January 18 – Crop-Based Biofuels Hit Political Snafu in Europe

Yesterday the European Parliament voted to cap crop-based biofuel use through 2030.

While there pretty much all of the EU’s rapeseed crop goes into biofuel, there is a negative in here for canola prices.

Yesterday the European Parliament voted to cap crop-based biofuel use through 2030.

Since pretty much all of the EU’s rapeseed crop goes into biofuel, what does this mean for canola prices?

Yesterday the European Parliament voted to cap crop-based biofuel use through 2030.

Since pretty much all of the EU’s rapeseed crop goes into biofuel, what does this mean for canola prices?

First of all, the crop that is going to likely take the largest hit here is palm oil.

The reason for that is because the European Parliament also voted to remove biodiesel made from palm oil from the list of biofuels that can count towards the renewables target in 2021.

Oh snap.

According to one study that everyone and their mother in the EU Parliament pointed to, biodiesel made from palm oil is on average three times worse for the climate that fossil-based fuels.

“Okay Brennan, so what does this mean for canola prices?”

Since Indonesia can’t push their palm oil into America via biodiesel anymore, it was supposed to find a home in Europe. That window has effectively been boarded up now though.

Thus, with biodiesel supply still staying at 2017 levels, but less palm-based biodiesel to contribute to that supply, it opens the door now for more rapeseed or canola-based biodiesel.

Europe also can’t produce enough rapeseed to keep up with its demand, hence why it imports. As we noted a month ago though, the EU Commission is calling rapeseed a dying crop in Europe as, in the long-term, more soybeans and less rapeseed getting produced in Europe.

But that’s like, a dozen years from now so I’m not too worried about it.

We do know today that Australia and Ukraine are ramping up their respective canola and rapeseed exports into the EU.

With palm oil out, maybe there’s room for Canadian canola to do more than the usual 250,000 tonnes or so of exports it usually does (and accordingly stronger canola prices, which is why you see the Winnipeg ICE futures board showing higher prices this morning).

There is a downside to this though, with less palm oil making its way into BOTH America and the United States, it adds to the growing size of available vegetable oils in the global market.

Ultimately though, this vote by the European Parliament is a net win for canola in my opinion.

As a reminder, we recently moved from 40% to 50% on our canola sales. Read up on how we’re playing the canola market here.

 

​EU Parliament ends support to highest-emitting palm oil biofuel while freezing all food-based biofuels at current levels

The European Parliament voted today to limit the support to biofuels made from food crops to 2017 national consumption levels and never higher than 7% of all transport fuels. Parliament also voted to remove biodiesel made from palm oil, the highest emitting biofuel in the market today, from the list of biofuels that can count towards the renewables target in 2021. This means that drivers will no longer be forced to burn palm oil in their cars and trucks.

Parliament also approved an overall transport target of 12% containing a 10% blending mandate for so-called ‘advanced’ fuels, which includes renewable electricity, waste-based biofuels and “recycled carbon fuels”. Overall, Transport & Environment (T&E) welcomes the decision to cap the use of food-based biofuels at current levels but regrets that MEPs missed the opportunity to support a more ambitious phase out.

Laura Buffet, clean fuels manager at T&E, said: “Today’s parliament vote sends a clear message to the biofuels industry that growth can only come from sustainable advanced fuels such as waste-based biofuels, not from food crops. This compromise redirects investments into the fuels of the future and eliminates palm oil biodiesel, the highest emitting biofuel. Unfortunately the deal does little to clean up and phase out existing EU crop biofuels which will continue to receive support until 2030.”

Four out of every five litres of biofuel consumed in Europe is biodiesel.  T&E’s analysis, based on the results of the Globiom study for the European Commission, shows that on average EU food-based biodiesel produces 80% more CO2 emissions than the fossil diesel it replaces. Biodiesel made from palm oil is on average three times worse for the climate than fossil diesel. Currently, most EU biofuels increase, not decrease, CO2 emissions.

T&E warns that the new definition and list of advanced biofuels leave the door open to unsustainable feedstocks. The rules need to be tightened to ensure only truly sustainable advanced feedstocks are incentivised under the Renewable Energy Directive.

Laura Buffet said: “This vote puts the EU fuels policy on a cleaner track, but it still leaves the door open to some unsustainable second-generation biofuels. We urge the European Commission and EU governments to tighten the definition and the list of advanced biofuels so as to only promote truly sustainable biofuels and avoid the same mistakes of the past.”

Around half of EU production of crop biodiesel is based on imports, not crops grown by EU farmers.

Before it is enacted as law, the European Parliament, EU governments and the Commission will have to agree a common position in trilogues starting next month.

H/T: Transport & Environment
About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.