04 January 2013 11:23 [Source: ICB]
The outlook for biofuels in 2013 is clouded, with the industry facing an uncertain future as a consequence of constantly evolving legislation and ongoing anti-dumping investigations.
European Commission renewables targets continue to evolve
However, in October the European Commission published proposals to amend the RED and cap the contribution of food crop-based biofuels towards this target at 5%.
Sources from the industry believe that if these proposals are adopted, there will be few willing to invest in first-generation biofuels in the future.
"Double-counting and quadruple-counting biofuels will have killed first-generation biofuels by 2020," said Rob Vierhout, secretary general of ethanol industry body ePURE, at a conference in Belgium in November.
"The European biofuels industry has big problems," he added. "It's like playing a football match where we haven't even reached half time and the referee stops the game and announces the rules are being changed."
The new proposals also seek to incentivise biofuels with low indirect land use change (ILUC) emissions and discourage the use of those with high ILUC emissions.
ILUC emissions are measured by the carbon emissions released as a result of land-use change.
This means that non-food crop-based biofuels and biofuels produced from waste material will count double - and in some cases four times - towards European biofuels mandates.
Under the new proposals, biofuels using feedstocks such as used cooking oil and tallow fats unsuitable for human consumption will count double, whereas biofuels using feedstocks such as algae, straw, sewage or manure could count four times towards targets.
These multiple-counting biofuels mean that smaller amounts of biofuel are needed to fulfil targets, negating the need to buy first-generation biofuels.
Furthermore, market participants are unsure whether the RED targets can be fulfilled without first-generation biofuels, as there is little commercial production of second-generation biofuels in Europe.
Anti-dumping investigations being carried out by the European Commission are also adding to the uncertain conditions. In the European biodiesel market, there is an ongoing anti-dumping investigation into imports from Argentina and Indonesia.
Not only has this hindered trading conditions in Europe, but it has also stunted activity in the Indonesian and Argentine markets, as there is concern that retroactive penalties could be imposed on product if allegations of dumping are upheld.
The investigation is set to last for up to another 13 months, meaning the outlook for the European biodiesel market could remain unclear until late in the fourth quarter of 2013.
US ETHANOL DUMPING
In the European fuel ethanol market, there has been an investigation into allegations that subsidised US ethanol was dumped in Europe.
Market sources believe that the Commission will impose penalties on US fuel ethanol.
In this eventuality, opportunities to bring fuel ethanol from the US to Europe will significantly diminish, and sources said imports from Brazil are likely to resurface in the European market.
While the possible introduction of penalties on US product is encouraging news for European producers, some sources have expressed concern about this move, saying US material has not been subject to a subsidy since the end of 2011.
"I'm surprised that the EU might go ahead with this," one source said. "It's a trade war on the US. Ethanol and corn are very important for the US.
"The whole investigation is bogus and has been carried out on fragile ground."
The final decision on the findings of this investigation is not expected until the end of February 2013.
Amid the all the confusion and uncertainty at least one thing remains certain - the biofuels industry will continue to be plagued by legislation throughout 2013.
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