BioFuels Journal

London, UK—The US is considering reducing its biofuels target for 2014 from 18.2 billion to 15.2 billion gallons, while the EU has lowered its ceiling on food-based biofuels used in the transportation fuel mix from 10% to 7%, in moves that slow the urgency around the industry’s growth and biofuels’ role in wider renewable targets, says research and consulting firm GlobalData.

The company’s report* states that the US Environmental Protection Agency (EPA) is considering shaving 3 billion gallons from this year’s biofuels goal, which would mark the first reduction to annual targets since they were set in 2007, with future reductions and regulatory modifications likely.

Carmine Rositano, GlobalData’s Managing Analyst covering Downstream Oil & Gas, says: “While gasoline demand has declined over the past seven years, the approved annual use of ethanol in gasoline has not been adjusted to reflect this change, as increasing amounts of biofuels have been mandated to be blended into petroleum products each year through to 2020.

“The refining industry has warned that increasing ethanol use in gasoline would exceed the 10% mix that dominates car engine designs and the gasoline fuelling infrastructure, so revising the mandated amounts for biofuels in the energy mix would make economic sense.”

While US biofuels targets are expected to be cut to mirror the decrease in gasoline demand, the EU has a different reason for its own target adjustments.

Rositano explains: “The EU’s new 7% biofuels ceiling comes in response to claims that using biofuels made from food crops increases inflation on food costs.

“As the EU is still aiming to achieve 10% of transportation fuels made from renewable energy sources by 2020, the gap between this target and the 7% ceiling of food-based biofuels indicates a reliance on next generation biofuels made from algae, waste and other materials.”

Matthew Jurecky, GlobalData’s Head of Oil & Gas Research, concludes: “It’s normal for agencies to review challenged policy. Ongoing analysis on the actual reduction of greenhouse gases, inclusive of the entire value chain, the impact they’ve had on food crops and prices, and the simple economics associated with producing them, underlies the regulatory shift.

"Biofuels will, however, remain a part of meeting mandated renewable energy and emissions targets, but other industries and policies, such as more stringent efficiency standards, will also form a part.”

*Third Quarter 2014 Regulatory Outlook

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