Row looms over plan to cut road fuel carbon
The European commission in January issued a radical proposal to cut life-cycle carbon emissions from road fuels by ten per cent by 2020. Sonja van Renssen reports on a debate poised to go critical this autumn
The EU directive on road fuel quality does not attract many readers. It is a technical document setting detailed quality standards for petrol and diesel. Hardly exciting reading, even though behind almost every number lurks the potential for controversy.
In the directive’s latest revision, tabled in January, the European commission smuggled in a bombshell primed to explode this autumn when debate on the directive is expected to come to a head.
Proposed amendment 7a requires fuel suppliers – in other words oil companies – to reduce the carbon footprint of their road fuels by ten per cent by 2020. Specifically, they must cut their fuels’ life-cycle greenhouse gas emissions by one per cent per year from 2011 onwards.
Life-cycle emissions are often also called well-to-wheel emissions – all the carbon emitted during a fuel’s production, distribution and consumption.
Critically, the commission’s proposal would leave the market to decide whether the fossil fuel chain or biofuels offer more cost-effective emission reductions.
“It introduces environmental competition on who can deliver the cleanest fuel at lowest cost,” says Jos Dings director of green transport NGO T&E.
There is debate, however, over how the proposal would interact with existing legislation like the EU emission trading scheme (EU ETS), covering refineries, and a separate target for biofuels to make up 10 per cent of road transport fuels by 2020.
The new Portuguese EU presidency hopes to broker political agreement between member states on the directive by Christmas. Here we explore the potentially far-reaching implications of amendment 7a.
The proposed amendment presents oil companies with a choice: they can reduce emissions from the fossil fuel chain or switch to biofuels.
The European petroleum industry association (Europia) is clear. “Most of the way forward will have to be switching,” says secretary general Isabelle Muller.
She points out only 15 per cent of life-cycle emissions are related to fuel production and distribution. And within this 15 per cent, there is “very little scope” for improvement.
On the contrary, tighter fuel specifications and growing demand for diesel will drive increases in greenhouse gas emissions from refineries, she adds.
The commission disagrees. It insists that the proposal should also drive emission reductions in the fossil fuel chain.
Carbon capture and storage (CCS) and energy efficiency improvements such as increasing use of cogeneration at oil refineries, substituting gas for oil and reducing gas flaring in oilfields are all more cost-effective ways to cut emissions than switching to biofuels, it argues.
Biofuels currently equate to a carbon cost of €150 per tonne. CCS becomes viable when carbon prices reach ¤30-40 per tonne, says the commission. Ms Muller acknowledges the oil industry is involved in “very active” discussions with the commission on CCS but she does not see it as a potential contributor in the near future.
CCS requires pure CO2 emissions. Ms Muller says this remains technically problematic for refineries, much more so than for power plants. Very few refineries have storage sinks nearby, she adds, and there are public acceptance issues.
Oil refineries already have incentives to improve their operations under the EU ETS. Ms Muller argues that amendment 7a merely duplicates this. But the commission believes the EU ETS carbon price will not climb high enough to trigger the investments it is looking for.
A Swedish study presented to the European parliament in the first week of July charted a 20 per cent difference in refinery efficiencies across Europe. Oil companies are not investing in energy efficiency because other investments are more profitable, it said.
Amendment 7a would ratchet up the pressure on oil companies. They would have to surrender any EU ETS allowances freed up by reductions required under the fuel quality directive, in effect reducing their emissions cap.
Jos Dings envisages the emergence of a new carbon trading market similar to the EU ETS.
Companies who exceed the one per cent annual reduction target would be free to trade their surplus allowances; those that miss it or fail to report their emissions would be required to buy allowances.
“After [the] aviation [emission trading proposal], this is the second time the European commission is spreading its wings,” says Mr Dings.
Crucially, like the aviation proposal and unlike the EU ETS, the proposed amendment would apply to all companies selling fuel in the EU, not just those producing it there.
Competitive distortions would be avoided. But, as for aviation, Mr Dings expects strong opposition from a powerful international sector.
Although the commission believes emissions from fossil fuel production can be reduced, it also intends amendment 7a to promote second-generation biofuels. These are plant-based fuels derived from non-food crops.
The origins of amendment 7a lie in an ongoing dispute about the greenhouse gas savings of biofuels. Every litre of fuel burnt emits roughly 2.5 kilograms of carbon dioxide, whether it is a litre of petrol, diesel or biofuel. The difference in emissions comes from how that litre of fuel is produced (see figure 1).
The best available biofuels can reduce life-cycle greenhouse gas emissions by 90 per cent relative to fossil fuels. But the worst increase them.
Amendment 7a pushes fuel suppliers towards the best performing biofuels on the market. The problem says Robert Vierhout, secretary general of EU bioethanol association eBio, is that these currently come from Brazil.
First-generation EU biofuels save 35-50 per cent of greenhouse gases while Brazilian bioethanol saves 90 per cent. The Brazilian product is also much cheaper to make.
eBio argues that if amendment 7a were adopted, existing European biofuel production would simply not be able to compete with Brazilian imports and no further biofuel investments would be made in Europe.
Europia does not see an immediate incentive for second-generation biofuel investments either. It calculates that meeting amendment 7a would equate to a 2010 biofuel target of 16 per cent – this assumes no fossil fuel improvements – which would be met by substantial Brazilian imports (see figure 2).
The commission sketches a different scenario. First, as we have seen, it believes there are cost-effective fossil fuel chain reductions that will be realised. Second, it questions potential demand for bioethanol, a substitute for petrol.
Today, the EU already exports petrol to the US, while it imports diesel from eastern Europe. Biodiesel, not bioethanol, is likely to be the future fuel of choice, says the commission. Diesel is taxed less, has a higher energy content and is easier to handle. And diesel engines are more efficient than petrol engines.
The commission believes that by promoting the most
cost-effective, climate-friendly biofuels, amendment 7a will stimulate second-generation biodiesel production in
Of course the EU already has a biofuel target. In March, EU leaders agreed to a legally binding ten per cent biofuel target by 2020. This is expressed in energy content terms. The binding nature of the target is subject to sustainable, second-generation biofuels being available.
Sustainability criteria are currently being developed by the commission. A public consultation document in April suggested they could require a life-cycle carbon saving requirement of ten per cent, as well as addressing non-carbon concerns like biodiversity.
This proposed life-cycle saving is well below even what most European biofuels can deliver. Hence the commission’s environment department has led the drive for amendment 7a. This is a tougher proposition for biofuels and has not been welcomed by the commission’s transport and agriculture departments.
Member states have also expressed some disquiet. Several are concerned over fixing a greenhouse gas reduction target when sustainability criteria for biofuels are not ready. Others want to know how life-cycle emissions would be calculated.
The UK, Netherlands and Germany are leading work on the latter. In June, the UK announced it wants to move from volume- to carbon-based biofuel targets by 2010. Germany has introduced the idea that biofuel producers pay a carbon displacement penalty unless they can prove their fuel came from unused land or a waste stream.
The oil industry remains unconvinced. Europia says amendment 7a is best applied only to biofuels. eBio says it should be restricted to fossil fuels. Each claims support for the idea in principle but argues that the fuel quality directive might not be the appropriate vehicle for it.
This apprehension is testimony to the radical nature of amendment 7a. Yet it is not likely to go away anytime soon.
Transport must be tackled in the context of climate change and carmakers are keen to see the burden shared out. The commission’s environment department is determined, methodological work is progressing and MEP’s first reaction has been positive. The big question is: what will be the consequences?
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