Changing landscape

Several EU countries have lowered or frozen their blending mandates as a result of rising food and fuel costs, while new incentives are promoting sustainable aviation fuel. Meanwhile, used cooking oil as a biofuel feedstock may be reaching its supply limit Gill Langham

A number of European Union (EU) countries have frozen or lowered biofuel blending mandates in response to rising food and fuel costs due to the confl ict in Ukraine, the ACI Oleofuels 2022 conference held earlier this year in May heard.

“In the early days of the Ukraine crisis, disrupted supply had a signifi cant impact on food and fuel prices and, as a result, several countries considered lowering, freezing or waiving biofuel blending mandates,” Cornelius Claeys, manager (biofuels) at Stratas Advisors, said.

The trend was likely to lead to a rise in emissions, but only in the short-term. In the longer term, the ongoing crisis was likely to accelerate the energy transiti on in Europe, Claeys said.

US approach

In the USA, Claeys said the initi al response to rising prices had been to strengthen biofuel incenti ves by allowing year-round E15 use.

Europe’s approach to (temporarily) waive or freeze biofuel blending to reduce prices – could parti ally be explained by the European debate having focused more on food than on fuel prices, he said.

In additi on, Claeys explained that relati vely expensive biodiesel was mainly used in Europe, while in the USA, lower cost corn ethanol was the primary biofuel.

EU moves

The European Commission (EC) published a statement in March saying it supported member states fi nding ways to reduce the blending proporti on of biofuels which could lead to a reducti on of EU agricultural land used for producti on of biofuel feedstocks, to ease pressure on food and feed commodity markets.

Although countries sti ll needed to comply with the minimum obligati ons under the EU Renewable Energy Directi ve (RED) and Fuel Quality Directi ve (FQD), Claeys said this had opened the door for

Country Mandate 2020 2021 2022 2023 2030

Source: Stratas Advisors a series of reducti ons in nati onal blending mandates.

In Finland, for example, the 2022 and 2023 blending obligati ons were reduced by 7.5%, while Sweden froze 2023 obligati ons at this year’s levels.

“These Nordic countries can aff ord to reduce their blending mandates while sti ll complying with EU directi ves, because they generally over-comply,” Claeys added.

The German government published a working paper on 17 May proposing to cap crop-based biofuels at 2.5% in 2023 and phase them down to 0% by 2030, a fi nal decision on which was set to be taken in October. Meanwhile, penalti es for non-compliance with blending obligati ons had been waived in Croati a.

“Despite these short-term bearish signs for (crop) biofuels, legislati ve incenti ves in the longer term appear to be strengthening as an indirect result of the Ukraine war,” Claeys said.

“This is exemplifi ed by Finland; despite being the fi rst country to reduce short-term blending obligati ons and by the largest margin, it simultaneously announced an increase in its 2030 blending obligati on from 30% to 34%.”

Although uncertainty in the sector was likely to conti nue while the confl ict in Ukraine remained unresolved, previous periods of recession combined with u

Aviation incentive SAF mandate in volume % Old framework No obligation

E-fuels submandate in volume % Direct taxes EU ETS No obligation

None Intra-EU included but free allowances

Aviation fuel multiplier

New EC proposal 2% (2025); 5% (2030); 20% (2035); 32% (2040); 38% (2045); 63% (2050). Waste-based biofuels and RFNBOs can contribute 0.7% (2030); 5% (2035); 8% (2040); 11% (2045); 28% (2050) Phased in from 2023 over 10 years Intra-EU included and free allowances phased out by 2027 x1.2 towards RES-T x1.2 towards Annex 1XA obligation and Annex 1XA obligation Table 2: Aviation gets EU volumetric SAF mandates and tax incentives European Parliament draft amendment 2% (2025); 5% (2030); 20% (2035); 32% (2040); 38% (2045); 63% (2050). Wastebased biofuels, RFNBOs, green electricity and low-carbon hydrogen can contribute 0.03% (2025); 0.7% (2030); 5% (2035); 8% (2040); 11% (2045); 28% (2050) Phased in from 2023 over 10 years Intra-EU included and free allowances phased out by 2025 x1.2 towards Annex 1XA obligation

Figure 1: UCO biofuel consumption volumes & share of total biofuels Figure 2: Global UCO collection outlook

u elevated fossil oil prices had generally accelerated rather than slowed down the shift towards alternatives, Claeys said.

“In the medium- to long-term however, a wide variety of European lawmakers share the view that climate objectives and energy independence should be accelerated by firm legislative action,” he added (see Table 1, previous page).

SAF developments

Since the conference, “game-changing” legislation had been announced in the sustainable aviation (SAF) sector, both in Europe and in the USA, Claeys said in August. (see Table 2, above).

“In Europe, the focus is on SAF mandates – the minimum quota which airlines or aviation fuel suppliers need to meet. Such mandates are now active in Norway, Sweden and France, with several other European countries having similar legislation in the pipeline. In parallel to this, the Refuel EU Aviation Regulation includes an EU-wide SAF mandate that will kick off in 2025 and increase exponentially through 2050,” he said.

North American legislators had taken a different approach, Claeys said, opting to incentivise SAF uptake through production subsidies in the recently passed Inflation Reduction Act. The act – the largest climate spending package in US history – includes a new dedicated tax credit for SAF. The credit of US$1.25/ gallon, which could rise to US$1.75/gallon depending on the fuel’s greenhouse gas reduction level, would remain in place until 2024 and transition to Clean Fuel Production Credit payments from 2025.

Several additional production pathways had also recently received ASTM approval, he added.

Feedstock/UCO outlook

At the Oleofuels conference, Claeys also presented his view on the supply outlook for UCO and other waste feedstocks.

Nearly one-fifth of all European biofuels was now produced from used cooking oil (UCO), which had also witnessed the most absolute growth compared with any other biomass-based diesel feedstock in Europe and North America in the last few years, he said. Globally, 6.6M tonnes of UCO biofuels were consumed last year, representing 5% of the total biofuels market (see Figure 1, above).

However, UCO use in biofuels could be reaching its supply limit, Claeys said.

UCO supply in Europe, for example, was forecast to rise only marginally from 1.13M tonnes in 2021 to 1.26M tonnes by 2030 (see Figure 2, above).

China contributed almost a third (29%) of global UCO supply last year and its share of the market was expected to increase with an additional 500,000 tonnes by 2030, he said.

“Asia is expected to continue driving UCO supply, with an increase also expected in the Middle East and Africa.”

Animal fats faced similar constraints to UCO and were in competition with other end uses.

Meanwhile, global consumption of other biofuel waste feedstocks in 2021 included: 4.27M tonnes of animal fats; 1.36M tonnes of corn oil; 0.26M tonnes of agricultural waste; 0.21M tonnes of POME; 0.15M tonnes of tall oil and 0.13M tonnes of spent bleaching earth. ●