Palm, soy under further pressure in EU biofuels mix
The future make up of biofuels in the EU is becoming clearer, with recent regulatory moves by some countries suggesting the bloc could meet its target to phase out palm oil and soy oil from the slate ahead of schedule. This should support EU demand for biodiesel made from domestically-grown rapeseed oil, which trades at a premium to imports.
The EU last year agreed to a gradual phase out of biofuels with a high risk of indirect land-use change (ILUC), which is solely palm oil, by 2030. The EU's renewable directive allows individual member states to reduce, to zero, their share of biofuels with a high risk of ILUC earlier than that.
Recently opting for earlier phase-outs are Germany, Italy and Denmark. They join France, which banned products made from palm oil — such as palm oil methyl ester biodiesel or hydro-treated vegetable oil (HVO) — from being counted under national quota commitments from the start of this year, and is planning to exclude state support for soy and palm oil products including palm fatty acid distillate (PFAD). It is unclear when this would enter into force.
The German government intends to reduce the share of biofuels deemed by the EU to be at a high risk of ILUC — again, palm oil — to 0.5pc from 2022, 0.3pc from 2024 and zero from 2026. Germany also intends to tighten the obligation, under the EU fuels quality directive, on fuel suppliers to reduce the GHG intensity of transport fuels to 7.25pc from 2026.
The Italian senate has voted to end financial and other support, from 1 January 2023, for palm oil and PFAD derivatives and soybean oil and fatty acids from treatment of imported soybeans. Denmark's governing parties have put forward a law for a ban on "biofuels based on palm oil from being included in the fulfillment of the blending requirement". The Danish law would lower the blending requirement for advanced biofuels from 0.75pc to 0.3pc in 2021 and increase the blending requirement for sustainable biofuels from 5.75pc to 7.6pc.
Any decline in the market share for biodiesel produced from soybean oil and palm oil will support demand for product derived from rapeseed oil, which is all grown in the EU. Competitively priced imports of soy-based biodiesel from Argentina and palm-based biodiesel from Indonesia have swelled since late 2017, following the EU's reduction and subsequent lifting of anti-dumping duties. A later implementation of anti-subsidy duties has limited imports, but they remain higher in 2020 — at close to 818,000t from both countries combined in the first eight months of this year according to the most recent customs data. This was around 65,000t in total in the period 2014-16.
Non-governmental body Transport & Environment (T&E) welcomed the early phase-out of palm oil diesel in major European markets as well as the additional ban on soy biodiesel in France and Italy. Its biofuels manager Cristina Mestre said next year's revision of the EU's renewable energy law should also set a ban on soy-based biodiesel.
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