Low carbon fuels exploring the future EU policy framework 13 th - - PowerPoint PPT Presentation

Low carbon fuels – exploring the future EU policy framework

13th Concawe Symposium March 2019 Dr Chris Malins

Introductions

 Chris Malins  Independent consultant at Cerulogy  Previously:

 Fuels Lead for the International Council on Clean Transportation 2010-2016  Communications Specialist for the UK Renewable Fuels Agency 2008- 2010

 Member of numerous advisory groups  PhD in Applied Mathematics, Sheffield University

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http://www.cerulogy.com https://scholar.google.co.uk/citations?user=Y16zid kAAAAJ&hl=en&oi=ao

Contents

 How did we get here?  Where are we now?  Where are we going?

Context – reducing transport energy demand

50% 60% 70% 80% 90% 100% 2020 2025 2030 2035 2040 2045 2050 Energy demand compared to 2020 in reference case Reference_updated Current_policies Energy_efficiency Diversified_supply High_RES Delayed_CCS

EU Energy Outlook

How did we get here?

RED, FQD, ILUC, ETS

EU low carbon fuels, 2010-2020

 EU biofuel industry is policy created and sustained  Energy mandate under the Renewable Energy Directive (RED), GHG mandate under Fuel Quality Directive (FQD)

 Double counting for fuels from ‘wastes and residues’ and cellulosic fuels  Basic sustainability criteria  Not effective as advanced biofuel policy

 ILUC/food vs. fuel debate

 Enthusiasm for 1G biofuels is reduced  No real agreement on regulating ILUC

 ILUC Directive amends RED/FQD

 Cap* 1G fuels  Indicative ILUC numbers  Non-binding advanced biofuel target

*…support for

What hasn’t worked?

 Indirect land use change (ILUC) – biofuel support policy has probably driven agricultural expansion in a way that undermines policy goals

 Analysing and reacting to ILUC remain enormously controversial, but central to the effectiveness of policy  There’s also food vs. fuel, which is controversial at every level  Sustainability uncertainty leads to policy uncertainty leads to value uncertainty

 Cellulosic fuel technologies have been held out as the near future for a decade and more – but we haven’t got far

 Compare to recent excitement about power to liquids fuels

 Sustainability governance is challenging, and generally decried as too weak when reviewed

 Voluntary standards have provided more assurance than legal requirements

Indirect land use change estimates from regulatory studies

54 56 55 54 63 231 65 150 22 44 107 51 51 69 14 10 7 15 34 14 38 15 17 30 30 18 45 8 20

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4 14 24 34 44 54 64 74 84 94 Wheat Corn (maize) Sugar beet Sugar cane Palm oil Soy oil Rapeseed oil Sunflower oil Wheat Maize Barley Sugar Beet Sugar Cane Sunflower oil Palm oil Rapeseed oil Soy oil Midwestern maize Californian maize Sugarcane Canola Midwest soybeans Palm oil Maize Sugarcane Switchgrass Soy Canola Palm (proposed rule) Ethanol Biodiesel Ethanol Biodiesel Ethanol Biodiesel Ethanol Biodiesel IFPRI for EU GLOBIOM for EU CARB EPA iLUC emissions (20 yr amortisation)

Discounting the value proposition for uncertainty

1 2 3 4 5 6 7 1 3 5 7 9 11 13 15 Price ($/ga) Gasoline ($/gal) Cellulosic Ethanol Waiver Prices (CWCs) Cellulosic Ethanol Price with RIN Projected Brazilian Sugarcane Ethanol Prices Cellulosic Ethanol in California Cellulosic Ethanol in California with 2GBPTC Discounted Expected Cellulosic Ethanol Price

Discount ethanol price by 10%, RIN value to 35%, LCFS credit value to 25%, tax credit to 0% This is out of date now, but illustrates the point!

Where are we now?

Out with the RED, in with RED II

RED II

 Creates a more ‘nested’ set of targets

 Advanced (Annex IX A) biofuels > residue based (Annex IX B) biodiesel > RFONBOs and recycled carbon fuels > other non-food biofuels > food based biofuels > high ILUC-risk biofuels (palm oil)

 Advanced biofuels receive strongest ever EU support  Flexibility at the Member State level (Directive not Regulation)

 Choosing trajectories  Implementing mechanism  Volume vs. energy vs. GHG targets  Food cap  Recycled carbon fuels  Cap on Annex IX Part B  Double counting  Further ILUC-related differentiation

Illustrative supply scenario

2 4 6 8 10 12 14 16 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

% of EU transport energy

Palm oil Food or feed based Member states cap food/feed? UCO/tallow 'Advanced' biofuels ??? RFONBOs, waste fossil fuels, renewable electricity

Indicative fractions and trajectory

Other elements

 High ILUC-risk fuels* to be phased out by 2030

 Commission proposal identifies palm oil (review due by 2021)  Treatment of PFAD likely to be decided at Member State level

 Low ILUC-risk biofuel certification

 Additionality-assessed yield projects  Abandoned and degraded land projects  Smallholder yield projects  Only regulatory value is to palm oil projects (MS could expand this)

 Enhanced incentives for aviation/maritime fuels (1.2x multiplier)

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*Associated with ‘significant’ conversion

• f high carbon-stock landscapes

Where are we going?

Advanced biofuels, co-processing, PtL, aviation

Big questions!

 What outlook for advanced biofuels?

 Targets provide a much stronger signal  Value proposition still very unclear  Depends on Member State implementations  Sensitive to competition

 What about other advanced low carbon fuels?

 Cost outlook for electrofuels (RFONBOs) more difficult than advanced biofuels  Place of recycled carbon fuels sensitive to implementation

 Modal choices?

 Non-CO2 effects may make aviation environmentally preferable market  Multiplier + CORSIA could add value for aviation applications  Tougher fuel specs and limited airline willingness to pay may however leave road transport as dominant market

 Is RED II ‘fit for purpose’?

 The framework is solid (given what was

• n the table)

 Implementation decisions crucial  Now probably not the time to consider yet another round of revision!

Opportunities

 Fuel suppliers (incl. refiners and importers) likely to remain as regulated parties under RED II

 Puts industry at the centre of RED II decision making, like it or not!

 While liquid fuel demand will reduce, it will certainly not disappear  Co-processing/retrofitting to utilise existing refinery capacity

 HVO

 Not palm oil, ideally not food oils, preferably not PFADs  Opportunity to enter market for sustainable oilseeds? (Cf. UPM and carinata)

 Pyrolysis oils

 Co-processing in existing refineries identified in some studies as a lower cost BtL pathway  Engineering issues relating to pyrolysis oil must be managed

 FT wax upgrading

Conclusions

 A decade of great uncertainty is giving way to a decade of less uncertainty  It’s still hard to pin down the future value proposition from policy to low carbon fuels in € per litre

Thanks!

chris@cerulogy.com

Here’s one I made earlier

Slides for potential questions

ILUC – would everything be fine if we just got away from palm oil?

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50 100 150 200 250 300 350 400 Sunflower Oil Palm Oil Rapeseed oil Soy Oil gCO2e/MJ Soil organic carbon Forest reversion Natural vegetation conversion Agricultural biomass Peatland oxidation

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Not really – both IFPRI-MIRAGE and GLOBIOM still bad for biodiesel

65 63 47 34

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10 20 30 40 50 60 70 80 90 Rapeseed oil Sunflower Oil Rapeseed (no palm) Sunflower oil (no palm) gCO2e/MJ Peatland oxidation Soil organic carbon Forest reversion Natural vegetation conversion Agricultural biomass

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Will renewable electricity be cheap?

EU Reference Scenario 2016

Transport energy demand

EU Reference Scenario 2016