European Commission: The State of the Energy Union is Good

02.02.17 | Blog | By:

The European Commission released yesterday its second State of the Energy Union report reviewing progress in the EU since the first report was released in 2015. The Commission notes:

“The Energy Union is a priority identified by the Juncker Commission as one of the political priorities, in which five dimensions are closely interlinked: energy security, solidarity and trust; a fully integrated European energy market; energy efficiency contributing to moderation of demand; decarbonizing the economy; and research, innovation and competitiveness. Progress has been made on all these dimensions.”

With the Clean Energy for all Europeans now released, the Commission says the focus is on implementation. “Agreement with the European Parliament and the Council should be reached on the legislative initiatives, existing legislation should be implemented and the Treaty’s  competition and state aid rules should be strictly enforced. At the same time non-legislative action at Union, national and local level should continue and be reinforced.”

The State of the Energy Union

Apparently, the state of the union is good. Highlights from the report include the following:

  • The European Union as a whole has continued to make good progress on delivering the Energy Union objectives, in particular on the 2020 energy and climate targets. It has already achieved considerable reductions in energy consumption. If Member States’ efforts continue, the European Union is on track to reach its 2020 energy efficiency targets. In 2015, greenhouse gas emissions in the European Union were 22% below the 1990 level. Despite a temporary limited increase in 2015, emissions remain on a decreasing trend. The figure below shows energy consumption and GDP.

  • The European Union is also on track in the renewable sector where – based on 2014 data – the share of renewables reached 16% of the gross final energy consumption of the European Union, according to the Commission. The figure below shows renewable energy shares in the European Union vs. Renewable Energy Directive (RED) and National Renewable Energy Action Plan (NREAP) trajectories.

  • According to the Commission, another important trend is that the European Union continues to successfully decouple its economic growth from its GHG emissions. During the 1990-2015 period, the EU’s combined GDP grew by 50%, while emissions decreased by 22%. This decoupling is expected to continue under current trends and projections, shown in the figure below.

An updated energy roadmap was included in the materials with a “state of play” for different initiatives. With respect to transport, there are several initiatives planned for 2017 including:

  • Fair and efficient pricing for sustainable transport – revision of the Eurovignette Directive and framework to promote European electronic tolling
  • Review of market access rules for road transport to improve its energy efficiency
  • Review of regulations setting emission performance standards to establish post-2020 targets for cars and vans
  • Establishing a monitoring and reporting system for heavy duty vehicles (trucks and buses) with a view to improving purchaser information
  • Review of Directive on the Promotion of Clean and Energy Efficient Road Transport Vehicles.

Renewable Energy in Transport

A number of accompanying reports were also included in the materials. I dug a bit into the accompanying report on renewable energy to review what the Commission had to say about transport. It noted, “Transport is the only sector which is currently below aggregated NREAP trajectories at EU level, with a 6% share of renewable energy in 2015. This confirms a rather slow progress to the mandatory 10% target in transport, due to various difficulties including relatively high GHG mitigation costs and regulatory uncertainty.”

Of course, that uncertainty was produced and prolonged by the Commission itself in its own hand-wringing and sluggish response to the indirect land use change (ILUC) controversy for biofuels, but you wouldn’t know that by reading the little footnote to that sentence which simply says, “Influenced by the discussions on the legal framework for biofuels produced from crops grown on agricultural land and ILUC.”

The figure below summarizes EU-28 renewable energy in transport through 2015. According to the Commission, biodiesel is the main biofuel used for transport in the EU, representing 79% of total use of biofuels in 2015 and the main country users are France, Germany and Italy. The share of biofuels produced from wastes, residues, ligno-cellulosic and non-food cellulosic material in the EU biofuel mix has increased from 1% in 2009 to 23% in 2015 mostly driven by Sweden, the United Kingdom and Germany. At EU level, these biofuels exceeded by three times the planned trajectory, with around 3 Mtoe (million tons oil equivalent) in 2015, mainly because of the utilization of used cooking oil.

I think this chart captures the essence of the problem, challenge and gamble with the Commission’s proposal to limit food-based biofuels (e.g. ethanol and biodiesel) in favor of advanced biofuels, which are barely shown on the chart. If the EU isn’t meeting NREAP targets already, how will it do so when the existing biofuels are phased down?  Will those advanced biofuels be there in the commercial volumes needed?

Renewable energy shares, including for transport, are shown for each member state in the following chart:

The Commission notes that in 2014, around 10% of ethanol and around 26% of biodiesel consumed in the EU was imported. The main exporting countries were Malaysia for biodiesel and Guatemala, Bolivia, Pakistan, Russia, Peru for ethanol. EU ethanol is mainly produced from wheat, maize and sugar beet, and that in 2014, more than 50% of biodiesel consumed in the EU was produced from rapeseed while the use of waste oils and fats but also of palm oil has significantly increased since 2010. In accordance with industry data, more than 60% of biodiesel and more than 90% of ethanol consumed in the EU was produced from the EU feedstock.

Non-EU ethanol feedstock is imported from Ukraine (maize, wheat), Canada (wheat), Russia and Moldova (barley, ray), and Serbia (sugar beet). The largest exporters of biodiesel feedstock to the EU were Indonesia and Malaysia (palm oil), Brazil and the U.S. (soybean). The majority of rapeseed oil is of EU origin. Feedstock potential for advanced renewable fuels is very large, but production facilities at commercial scale are still limited. The table below breaks down feedstock and their percentages in the ethanol and biodiesel pools.

You would not know it from the years-long controversy over the use of palm oil ILUC in the EU for biofuels, but it actually represents a small portion of biodiesel consumption, according to the Commission and as the table above shows. In fact, the Commission says:

“On biofuel sustainability, the majority of biofuels consumed in the EU are produced within the Union from domestic feedstock. No significant direct adverse effects on biodiversity, soil and water, food security nor on developing countries have been identified. (Emphasis mine.) However, risks of indirect land use change impacts remain of concern. Modelling analysis has found risks of indirect land use change (ILUC) resulting from food based biofuels. This is why, with the adoption of the ILUC Directive, the EU has limited the contribution of these biofuels to the 10% renewables transport target. Furthermore the Commission has recently made proposals to gradually reduce the share of food-based biofuels after 2020, while promoting their progressive replacement through advanced biofuels and renewable electricity.”