Bio Fuels Policy

8/10/2019 Bio Fuels Policy

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Bio Fuels, Policies and its Impact

1.1. Bio Fuels

The energy sector has played a crucial role in the context of the global economy as wellas the socio-economic development. The world energy consumption is growing at the rate of

2.3% per year. The Energy Information Administration estimated that the primary sources of

energy consisted of petroleum 36.0%, coal 27.4% and natural gas 23.0% amounting to 86.4%share for fossil fuels in primary energy consumption in the world [1].

The domestic production of crude oil from fossil fuels has been more or less stagnantover the years and meets only 30 per cent of the national requirement, while the balance is met

through imports of nearly 146 million tonnes of crude petroleum products that cost the country

close to US $ 90 billion in 2008-09 (Figure 3). Such high reliance on imported crude oil is

impacting the countrys foreign exchange reserves in a big way (Ethanol India, 2009). Over thepast eight years, the consumption of motor spirit (gasoline) has increased by 6.64 per cent from

7.01 million tonnes in 2001-02 to 11.26 million tonnes in 2008-09. For high speed diesel (HSD),

this growth has been 5.10 per cent from 36.55 million tonnes to 51.67 million tonnes [2-3]. Thisgrowth is expected to continue over the next several years since it is projected that the motor

vehicle population in India will grow by 10-12 per cent that would further increase the demand

for petroleum products. Due to this rapid increase in demand, Indias dependence on oil import is

expected to rise to 92 per cent by the year of 2030 [4].

Fig.1 Domestic production and import of crude oil in India:1974-75 to 2008-09

Also fossil fuel consumption is the largest contributor to air pollution, greenhouse gasemissions and the environmental impacts with a large endowment of coal and has an energy

system that is highly carbon intensive. The combustion of fossil fuel releases VOCs, nitrogen


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oxides (NOx), carbon monoxide (CO) and particulate matter (PM). The combination of VOCs

and NOx with sunlight further results in the formation of tropospheric ozone, the maincomponent of smog. The burning of fossil fuels produces around 21.3 billion tonnes (21.3 giga

tonnes) of carbon dioxide (CO2) per year and the natural processes can only absorb about half of

that amount, so there is a net increase of 10.65 billion tonnes of atmospheric carbon dioxide [5].

Coal combustion also leads to sulphur dioxide (SO2) emissions with serious implications forlocal pollution [6].

Biofuels offer a number of environmental, social and economic advantages, apart from

being a renewable alternative for fossil fuels. The use of biofuels may lead to reduction in

vehicular pollution and emission of green house gases as it has been established that the emission

of sulphur dioxide, particulate matter and carbon monoxide are less from biofuels [7]. A fuel is

considered as biofuel if it is derived from biomass such as agricultural products or residues,

industrial and urban residues, wood residuals and forest products, either as liquid or as gas [8]. It

encompasses mainly bioethanol, biodiesel, biogas and biohydrogen [9]. Ideally a biofuel should

be carbon neutral and should therefore not contribute to the overall accumulation of carbon in theatmosphere [10]. Carbon in crops is the result of the photosynthetic conversion of carbon dioxide

in the atmosphere (capturing CO2) into dry matter determined by solar radiation during thegrowing season [11] and by natural resources (e.g. climate, water) and external inputs (e.g.

fertilizers, pesticides).

Fig 2: Global CO2 Emissions

Bio-fuels began to be produced in the late 19th century, when ethanol was derived from

corn and Rudolf Diesels first engine ran on peanut oil. Until the 1940s, biofuels were seen as

viable transport fuels, but falling fossil fuel prices stopped their further development. Interest in

commercial production of biofuels for transport rose again in the mid-1970s, when ethanol began


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to be produced from sugarcane in Brazil and then from corn in the United States. In most parts of

the world, the fastest growth in biofuel production has taken place over the last 10 years,supported by ambitious government policies. By 2050, biofuels could provide 27% of total

transport fuel and contribute in particular to the replacement of diesel, kerosene and jet fuel. The

projected use of biofuels could avoid around 2.1 gigatonnes (Gt) of CO2emissions per year when

produced sustainably as shown in fig 2. Production and use of biofuels can also provide benefitssuch as increased energy security, by reducing dependency on oil imports, and reducing oil price

volatility. In addition, biofuels can support economic development by creating new sources of

income in rural areas. More recently, the reduction of CO2emissions in the transport sector hasbecome an important driver for biofuel development, particularly in countries belonging to the

Organisation for Economic Cooperation and Development (OECD). One of the most common

support measures is a blending mandate which defines the proportion of biofuel that must be

used in (road-) transport fueloften combined with other measures such as tax incentives. Morethan 50 countries, including several non-OECD countries, have adopted blending targets or

mandates and several more have announced biofuel quotas for future years [12].As a result, global biofuel production grew from 16 billion litres in 2000 to more than100 billion litres (volumetric) in 2010 (Figure 3). Today, biofuels provide around 3% of total

road transport fuel globally (on an energy basis) and considerably higher shares are achieved in

certain countries. Brazil, for instance, met about 21% of its road transport fuel demand in 2008

with biofuels. In the United States, the share was 4% of road transport fuel and in the European

Union (EU) around 3%in 2008.

Fig.3 Global Bio-fuel production


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Fig.4 Bio-fuel demand by region 2010-50

The biofuel demand over the next decade is expected to be highest in OECD countries,but non-OECD countries will account for 60% of global biofuel demand by 2030 and roughly

70% by 2050, with strongest demand projected in China, India and Latin America [12].

Biofuels already constitute the major source of energy for over half of the worlds

population, accounting for more than 90% of the energy consumption in poor developing

countries [13]. Over the next several decades, the most certain increase in demand for biofuels is

going to focus on displacing liquid fuels for transport, mostly in the form of ethanol which

currently supplies over 95% of the biofuels for transportation [14]. In comparison, the yield of

maize-based ethanol in USA and China is much lower, it is around 3,751 litres / ha, and 1,995litres / ha, respectively [15]. In China, wheat, cassava and sweet sorghum are used besides corn

for ethanol production. European Union (EU), another major ethanol producer, uses cereals likewheat, corn, barley and sugarbeet for production of bio-ethanol. Blending rates differ

substantially across the countries. While USA mandates 3 per cent blending of ethanol with

petrol, Brazil is following a very high ratio of 25 per cent blending. China and Indonesia have set

a target of 10 per cent blending, whereas in EU the blending specification stands at 5.75 per centin the year 20100 (Table 1).


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Table.1 Differ substantially across the countries:

Biodiesel production that accounted for a smaller proportion of liquid biofuels, increasedfrom 0.01 million tonnes in 1991 to 21.0 million tonnes by 2010. European Union is the major

producer of biodiesel (above 47 per cent), with a significantly smaller contribution coming from

the USA (13 percent). Other major biodiesel producers include China, India, Indonesia and

Malaysia (Figure 4). In EU, 80 per cent of the biodiesel is produced from rapeseed oil, the restbeing animal fats and other used cooking oils. Oil palm is the major source of diesel production

in Malaysia and Indonesia, whereas both USA and Brazil are using soybean to produce biodiesel

(Table 1). In India, biodiesel production is only at the nascent stage, with about 95 million litres

being produced fromjatropha andpongamia oil.


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Fig.5 Bio-diesel production by country: 2010[16]

Global production of biodiesel has grown rapidly as well, although starting from a much smaller

base. Biodiesel output expanded from 0.23 billion gallons in 2000 to 3.9 billion gallons in 2008

[17]. The European Union produces nearly 80 percent of the worlds biodiesel, largely from

rapeseed; Germany is the single largest biodiesel producer, followed by the United States which

produces the fuel mainly from soybeans [18]. Policy choices are instrumental in determining the

direction of national as well as global biofuels development. Around the world, governments are

considering a number of biofuel policy options. The biofuel policy aims to promote the use intransport of fuels made from biomass as well as other renewable fuels. A range of policies arecurrently being implemented to promote renewable bioenergy in United States, including the

Energy Policy Act of 2005, the Energy Independence and Security Act of 2007, the 2002 Farm

Bill and the Biomass Research and Development Act of 2000 [19].

Support policies for biofuels are often driven by energy security concerns, coupled with the

desire to sustain the agricultural sector and revitalise the rural economy. More recently, the

reduction of CO emissions in the transport sector has become an important driver for biofuel

development, particularly in countries belonging to the Organisation for Economic Cooperationand Development (OECD). One of the most common support measures is a blending mandate

which defines the proportion of biofuel that must be used in (road-) transport fuel oftencombined with other measures such as tax incentives. More than 50 countries, including several

non OECD countries, have adopted blending targets or mandates and several more have

announced biofuel quotas for future years (Table 2).


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Table 2. Biofuel Mandates in Different countries


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As a result, global biofuel production grew from 16 billion litres in 2000 to more than 100 billionlitres (volumetric) in 2010 (Figure 1). Today, biofuels provide around 3% of total road transport

fuel globally (on an energy basis) and considerably higher shares are achieved in certain

countries.

Brazil, for instance, met about 21% of its road transport fuel demand in 2008 with biofuels. In

the United States, the share was 4% of road transport fuel and in the European Union (EU)

around 3% in 2008.


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1.2. Biofuel Technologies:

A wide variety of conventional and advanced biofuel conversion technologies exists today. The

current status of the various technologies and approaches to biofuel production is summarized inFigure 6 and below. Conventional biofuel processes, though already commercially available,

continue to improve in efficiency and economics. Advanced conversion routes are moving to thedemonstration stage or are already there. Technology development of conventional and advancedbiofuels currently underway promises to boost sustainable biofuel production and reduce costs.

The most critical milestones for advanced conversion technologies closest to commercialisation

(HVO, cellulosic-ethanol, BtL/ FT, bio-SG) are to demonstrate reliable and robust processes

within the next five years, and achieve commercial-scale production within the next 10 years.

Conventional biofuels are relatively mature, but overall sustainability of the technologies could

be further improved by reducing economic, environmental and social impacts. Conversion

efficiency improvements will not only lead to better economics but also increase land-use

efficiency and the environmental performance of conventional biofuels. For conventionalbiodiesel, key areas for improvement include more ef ficient catalyst recovery, improvedpurification of the co-product glycerine and enhanced feedstock flexibility. For conventional

ethanol, new, more efficient enzymes, improvement of DDGS nutritional value, and better

energy efficiency can raise the conversion efficiency and reduce production costs.

Several advanced biofuels currently in a critical phase of technology development need to reach

commercial scale and be widely deployed. As with conventional biofuels, improvements inconversion efficiency are needed, as well as strategies for reducing capital requirements. These

strategies have to include integrating the dif ferent process steps along the whole supply chain

(i.e.from biomass feedstock to transportation biofuel) to demonstrate the effective performanceand reliability of the process. This should include the use of core technology components such as

tarfree syngas production or (hemi-)cellulose to sugar conversion in other industries (e.g.

chemical industry).


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Figure 6: Various technologies for biofuel production

1.3. BioFuel Policy in India:

In 1948, the Power Alcohol Act heralded Indias recognition of blending petrol

with ethanol. The main objective was to use ethanol from molasses to blend withpetrol to bring down the price of sugar, trim wastage of molasses and reducedependence on petrol imports. Subsequently, the Act was repealed in 2000, and inJanuary 2003, the Government of India launched the Ethanol Blended Petrol

Programme (EBPP) in nine States and four Union Territories promoting the use ofethanol for blending with gasoline and the use of biodiesel derived from non-edible

oils for blending with diesel (5% blending). In April 2003, the National Mission onBiodiesel launched by the Government identified Jatropha curcas as the most

suitable tree-borne oilseed for biodiesel production. Due to ethanol shortage during

2004-05, the blending mandate was made optional in October 2004, and resumedin October 2006 in 20 States and 7 Union Territories in the second phase of EBPP.

These ad-hoc policy changes continued until December 2009, when the

Government came out with a comprehensive National Policy on Biofuelsformulated by the Ministry of New and Renewable Energy (MNRE), calling for

blending at least 20% biofuels with diesel and petrol by 2017.


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Salient Features

An indicative target of 20% blending of biofuels both for biodiesel andbioethanol by 2017.

Biodiesel production from non-edible oilseeds on waste, degraded andmarginal lands to be encouraged. A Minimum Support Price (MSP) to be announced for farmers producing

non-edible oilseeds used to produce biodiesel. Financial incentives for new and second generation biofuels, including a

National Biofuel Fund. Biodiesel and bioethanol are likely to be brought under the ambit of

declared goods by the Governmentto ensure the unrestricted movement ofbiofuels within and outside the states.

Setting up a National Biofuel Coordination Committee under the PrimeMinister for a broader policy perspective.

Setting up a Biofuel Steering Committee under the Cabinet Secretary to

oversee policy implementation.

Drawback of the policy

While the policy framework to promote the biofuel sector in India is veryencouraging, experience has show that the governments initiatives have not

translated into results on the production and commercialization fronts to meet thecountrys energy demand.

The policy focuses on ethanol production from molasses, a process that is plaguedby price volatility, combined with demand for molasses-based alcohol from the

potable and chemical industries. Its production is dependent on sugar production.Volatility in sugar production affects molasses availability. This is already evidentas the viability of blending mandates is at stake as the EBPP has not been

successfully implemented across the country owing to the non-availability ofethanol for blending on a continuous basis.

The policy is thus sugarcane-centric which is counterintuitive to the policy

recommendation of using degraded and less fertile land for biofuel production.

Sugarcane is a big beneficiary of subsidies on fertilizer, pesticide and electricity forirrigation. The policy not only favors production of ethanol from sugarcane


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through molasses but also recommends sugarcane juice as another option. Whilemention is made of other feedstocks like sweet sorghum, sugar beet etc.,

prominence and a clear roadmap are not specified. In view of the above,prioritization of alternative feedstocks to fulfill targeted blending mandates is

called for. Policies favoring alternative feedstock such as sweet sorghum bycapping a third of the 5-10% requirement will serve as an incentive. A small

subsidy in the initial years will go a long way in promoting alternative feedstockswhich can supplement ethanol production for blending requirements. [20]

1.4. Lessons to be learnt from European Biofuel policy:

In the last decade, bioenergy and notably liquid biofuels have emerged as a

suitable, renewable alternative to co-exist with fossil fuels as their quality

constituents match petroleum-based products while less polluting (at combustion)and, if managed correctly, can contribute to rural development and economicgrowth. In this regard, the European Union (EU) Renewable Energy Directive

2009/28/EC sets a 10% target by 2020 which is expected to be met through (i)8.5% of first generation biofuels (mostly based on food/feed crops and vegetableoils) (ii) 1% of second generation biofuels and (iii) 1% of renewable electricity

[21].

Figure 7: Current and future biofuel consumption.

Currently, strong developments in the biofuels sector can be observed due to

relatively low oil prices and increased concerns about their impacts as it goes alongwith a marked and continuous increase of food price with relatively high volatility

and pressure on agricultural land - especially in developing countries. The extent to


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which EU biofuels policies might have contributed to rising food prices, reducedavailability, pressure on agricultural land and other adverse effects has not been

fully measured.

Currently, biofuels occupy less than 1% of total agricultural land. Even from the30 Mha used today, a considerable amount of by-products are produced, such as

cattle-feed, bioelectricity and heat (IEA Bioenergy 2012). According toInternational Energy Agency (IEA) scenarios, 100 Mha are required in 2050 for

biofuels, equivalent to 2% of total agricultural land. This does not appear to be

substantial in absolute terms, but nevertheless represents a three-fold increase in

land-use, if biofuel production is multiplied by ten in the next forty years. All thisis further constrained by the challenges linked to the expansion of crop productionfor food by 60% by 2050 (according to FAO figures), based on growth of world

population to 9 billion in 2050. This will require around 60 Mha of additionalarable land, in addition to considerable yield increases [22] (FAO 2011).

Impacts:

Environmental impacts of EU Biofuel policies:

Like emissions, the environmental impacts of biofuels are associated withchanging patterns in land use and intensity of farming as a result of biofuels

policies (Joint Research Centre, 2010a). The Joint Research Centre (JRC) (2010b)lists a number of environmental impacts from increased production ofbiofeedstocks and biofuel refining, such as:

higher rates of nitrate and phosphate leaching into surface and ground water

pesticide contamination soil degradation loss of biodiversity

deterioration of landscape amenity

Many of these effects are related to agricultural production, in which fertilizers are

used to enhance crop yields and pesticides to prevent pest related damage (such as

insecticides to prevent insect-related damage and herbicides to kill off weeds).

The same study also points to the fact that environmental drawbacks of biofuels are

often site- and crop-specific, and therefore aggregate impacts are difficult to


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model. Especially for biodiversity loss and landscape deterioration, data are oftenunavailable and negative environmental impacts difficult to measure. This makes

overall quantification of environmental impacts verydifficult and reliance on moresmall-scale or localized evidence necessary (Joint Research Centre, 2010a).

EMPA, ART, PSI and Doka kobilanzen (2012) offer the most comprehensive

study assessing the overall environmental impacts of biofuels. Even though thestudy is performed specifically in relation to biofuels in Switzerland, theassessment of environmental indicators is most relevant to the EU as it does not

give specific nominal values, but rather assesses the performance of different

biofuels against fossil-fuel use. In addition, their model specifies the origin of thefeedstock, making the results more relevant to the EU as environmental

performance is linked to feedstock origin. While recognizing modelling

uncertainties and a lack of data, the study concludes that on many environmentalimpact indicators, biofuel value chains have higher values than the fossil-fuelreference indicator, in particular when assessing agricultural processes contributing

to environmental problems, such as eutrophication, acidification, water depletion,

and ecotoxicity. In terms of particulate matter formation, biofuels also have ahigher impact than fossil fuels, in particular as a result of ammonia emissions dueto fertilizer utilization in agricultural processes and the transformation of forest

into agricultural land for feedstock production (EMPA et al., 2012)


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Figure 8: GHG emissions from Biofuels

Certain biofuels can provide greenhouse gas emission reductions relative to fossil

fuels (EMPA et al., 2012). The biodiesel produced from Rapeseed Oil, Soya Oiland Palm Oil have more greenhouse gas emission then diesel and gasoline. Inaddition, greenhouse gas benefits may be exaggerated through being credited with

the benefit of reduced food consumption and because possible Indirect Fuel Use

Change is often ignored. This leaves ozone depletion as the only indicator againstwhich biofuels generally have an advantage over petrol and diesel derived fromconventional crude oil, which, as it is often found in conjunction with natural gas,

emits methane during production, refinement, transportation and storage (EPA,2013a). However, this environmental benefit can be undermined where higher

vapour pressure limits for ethanol blended with petrol are permitted in the

European Union. These higher vapour pressure limits result in greater VOCemissions which are a precursor of ground level ozone. There is considerableevidence that wood-based biofuels emit ground-level ozone, which is a pollutantcausing reductions in crop yields, loss of biodiversity and excess health relateddeaths (Transport and Environment, 2008).


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Nitrous Oxide Emissions:

The study by EMPA et al. (2012) also points to the need for more specificmodelling of nitrous oxide (N2O) linked to agricultural production, and warnsthat

uncertainty related to such emissions should lead to general caution whenpromoting biofuels (EMPA et al., 2012, p. 1). One of the reasons for these nitrous

oxide emissions is nitrate leaching into ground water from fertilizer use. When thiswater eventually becomes surface water, N2O is released. Such emissions have300 times the global warming potential of CO2 emissions (FAO, 2008). Already in

2008, atmospheric chemist and Nobel laureate Paul Crutzen and colleagues

concluded that the production of biofuels depending on nitrate fertilizer has anequal or larger amount of global warming potential from N2O emissions as itscooling potential from displacing fossil fuel. This analysis did ignore the benefits

from co-products generated by biofuels, as well as fossil-fuel emissions on farmsand for fertilizer and pesticide production (Crutzen, Mosier, Smith, & Winiwarter,2008). A Swedish case study found that crops grown on nitrate-intensive soils will

fail the EUs target of 35 per cent greenhouse gas savings threshold with a

probability of higher than 50 per cent (Klemedtsson & Smith, 2011).

Water depletion as a result of biofuels:

An increase in water demand for biofuel feedstock production is a particularly

problematic issue (Joint Research Centre, 2010a). Water resources are scarce and

used in a variety of important sectors, most naturally for growing food. Irrigatedcrops such as wheat and maize, sweet sorghum, sugar cane, palm fruit and

jatropha, have the highest water depletion impacts, around 17 litres/kg (forextensive jatropha production) and 110 litres/kg (for intensive jatropha

production). Apart from feedstock production, biorefineries and fertilizers used to

grow feedstock can also contribute to water depletion (EMPA et al., 2012). Overall

water use in biorefineries is much less than for growing biofeedstocks. Biodiesel


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refineries are generally less water intensive than ethanol refineries (NationalResearch Council of the National Academies, 2008).

Irrigation water supporting the growth of these crops is often subsidized in

European countries, as well via the second pillar of the CAP. Due to a lack of data,the share of irrigation subsidies going to biofeedstock production is difficult to

quantify.

Water intensity is, like other environmental factors, often difficult to observe

(Ecofys et al., 2011). Assessments on a watershed basis would be more useful for

identifying water stress. However, the data required to undertake such assessmentsof biofuel feedstock cultivation are unavailable in the European Union (Ecofys et.al, 2011).

In a case study on Germany, Ayres (2012) found that previous studies haveunderestimated domestic and international water depletion caused by increased

biofuel production at home and abroad. The study finds that the largest producersare not necessarily those with the largest water footprints. While water use is notonly dependent on crops, but also on site-specific characteristics, the study givesan average water footprint by type of biofuel in which it is clear that imported

biofuels generally have higher water footprints. This begs an internationalperspective on water depletion concerns as a result of EU biofuel policies, which is

beyond the scope of this study.

Based on these numbers and EU biofuel consumption and importation figures from

the Impact Assessment accompanying the October 2012 proposal (EuropeanCommission, 2012d), it is possible to calculate a rough estimate of the EU water

footprint. As mentioned, since water use is also specific to each watershed, thisestimate is imperfect and mainly gives an indication of the rough magnitude of EUwater use. In this calculation, it is further assumed that all sunflower production is

European (while it is in reality shared between European and imported feedstock)and that the water footprint of soy from the United States and Argentina is equal tothe reported one from Brazil.


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Table 3: EU Biofuel water footprint

This estimate of around 82 km3 is comparable to the 2010 EU water footprint

estimated by Melkko in 2008 who estimated an EU total water footprint associatedwith biofuels of between 44 and 88 km3, depending on the crops used and

assuming that the share of biofuels in every country would have reached 5.75 percent of transport fuel consumption in 2010. Melkko also finds that the waterfootprint compared with renewable water resources varies significantly between

EU countries (Melkko, 2008). Of the 82 km3, around 39 km3 is water consumed

from European water resources. There are few available studies estimating thewater footprint of the EU biofuels sector. Other quantitative estimates in this area

are required, especially from the biofuels industry assessing their value chain.

There is also a lack of data on biofeedstock production, in terms of water and other

environmental performance. To put these numbers in perspective, total annualfreshwater resources in Germany (Europes largest country and the one with the

highest freshwater resources) is around 188 km3 (Eurostat, 2012e), and 39 km3 isroughly equal to the annual discharge of the Seine (15.8 km3) and Elbe (23.7 km3)combined (Kempe, Pettine & Cauwet, 1991). One can conclude that the water

footprint of EU biofuels is significant. Even though biorefineries use less water

relative to feedstock production, the effect on local communities can be verysignificant. Water depletion within the EU as a result of biofeedstock growth and

biorefineries is a serious risk and dependent on specifics related to location,watersheds and crop type.


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Loss of biodiversity as a result of biofuels :

Closely related to environmental degradation and water depletion, certain biofuelproduction also has an impact on biodiversity. For example, in Germany, an

increase in feedstock production for bio-energy has led to the destruction ofgrassland habitats. It is estimated that between 2003 and 2009, at least 55,000 ha of

grassland were lost as a result of conversion to maize (European EnvironmentalBureau et al. 2011). Under certain circumstances, traditional and small-scalefarming management methods can be beneficial to biodiversity, if they are

themselves not used in mass scale (European Environmental Bureau et al. 2011).

However, feedstock production for biofuels is nearly always produced on large-scale holdings and associated with land-use change. The Joint Research Centre(JRC) of the

European Commission estimated biodiversity loss as a result of changing land

patterns due to biofuel production. It found that the transformation of pastures to

croplands on average will lead to an 85.3 per cent decrease in those areas of theMean Species Abundance (MSA) index, which is an indicator for biodiversity. TheJRC therefore comes to the conclusion that the extensive use of bio-energy cropswill increase the rate in loss of biodiversity (Marelli, Ramos, Hiederer, & Koeble,

2011). Similarly, the Convention on Biological Diversity found that land- use

change from biofuel production exacerbates the risk of losing biodiversity andecosystem services. The effect is the largest when undisturbed natural vegetation

is transformed to land for feedstock cultivation. There is also a large effect whendisturbed natural vegetation is converted to land for feedstock production(Convention on Biological Diversity, 2012).

Economic Impacts:

Most modelling exercises validate that the EUs policies have had the biggest

impact on world prices of oilseeds and vegetable oils, the feedstocks for biodiesel.Indeed, the EU is the leading consumer of biodiesel while its consumption ofethanol is not so significant on the global scale. The markets for wheat, maize,sugarcane and sugar beet, the feedstocks for ethanol, it is the US policies that

matter most, since the United States is the worlds leading consumer of ethanol.

Combining the estimates of the price effects of the EU biofuel policies and the


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estimates of the value of the EU markets of vegetable oils produces an extremelywide range of estimates (with a factor of 36!) for the extra costs that the EU

consumers had to incur: between EUR 100 million and EUR 4 billion a year forfood and animal feed-end uses of vegetable oils, while the biofuel industry itself

had to pay between EUR 60 million and 2.2 billion extra a year over the period2010 to 2011. EU biofuel policies may be a major contributor to food price hikes,

but they hardly endanger food security of the average EU citizen. The negativeeffects on the poor will be mostly felt in developing countries in the strata of thesociety that spend a disproportionately high share of their income on food.

European biofuels policies effects on food prices:

Biofuels represent a large and increasing part of global agriculture production use,which has a significant impact on global food prices. During the 2007-2009 period

biofuels accounted for a significant share of global use of several crops20% forsugar cane, 9% for vegetable oil and coarse grains and 4% for sugar beet [24].These shares in global markets influence both the price levels, which are higher


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than they would be if no biofuels were consumed, and price volatility, becausethere is very little elasticity in the agricultural market either as a result of a supply

shortfall (such as weather related factors) or demand pressures (such as biofuels).

The use of agricultural biomass to produce energy constitutes a significantadditional demand for agricultural commodities. This shift in demand can

reasonably be expected to have some impact in raising agricultural commodityprices above where they would have been before the additional demand for thesecrops as energy feed stocks. The question is therefore not whether there is an

impact on agricultural commodity prices but how big it will be. According to a

report written by 10 inter-governmental organisations including the World Bankand the Food and Agricultural Organisation (FAO), forward projections

encompass a broad range of possible effects but all suggest that biofuel productionwill exert considerable upward pressure on prices in the future. [25]


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Table 4: Overview of Environmental and Economic impacts of EU Biofuel

Policy

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