Low carbon fuels – exploring the future EU policy framework 13 th Concawe Symposium March 2019 Dr Chris Malins
Introductions 2 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 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 100% Energy demand compared to 2020 in 90% reference case 80% 70% 60% 50% 2020 2025 2030 2035 2040 2045 2050 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
from regulatory studies Indirect land use change estimates iLUC emissions (20 yr amortisation) 14 24 34 44 54 64 74 84 94 -6 4 Wheat 14 Ethanol Corn (maize) 10 Sugar beet 7 IFPRI for EU Sugar cane 15 Palm oil 54 Biodiesel Soy oil 56 Rapeseed oil 55 Sunflower oil 54 Wheat 34 Maize 14 Ethanol Barley 38 GLOBIOM for EU Sugar Beet 15 Sugar Cane 17 Sunflower oil 63 Biodiesel 231 Palm oil Rapeseed oil 65 150 Soy oil Midwestern maize 30 Ethanol Californian maize 30 Sugarcane 18 CARB Canola 22 Biodiesel Midwest soybeans 44 107 Palm oil Maize 45 Ethanol Sugarcane 8 Switchgrass 20 EPA Soy 51 Biodiesel Canola 51 Palm (proposed rule) 69
Discounting the value proposition for uncertainty 7 6 5 Price ($/ga) 4 3 Discount ethanol price by 10%, RIN value to 35%, 2 LCFS credit value to 25%, tax credit to 0% 1 0 1 3 5 7 9 11 13 15 Gasoline ($/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 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 Recycled carbon fuels Implementing mechanism Cap on Annex IX Part B Volume vs. energy vs. GHG targets Double counting Food cap Further ILUC-related differentiation
Illustrative supply scenario 16 14 12 % of EU transport energy 10 8 6 4 2 0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 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 13 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) *Associated with ‘significant’ conversion of high carbon-stock landscapes
Where are we going? Advanced biofuels, co-processing, PtL, aviation
Big questions! Modal choices? What outlook for advanced biofuels? Targets provide a much stronger signal Non-CO 2 effects may make aviation environmentally preferable market Value proposition still very unclear Multiplier + CORSIA could add value Depends on Member State for aviation applications implementations Tougher fuel specs and limited airline Sensitive to competition willingness to pay may however leave road transport as dominant market What about other advanced low carbon fuels? Is RED II ‘fit for purpose’? Cost outlook for electrofuels (RFONBOs) The framework is solid (given what was more difficult than advanced biofuels on the table) Place of recycled carbon fuels Implementation decisions crucial sensitive to implementation 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 20 just got away from palm oil? 400 350 300 250 200 gCO2e/MJ 150 100 50 0 -50 -100 -150 Sunflower Oil Palm Oil Rapeseed oil Soy Oil Soil organic carbon Forest reversion Natural vegetation conversion Agricultural biomass Peatland oxidation
Not really – both IFPRI-MIRAGE and 21 GLOBIOM still bad for biodiesel 90 80 70 65 63 60 50 47 gCO2e/MJ 40 34 30 20 10 0 -10 -20 Rapeseed oil Sunflower Oil Rapeseed (no palm) Sunflower oil (no palm) Peatland oxidation Soil organic carbon Forest reversion Natural vegetation conversion Agricultural biomass
Will renewable electricity be cheap? EU Reference Scenario 2016
Transport energy demand EU Reference Scenario 2016
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