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 well
as 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 stagnant
over 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 the
past 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]. This
growth 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 gas
emissions 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

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 main
component 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 for
local 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 the
atmosphere [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 the
growing 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

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 CO2 emissions per year when
produced sustainably as shown in fig 2. Production and use of biofuels can also provide benefits
such 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 CO2 emissions in the transport sector has
become 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 fuel often combined 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 [12].
As a result, global biofuel production grew from 16 billion litres in 2000 to more than
100 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

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 1,995
litres / 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 like
wheat, 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 cent
in the year 20100 (Table 1).

Table.1 Differ substantially across the countries:

Biodiesel production that accounted for a smaller proportion of liquid biofuels, increased
from 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 rest
being 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 from jatropha and pongamia oil.

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 in
transport of fuels made from biomass as well as other renewable fuels. A range of policies are
currently 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 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 fuel often
combined 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).

Table 2. Biofuel Mandates in Different countries

As a result, global biofuel production grew from 16 billion litres in 2000 to more than 100 billion
litres (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.

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 in
Figure 6 and below. Conventional biofuel processes, though already commercially available,
continue to improve in efficiency and economics. Advanced conversion routes are moving to the
demonstration stage or are already there. Technology development of conventional and advanced
biofuels 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 conventional
biodiesel, key areas for improvement include more ef ficient catalyst recovery, improved
purification 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 in
conversion 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 performance
and 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).

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 with
petrol to bring down the price of sugar, trim wastage of molasses and reduce
dependence on petrol imports. Subsequently, the Act was repealed in 2000, and in
January 2003, the Government of India launched the Ethanol Blended Petrol
Programme (EBPP) in nine States and four Union Territories promoting the use of
ethanol 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 on
Biodiesel 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 resumed
in 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 Biofuels
formulated by the Ministry of New and Renewable Energy (MNRE), calling for
blending at least 20% biofuels with diesel and petrol by 2017.

Salient Features

An indicative target of 20% blending of biofuels both for biodiesel and

bioethanol by 2017.
Biodiesel production from non-edible oilseeds on waste, degraded and
marginal 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 Government to ensure the unrestricted movement of
biofuels within and outside the states.
Setting up a National Biofuel Coordination Committee under the Prime
Minister 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 very
encouraging, experience has show that the governments initiatives have not
translated into results on the production and commercialization fronts to meet the
countrys energy demand.
The policy focuses on ethanol production from molasses, a process that is plagued
by 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 evident
as the viability of blending mandates is at stake as the EBPP has not been
successfully implemented across the country owing to the non-availability of
ethanol 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 for
irrigation. The policy not only favors production of ethanol from sugarcane

through molasses but also recommends sugarcane juice as another option. While
mention 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 by
capping 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 feedstocks
which 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 economic
growth. 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 vegetable
oils) (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 along
with a marked and continuous increase of food price with relatively high volatility
and pressure on agricultural land - especially in developing countries. The extent to

which EU biofuels policies might have contributed to rising food prices, reduced
availability, 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 the
30 Mha used today, a considerable amount of by-products are produced, such as
cattle-feed, bioelectricity and heat (IEA Bioenergy 2012). According to
International 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 this
is further constrained by the challenges linked to the expansion of crop production
for 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 additional
arable 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 with
changing 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 of
biofeedstocks 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

model. Especially for biodiversity loss and landscape deterioration, data are often
unavailable and negative environmental impacts difficult to measure. This makes
overall quantification of environmental impacts very difficult and reliance on more
small-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 the
study is performed specifically in relation to biofuels in Switzerland, the
assessment 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 the
feedstock, 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 environmental
impact indicators, biofuel value chains have higher values than the fossil-fuel
reference 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 a
higher impact than fossil fuels, in particular as a result of ammonia emissions due
to fertilizer utilization in agricultural processes and the transformation of forest
into agricultural land for feedstock production (EMPA et al., 2012)

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 Oil
and Palm Oil have more greenhouse gas emission then diesel and gasoline. In
addition, 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 against
which biofuels generally have an advantage over petrol and diesel derived from
conventional 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 VOC
emissions which are a precursor of ground level ozone. There is considerable
evidence that wood-based biofuels emit ground-level ozone, which is a pollutant
causing reductions in crop yields, loss of biodiversity and excess health related
deaths (Transport and Environment, 2008).

Nitrous Oxide Emissions:

The study by EMPA et al. (2012) also points to the need for more specific
modelling of nitrous oxide (N2O) linked to agricultural production, and warns that
uncertainty related to such emissions should lead to general caution when
promoting 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 this
water eventually becomes surface water, N2O is released. Such emissions have
300 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 an
equal or larger amount of global warming potential from N2O emissions as its
cooling potential from displacing fossil fuel. This analysis did ignore the benefits
from co-products generated by biofuels, as well as fossil-fuel emissions on farms
and 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. Irrigated
crops such as wheat and maize, sweet sorghum, sugar cane, palm fruit and
jatropha, have the highest water depletion impacts, around 17 litres/kg (for
extensive 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

refineries are generally less water intensive than ethanol refineries (National
Research 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 assessments
of 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 have
underestimated domestic and international water depletion caused by increased
biofuel production at home and abroad. The study finds that the largest producers
are not necessarily those with the largest water footprints. While water use is not
only dependent on crops, but also on site-specific characteristics, the study gives
an average water footprint by type of biofuel in which it is clear that imported
biofuels generally have higher water footprints. This begs an international
perspective 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 (European
Commission, 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, this
estimate is imperfect and mainly gives an indication of the rough magnitude of EU
water 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 to
the reported one from Brazil.

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 associated
with 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 per
cent of transport fuel consumption in 2010. Melkko also finds that the water
footprint 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 the
water 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 annual
freshwater resources in Germany (Europes largest country and the one with the
highest freshwater resources) is around 188 km3 (Eurostat, 2012e), and 39 km3 is
roughly 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 very
significant. 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.

Loss of biodiversity as a result of biofuels :

Closely related to environmental degradation and water depletion, certain biofuel
production also has an impact on biodiversity. For example, in Germany, an
increase in feedstock production for bio-energy has led to the destruction of
grassland 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 Environmental
Bureau et al. 2011). Under certain circumstances, traditional and small-scale
farming 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 largescale 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 the
Mean Species Abundance (MSA) index, which is an indicator for biodiversity. The
JRC therefore comes to the conclusion that the extensive use of bio-energy crops
will 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 and
ecosystem services. The effect is the largest when undisturbed natural vegetation
is transformed to land for feedstock cultivation. There is also a large effect when
disturbed 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 of
ethanol 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

estimates of the value of the EU markets of vegetable oils produces an extremely

wide 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 for
food 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 period
2010 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 negative
effects on the poor will be mostly felt in developing countries in the strata of the
society 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 crops 20% for
sugar 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

than they would be if no biofuels were consumed, and price volatility, because
there 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 significant
additional demand for agricultural commodities. This shift in demand can
reasonably be expected to have some impact in raising agricultural commodity
prices above where they would have been before the additional demand for these
crops 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 Bank
and the Food and Agricultural Organisation (FAO), forward projections
encompass a broad range of possible effects but all suggest that biofuel production
will exert considerable upward pressure on prices in the future. [25]

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

Policy

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