09 January 2012 00:00 [Source: ICB]
While the European biofuels market faces uncertain prospects in 2012, the changing legislative environment surrounding the industry could offer some level of protection against the negative influences of a sickly economy.
The European Commission's Renewable Energy Directive (RED) requires that by 2020, all transportation fuels in the European Union (EU) must contain 10% biofuel. Individual EU states are free to incrementally build to this target as they see fit, meaning current mandated levels vary. Fines incurred by fuel producers for failing to meet local requirements offer some measure of demand stability.
© Rex Features
The European Commissions's Renewable Energy Directive can cushion biomethanol production
Biofuels produced from a raw material that is not part of the food chain, known as second-generation biofuels, are set to count double when tallying the biocontent of a fuel blend. This will include biodiesel, which uses cooking oil and methanol produced from crude glycerin - itself a byproduct of biodiesel production.
New legislation permitting levels of 3% in gasoline blends will also affect biomethanol.
Robert Vriens, marketing advisor at Netherlands biomethanol producer BioMCN, is confident these changes add up to a positive future for the biomethanol product, which has yet to enjoy widespread usage.
"We have orders already from major oil companies for both methyl tertiary butyl ether (MTBE) production and direct blending. The more they use, the earlier they fulfill their quotas so they can use more of their own products," he said.
RED EQUALS GREEN?
The sustainability requirements of the RED could potentially have a greater consequence in the biodiesel market, which itself is composed of a range of products, each with its own market dynamics.
The proportion of material that holds sustainability certification as required by the RED varies widely among these different products. Sustainable rapeseed oil methyl ester (ROME) is readily available, whereas supplies of certified palm methyl ester are very limited. Meanwhile, in the soybean methyl ester market, sustainable material is practically nonexistent.
As compliance with the RED becomes more widespread and demand for sustainable material increases, this could bring about a shift in the relative market shares of these biodiesel products in 2012, with a potential decrease in soybean methyl ester consumption, while ROME and fatty acid methyl ester blends experience increasing popularity.
While many of these legislative changes appear likely to have a positive impact on biofuels, sources stress that these products are still vulnerable to an economic slowdown.
"Economics impacts everything. Ethanol prices have been dropping, and we hit new bottom recently. This is the first year there has been no increase in consumption - it's stagnating. But I think it could recover next year," said one biofuels analyst.
In the fuel ethanol market, a more likely source of change is an impending amendment to the import duty on E90 - a blend of 90% ethanol and 10% gasoline. E90 imports are subject to 6.5% duty, as it is classified as a chemical by some EU member states. The EU now plans to introduce legislation ensuring E90 is subject to the same €102/m3 ($132/m3) duty as regular denatured ethanol.
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
Sample issue >>
My Account/Renew >>
Register for online access >>
|ICIS Top 100 Chemical Companies|
|Download the listing here >>|
Asian Chemical Connections