The EU has agreed to put a cap on the amount of palm oil, soy, maize and other food crops to be used in biofuels. After a long-running dispute between industry and environmental groups, members of the European Parliament’s Environment Committee agreed this week to limit the use of food crops to 6% of the EU’s 10% renewable transport energy target for 2020.

The committee also widened the scope of the cap to include energy crops that compete with food production for land, and ensured that member states cannot subsidise or mandate this type of biofuel after 2020.

In addition, it agreed to support plans to factor indirect land use change (ILUC) emissions relating to biofuel production – such as the clearing of rainforests to make way for energy crop production – into biofuels legislation.

Palm oil portion in biofuels drops

The decision, which is expected to be approved by the European Parliament in April, has been seen as a compromise between industry and green groups’ standpoints.

Significantly, it will likely cause a continuing decline in the use of palm oil as a biofuel. Oil palm is often grown on land that has been cleared of peat swamps or rainforests, and competes for land that could be used for growing food, meaning it will fall foul of the proposed EU legislation on both counts.

Europe is the world’s largest market for diesel cars. This means that when consumers want to switch to biofuel, they must use biodiesel, such as palm oil and other vegetable oils, rather than ethanol.

Clare Wenner, head of renewable transport at the UK’s Renewable Energy Association, explains: “The reason why it’s an issue here in the EU is we’ve got a very dieselised car park. If you could switch back to gasoline this wouldn’t have been such a burning problem in the EU.”

The policy landscape, however, is desperately complicated. Politicians have long been trying to balance the EU directive that requires them to switch to more renewable fuels with concerns that biofuels actually increase greenhouse gas emissions because of indirect land-use change.

That has thrown the industry into disarray. Biofuel companies, unsure of the subsidies they will or will not receive, have stepped back until the situation is resolved.

Wenner says: “For two and a half years now there have been proposals in Brussels being considered on whether the EU should put a cap on crop-based biofuels and how greenhouse gas emissions from indirect land use-change should be factored in. The consequence is, there’s just no more investment in crop-based biofuels, or advanced biofuels, or anything else.”

This week’s decision was welcomed cautiously by the biofuels industry. The European Renewable Ethanol Association (ePURE) said the committee’s approval for the proposal was “an important step forward in the process of reforming Europe’s biofuels policy”. It suggested, however, that a higher 7% cap would provide greater long-term certainty.

Are palm oil alternatives any better?

Wenner says there is a movement within the biofuel industry away from palm oil in particular because of the unsustainable methods used in its production. “The industry has actually said, ‘Do you know what, if this is unacceptable to society we won’t do it.’ The NGOs gave a very valuable wake-up call. I think we have responded accordingly; we don’t use the stuff to make biofuels [in the UK].”

In the UK and other parts of Europe, used cooking oil is replacing palm oil. That means the debate over competition for land with food growers is redundant, says Wenner. “As far as competition with food, what we produce provides food and fuel.”

Soy oil will flood the market this year following a record high soybean crop, says Rabobank. Photograph: Design Pics Inc/Alamy

In other parts of the world, soy oil is being used instead of palm oil and that looks set to continue. Stefan Vogel, head of agri commodity markets research at Rabobank, says soy oil will flood the market this year following a record high soybean crop: “There is an easy substitution among these oils in parts of the food chain and biofuel chain.”

There are, however, environmental concerns related to soybean oil. It yields less oil per hectare than palm oil, although the majority of its yield is high protein animal feed so does not go to waste. It also requires more fertilisers, pesticides and energy input per hectare.

Pat Venditti, senior forest campaigner at Greenpeace, says: “It’s hard to point people away from palm oil because, if you look at overall land use, it does have a good yield per hectare. We’re really pushing much more to break the link between palm oil and deforestation than for palm oil to be excluded.”

Elsewhere in the world, fossil fuels have been making up for much of the decline in the use of palm oil as a biofuel. As the oil price has almost halved since June last year, it has become cheaper to use the black sticky stuff rather than its vegetable oil alternatives. There are mandates in some parts of the world that stipulate that diesel must be blended with a certain percentage of biodiesel, but they are by no means worldwide and not enforced in many places.

Vogel says: “As long as you have a mandate and it is enforced, it doesn’t matter how low or high the price of crude oil is because consumers are forced to use biodiesel. But in regions where you don’t have a mandate, this has resulted in a situation where the biodiesel producers are not economic anymore.”

As the use of palm oil as a biofuel declines, it remains to be seen whether its alternatives prove more or less damaging to the environment.

The palm oil debate is funded by the Roundtable on Sustainable Palm Oil. All content is editorially independent except for pieces labelled advertisement feature. Find out more here.

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