also increase its biofuel compulsory target to 7.5%, with additional targets to reach 10% in 2019 and 2020. The Government of the Netherlands just approved an increase in its biofuels target to 6.25%, establishing increasing goals to achieve 10% in 2020.
Italy has also increased its obligation to biofuels from 4.5% to 5%, setting an upward path that reaches 10% in 2020, 2021 and 2022. [Whilst] Other countries like France have already established a global biofuels target for 2030 (15%).”
Given that Spain seems on such a different course to so many other EU partners, it is maybe logical that the government has been forced to perform a small u-turn. As it was recently announced that a plan to increase the mandate was being put in place.
As Jim Lane of Biofuels Digest notes, “the [Spanish] government has announced a new plan to reach 8.5% blending of biofuels by 2020. This is short of the EU Renewable Energy Directive’s 10% mandate by that date, but an increase on the blended minimums of 4.1% in diesel and 3.9% in gasoline.”
However, this u-turn may only be a small compromise that will neither save the fledgling industry nor please EU legislators. As Lane notes, “The national renewable energy producers association has called the shift a move in the right direction but is critical that the plan still falls short of the EU mandate.”
Indeed, what is most curious about the change in direction, is that it does not reinstate previous mandates, but instead offers a single quota that combines the ethanol and biodiesel targets. Why this course of action has been taken remains unclear.
Possibly, the government’s latest proposal is more of an opening bid, as industry insiders argue that the proposal should be revised. As Meghan Sapp of Biofuels Digest speculates, “The national regulator CNMC won’t support a move to combine the ethanol and biodiesel blending quotas into a single quota, a shift that it says would damage the investments that have so far been made in the sector. Specifically, it fears the quota would lead to an over-reliance on biodiesel to fulfill the quota to the detriment of ethanol. The agency does support, however, a shift towards 5% biofuels in 2016 and 8% for 2020 while maintaining the current minimums of 3.9% for gasoline and 4.1% for diesel, which should provide enough flexibility for retailers to adjust to prices and demand shifts.”
Whilst such speculation gives food for thought to biofuel traders, the wider debate of whether Spain will achieve it’s EU targets for road transport emissions is strong. Perhaps it is this increasing pressure from environmental groups, other EU states and lobbyists that may well decide where Spanish policy on biofuels ends.
For example, the conclusions presented in a report by the Group of Energy Economics from Vienna University of Technology (Austria), recommended that, “The consumption of Biofuels in Spain must be multiplied by three to comply with the target set by the EU for renewable to meet 20% of the Spanish energy demand by 2020.”
A recent Platts report agrees that the problem must be tackled soon if the EU targets are to be met. Stating that, “Spain is yet to implement the RED (Renewable Energy Directive) for biofuels, which has more stringent certification audit requirements than that set out for minimum greenhouse gas savings in biofuels.”
The report continues by highlighting how Spain is out of step with the rest of Europe on the matter. It notes that, “Spain is the only member state which has not applied the legislation for biofuels, after Poland made the transition starting 2015.”
Why the Spanish government is not adhering to EU targets is speculated by one industry insider, who Platts quotes as saying, “Spain is able to meet renewable energy obligations with solar- and wind-powered electricity generation, among other things, leaving the government in no rush to push through legislation that would increase fuel prices at the pump and hamper economic growth.”
This insider is not alone in believing that the Spanish government is letting its biofuels industry suffer. First among these is Oscar Garcia, President of APPA (Association of Renewable Energies ) biofuels, who is understandably one of the leading advocates for increasing biofuel mandates, stating that, “The Spanish Government should follow the example of so many EU countries that continue to increase their biofuel targets to move towards a greener and less oil-dependent energy model in transport.”
Even the EU’s own ‘Biofuels Barometer’ report is critical of not only Spain’s handling of the issue of biofuels, but how the EU policy makers have failed to ensure member state support for national biofuel industries. It questions if the industry can be successful without a cohesive and properly enforced policy. “The European Union’s forthcoming Energy/Climate package suggests a 2030 target of 27% renewable energies in energy consumption (only binding at the scale of the European Union), but the Commission did not consider it useful or relevant to set a specific transport target. This lack of visibility at European Union level is particularly detrimental to the development of advanced types of biofuel. Thus in the short and medium-term, their growth prospects will depend on their nationally-defined incorporation targets.”
Deloittes also believes that the industry would perform better if long-term planning and political commitment was shown towards biofuels targets, but also rests some blame on manufacturers, stating that, “Producers should stop relying on unpredictable government decrees in the development of their business models. For instance, they can develop projects with take-off agreements signed with consumers willing to consume renewable power for sustainability reasons.”
However, its report, ‘European Energy Market Reform: Country Profile Spain’ concludes that, “Spain’s pathway towards its 2020 targets has been masked by the country’s economic situation and there is considerable uncertainty about the country’s ability to reach these goals. There is little to no planning for the period beyond 2020. Spain would benefit from policies in the energy sector focusing on long-term sustainability rather than on short-term actions to mitigate the effects of the economic crisis.”
As we have seen, national targets can easily be changed to suit national politics. Given the growing urgency to tackle carbon emissions and the competitive nature of the modern biofuels market, surely the EU will need to strengthen its position and its laws to ensure that investors and traders have a more certain future.
Without that, does the Spanish biofuels market have a chance?