MEPs' vote for 40% CO2 reduction target in cars could dent biofuels demand

EU growth in demand for biofuels could slow in the 2020s if carbon reduction targets approved by MEPs on October 3 survive intact in final legislation expected to become law next year.

EU legislators in Strasbourg today voted in favour of a 40% CO2 reduction target for light vehicles by 2030 and a 20% cut by 2025, a threshold that would require carmakers to offer a much higher share of electric and hydrogen-powered vehicles and phase down offerings of petrol- and diesel-fueled cars, as well as hybrids.

The 40% target poses a potential threat to demand for ethanol and biodiesel because carmakers would be heavily fined for failing to meet sales targets for electric vehicles, and would oblige member states to provide sufficient incentives for alternatives to combustion engines that burn biofuel-blended products.

“Despite an unprecedented lobby effort by the oil and car industries, the European Parliament has voted decisively to require carmakers to make their cars cleaner and sell more electric and hydrogen vehicles," said Julia Poliscanova, clean vehicles manager with T&E, a Brussels-based NGO.

Lawmakers in Strasbourg also rejected the double counting of biofuels and other alternative fuels that are already promoted through the recently-adopted recast of the EU's Renewable Energy Directive (RED II).

In a setback for producers of biomethane for the transport market, MEPs also blocked an amendment that would establish a 'carbon correction factor' enabling carmakers to use biogas to count towards their CO2 reductions.

Yet RED II was always the main focus for biofuels producers, as EU institutions have agreed that crop-based biofuels can supply up to 7% of the overall equivalent fuel demand in transport by 2030, while producers of advanced biofuels will benefit from multipliers that can earn them extra credits. 

That RED II target will involve an increase in blending mandates for ethanol and biodiesel, while the freight industry, which accounts for a quarter of the EU's fuel demand, is expected to increase its demand of biodiesel because of the difficulties of adapting battery technology to heavy duty vehicles. 

Besides approving 2025 and 2030 CO2 reduction targets, the Parliament today set sales targets for EVs and hydrogen-powered vehicles of 20% in 2025 and 35% in 2030, which would provide incentives for manufacturers and suppliers of batteries.

These incentives would be accompanied by penalties for failing to meet sales targets, a policy tool that the Commission omitted from its proposal after last-minute lobbying by German carmakers, T&E said in its statement.

However, at a meeting of EU environment ministers next week the 40% target is sure to encounter strong pushback by some major car-producing member states including Germany, while the automotive firms themselves say that the thresholds are unrealistic.

EU policy newsite Euractiv reported that the Austrian EU presidency will propose a 2030 target of 35%, a threshold that would still likely require the automotive industry to make a fast shift away from combustion engines in order to comply by the end of the next decade.

The European Automobile Manufacturers’ Association said in statement that it had "serious concerns" following the European Parliament’s plenary vote, adding that the legislature's proposals would "essentially force the industry into a dramatic transformation in record time.”

The main lobby for ethanol producers in Europe, ePURE, said today's vote had no relevance for biofuels demand, although it did express disappointment that the Parliament did not recognize the role of renewable fuels in reducing emissions and improving engine efficiency.

Vehicle pool

In addition, ePURE said it welcomed "movement towards addressing the shortcomings of the current tank-to-wheel methodology and more realistically calculating the life-cycle emissions of new cars and fuels".

The ethanol producers' organisation cited a report from environmental consultants Ricardo that EVs would make up just 16% of the EU passenger car fleet and 40% of new passenger car sales in 2030.

"EVs cannot do the whole job alone. EU needs a mix that includes sustainably-produced low-carbon fuels such as ethanol," it said in a tweet.  

Rising CO2

According to the European Parliament's website, cars and vans produce about 15% of the bloc's CO2 emissions, and transport is the only sector in which greenhouse gas emissions are still higher than they were in 1990.

It added that average emissions from new cars rose to 118.5g CO2/km in 2017, overturning several years when emissions had fallen, according to recent data.

This is considerably higher than current rules, the average new car must not emit more than 95g/km by 2021.

EU institutions are expected to hammer out compromises on the legislation later this year or early next, and enact it before EU Parliament elections in May 2019.