Biofuel Support Policy, Summary of the Public Thematic Report

COUR DES COMPTES

Summaryof the Public Thematic Report

January 2012

Biofuel support policy

Notice his summary is designed to make the Cour des Comptes report easier to read and use. TheT Cour des Comptes is responsible only for the content of the report. The responses of government departments, councils and other organizations are appended to the report. Conclusion and recommendations and Conclusion policy support biofuel the of relevance and costs Results, Stakeholders Facts Introduction ...... 7 ...... 5 ...... 13 ...... 21 Contents ...... 27

3 Summary of the Public Thematic Report by the Cour des Comptes 3 Introduction

his assessment of the French Government’s biofuel support policy is a public policy assessment made by the Cour des Comptes on its own initiative, in accordance with ArticleT 47-2 of the French Constitution and Article 111-3-1 on the French Financial Jurisdiction Code. Like public policies in other areas, the one supporting biofuel must overcome the difficul- ty of having to meet a combination of objectives. In fact, it was initially linked with support to agriculture, then with the quest for energy independence and later with environmental concerns. “Sustainability” encompasses not only the notion of environmental protection, but also social equity and the inter-generational bond. The later priorities are additions to and not substitutes for the earlier ones. Consequently, any assessment of the positive or negative effects of policies must take into account the whole picture and consider the priorities in succession. This makes it quite difficult to single out the effects of the various instruments in place: global, European and national regulations (incorporation mandates, border protection), tax instruments (exemption from domestic consumption tax on fuel associated with production quotas, general tax on polluting activities), waste recycling by double counting tallow and used cooking oils.

The biofuel support policy is also impacted by those implemented in other countries Comptes des Cour whether in Europe (Germany) or elsewhere in the world (United States, Brazil or Indonesia for example). Government support for biofuels has increasingly become the subject of public debate. This is due to controversy about its environmental implications and because it is thought to be responsible for the highly volatile agricultural commodity prices observed since 2007. A number of questions must be asked: is biofuel policy a matter of agricultural, energy or environment policy? Can its effects be verified and measured? Is public money being well- spent and is this spending justified? Who benefits? Are policy goals consistent with the instruments used to implement it? Is proper consideration given to uncertainties, especially those of the Public Thematic Report by the regarding sustainability and ethics? This assessment covers all the “stakeholders” involved in this policy. Most of them are private natural persons or legal entities (including farmers, biofuel producers, oil companies, fuel Summary

5 Introduction

distributors and car manufacturers) and, as such, are outside the Cour des Comptes’ jurisdiction. This has called for the utmost transparency in conducting dialogue and the utmost objec- tivity in considering interests and viewpoints that were, by definition, different if not completely opposite. The assessment was also based on the work of independent experts, selected for their specific individual skills before investigations began. Lastly, international and, more specifically, European calibration was carried out.

6 Cour des Comptes 1 Facts Biofuels and energy Biodiesel is made in France not only from home-produced rapeseed While energy is crucial for and sunflower oil and imported soy- human society in general, it nonethe- bean and palm oil, but also from tal- less poses a basic dilemma in that no low and used cooking oil. Crude veg- source is without its drawbacks. etable oil is not used in motors as Biomass is no exception. such, but as a derivative known as Transport currently accounts for vegetable oil methyl ester or VOME. 25% of all energy consumed in the It is incorporated into diesel oil, world, mostly as liquid fuel generally at a rate of 7% v/v in B7 (2.5 bn m3). There are two types of diesel, which is the maximum per- liquid fuel, diesel oil and petrol. In mitted amount, or, in a very limited Europe and especially in France, number of cases, at a rate of 30% diesel oil is by far the more widely v/v in B30 diesel in the captive fleets used of the two, while petrol (or of some cities or companies. gasoline as it is called in the USA) Biodiesel production is closely dominates in the Americas. linked to that of its main by- This has an impact on procure- product, rapeseed and sunflower ment. French refineries are old and cake, which plays an important role produce more petrol than the in livestock feed. It is also a major Comptes des Cour domestic market needs, but too little economic issue because the diesel oil. As a result, the country European Union has always been must export its surplus petrol but forced to import large quantities of import large quantities of diesel oil, soya bean cake from North and especially from Russia. South America. Similarly, biodiesel The biofuels currently available production reduces to a certain on the market come largely from extent diesel oil imports. energy reserves from plant or animal Bioethanol is an alcohol pro- waste. They are blended with duced either by fermenting sugar hydrocarbons. from plants (sugar beet, sugar cane) In France, they are distributed in or through grain starch hydrolysis of the Public Thematic Report by the two forms for use in motor vehicles: (wheat, maize). It can be added biodiesel, used in conjunction with directly to petrol at percentages diesel oil, and bioethanol, which is ranging from 5 to 85% v/v. As it is Summary added to petrol. more difficult to handle than biodiesel, it was once chiefly used in

7 7 Facts

conjunction with a refinery residue to produce ethyl tert-butyl ether Biofuels from an (ETBE). agriculture and Like biodiesel production, ethanol production generates by- environment products (beet pulp, wheat or maize perspective distillers grains) which are an important source of high protein livestock In France, a little less than 6% feed. of the total agricultural area, or World biofuel production has 1.7 million ha, was given over to risen sharply over the past ten years, the production of biofuel raw climbing from 16 million m3 in 2000 materials in 2010. Of that total, to more than 100 million m3 in 2010. 1.45 million ha was for biodiesel and Significant as these figures are, they 250,000 ha for bioethanol. Yet a represent no more than 2.5% of the greater area is given over to oilseed total fuels used in road transport. At plants (2.2 million ha, of which 75% of the world total, ethanol oilseed rape covers two-thirds), as dominates biofuel production, main- much of their production is intended ly because 90% of this total is pro- for cooking oil (0.8 million tonnes). duced by the United States and The situation is quite different for Brazil, where most vehicles run on ethanol. Only a very small amount of Cour des Comptes des Cour petrol. The European Union has wheat (4.4%) is used for ethanol pro- opted for biodiesel as most vehicles duction, the rest being used for other run on diesel oil. The EU produces purposes. The same is true for maize half of the world’s biodiesel. and, to a lesser extent, sugar beet. The It should be noted that biofuels world and European sugar market output less energy by unit volume reform limited France’s export capaci- (LHV or lower heat value) than fos- ty regarding sugar beet, thereby reduc- sil fuels. This means that more bio- ing the area given over to this crop. fuel than fossil fuel is required to Ethanol production has made up for cover a given distance. The gap is this loss. wider for ethanol (-34%) than for From an environmental angle, bio-

of the Public Thematic Report by the biodiesel (-8.5%). fuels were viewed favourably at the beginning since, unlike fossil fuels, they only release to the atmosphere

Summary what they have captured during their growth phase.

8 es osl nry o produce to energy 84% fossil to 68 takes a less it fuel, fossil refer- represents same ence the Using ethanol drop. fossil 49-72% reference while the lower fuel, of 90% those and than 59 cur- are between Agency, rently emissions the GHG to biodiesel According tested. rather con- been have life were they although so, the less method, on analysis based cycle and in 2009/2101 conducted last, the of the while conclusions positive, rather were in 2002, completed first, points. the of these results on The studies de several maîtrise out la de et l’énergie l’environnement ( de Agency Management Energy to land production. their for of intended areas crops large of increasingly allocation use the by land induced the changes b) combustion; energy during generated they com- energy the the biofuels, with pared a) produce to to: required proper cost-benefit give to consideration begun addition, have analyses down- In revised wards. emissions constantly been (GHG) has gas produce greenhouse to feed. livestock available and food human fewer be the biofuel, would were produce crops to more used the criti- because more cally, viewed were they commodity prices, agricultural in rise sharp h Fec Evrnet and Environment French The of terms in balance the Also, the and 2008 of as However, , ADEME) was asked to carry to asked was ADEME) , Agence emte poie te d not do they provided permitted principles: of array wide a down at duty no all. paying treat- frequently ment, such, preferentialtariff as from and, benefit world from developing come the suppliers of number increasing an Lastly, all. product”is at petrol. taxed barely “chemical with - resulting The slightly no - how blended is it matter if case the no almost longer is this be But should well-protected. bioethanol alcohol). product, agricul- an tural duty-free products As reasons. are historical for biodiesel) oilseed food-grade (including products Furthermore, similar of (e.g. uses other to respect with out not, singled are example, for Biofuels so. partly only but and distribution consumption. imports, duction, especially indirect changes. changes, indirect use land especially for makes data allowance the by- no method that the claim and allocation with used energy agree Environmental product not data. do this They contest ethanol. however, groups, pro- to duce less 85% to 18 and biodiesel of rules of variety great A - tax support measures are are measures support tax - lay directives European Several biofuels, to applied are Tariffs pro- biofuel govern rules Many Facts

9 Summary of the Public Thematic Report by the Cour des Comptes 10

Summary of the Public Thematic Report by the Cour des Comptes nry n h bss f CO of basis the on tax would energy which taxation energy on oils. cooking applied used or rule tallow to “double-counting” the ethanol; for v/v 10% v/v oil, 7% diesel for quality: fuel to respect with incorporation: (LHV); value biofuel heat lower by 5.75% energy for the exist in renewable defined directive; criteria European ability with compared fuels; cost fossil production in difference the for overcompensate epcie aiu permitted for maximum v/v the above for respective are 10.28% values v/v These and ethanol. 7.57% to biodiesel equivalent rate is incorporation 7% the The and account ethanol. biodiesel of into output energy taking lower an 2010, for as LHV of by 7% of provides rate which incorporation plan, 2005 fuel government’s the in out set are yields. product a actual that (i.e. energy) content energy and sions Facts aty tee s dat directive draft a is there Lastly, by supported is recycling waste - defined are levels maximum - levels minimum recommended - sustain- the meet must biofuels - In France, regulations in this area this in regulations France, In 2 emis- n cud lo e re o biodiesel 2010. for of as true was be 2009 also in This could and ethanol for target. case the the already of short results fall (oil incorporation manufacturers). Consequently, car stakeholders and industrial companies of strate- the gy with or realities infra- structure distribution or rates) incorporation (maximum tech- requirements quality are nical fuel they with however, incompatible reality, ambi- In European tions. beyond and above is rate incorporation met. be the not to if 2005 in paid created was TGAP) eea tx n oltn activities polluting on ( tax general stiff very a mandatory, legally not are targets these As oil petrol. diesel SP95E10 and B7 for rates incorporation ae ééae u ls ciié polluantes activités les sur générale taxe rnh noprto tres are targets incorporation French , wnynn fr idee, wny for of last The ETBE. for four and ethanol twenty biodiesel, for twenty-nine Fifty-three such approvals were granted: regulations.EC meet to process bidding competitive a by selected units duction ( “approvals” or six licences production year under granted only was reduction TIC revenues,the fiscal on expenditure respectively.€8/hl and €14 only at stands now and introduction its than biodiesel. It has fallen steadily since produce to more costs ethanol that fact the by justified was difference this time, in (€37/hl 2005) than for biodiesel (€33/hl). At the ethanol for so more ered, appears significant. quite 2005 since of instruments cost these The TIC). consommation, la sur tax on petroleum products ( which VATto under subject are fuels domestic a and system, tax fuel its general of part as instruments financial of number a introduced France plan, fuel revenue additional by balanced entirely almost is expenditure Financial agréments o ii te mat f ti tax this of impact the limit To low- significantly thus was TIC The To meet the targets set out in its bio- . h bnfcais ee pro- were beneficiaries The ). taxe intérieure in the biofuel plan. biofuel the in to meet the incorporation targets set out failure to due largely is This 2009. since sharply risen has TGAP,that in figure a about €0.33 bn ment collected a total of sold: over2005-2010. quantities large bn €0.5 total a and 2011 in million €143 revenues the TIC to owing increased from efits ben- LHV, government the of terms in 10% than less is oil diesel and biodiesel bn; €1 to ed to from amount- 2005-2010 period the rev- for enue amounted Total 2011. in earnings bioethanol million/year €260 on additional TIC rate, revenues: in increase mechanical a from benefits government the however, biofuels, of bn. €2.65 of total a making ethanol, for bn €0.85 and biodiesel reductions for bn €1.8 to TIC amounted (2005-2010), report expectations, of short ethanol. for especially well has fallen built actually units production of ing, they were oversized and the number speak- Generally 2015. in expire them vr h sm pro, h govern- the period, same the Over between difference the although - incorporation current the at - density energy lower the to Owing this by concerned period the Over Facts

11 Summary of the Public Thematic Report by the Cour des Comptes Facts

produce it. An estimated $1 bn/year is International currently spent in tax subsidies. Despite comparisons this, Brazil has not exported any ethanol in the past two years as, owing to poor Since 2006, the United States has sugar cane harvests, it has barely pro- been the world’s leading producer of duced enough to meet fast-growing biofuels, for which it grants massive domestic demand. From zero subsidies. These are increasingly under production in 2005, the country now fire today, to such an extent that the produces 1.6 million m3 of biodiesel per main subsidy was dropped on year. 31/12/2011. Ethanol has seen a real Biodiesel is experiencing spectacular boom in the country: production capac- development in Argentina where it ben- 3 ity rose from 6.4 million m in 2004 to efits from an export tax system that can 3 more than 41 million m in 2007. be likened to a subsidy. Indonesia and Biofuels are supported by domestic tax Malaysia are also becoming major play- reductions which are applied not only to ers on the biodiesel market. They are the biofuels intended for the domestic mar- world’s two leading palm oil producers ket but also to those destined for export. and are both developing significant This led to an explosion in biodiesel esterification capacities for this product. exports, particularly to Europe, until the EU Member States have also intro- European Union took antidumping duced measures to support biofuel pro-

Cour des Comptes des Cour measures in 2008 to check the situation. duction to varying degrees. There are Brazil, which is historically the world two exceptions: Germany, which has leader in ethanol production, still has a drawn back considerably from its initial decisive edge in the field and has now position as one of the leading propo- begun to develop biodiesel production. nents of this policy and Sweden, which The world’s leading sugar producer, had built its entire policy on E85 petrol Brazil transforms nearly half its produc- (85% biofuel), flexible-fuel engines and tion into ethanol, which is highly com- imports, for which the country had petitive as “bagasse” (sugar cane obtained a special dispensation from the residue) provides the energy required to European Union. of the Public Thematic Report by the Summary

12 Cour des Comptes 2 Stakeholders

Oil companies Distributors procure their biodiesel from the leading manufac- and distributors turers and as there is little competi- France is a European exception tion, fossil diesel serves as the refer- in that large retail distributors are ence price, plus a bonus negotiated the outlet for 60% of the country’s with the main supplier, Diester domestic market of 36 million t/year Industrie. This bonus, which is the of diesel oil (including trucks) and result of the considerable burden 10 million t/year of petrol. The placed on distributors by the TGAP, other 40% is divided more or less varies considerably with the relative equally between Total and other oil prices of diesel oil and vegetable oil. companies. It is currently $400 to $500 per Distributors see themselves first tonne. and foremost as “blenders” to Total considers that ethanol will implement incorporation rules. necessarily become the reference product, since incorporation as Regarding biodiesel, oil companies/distributors have until now ETBE has only ever been a stopgap been very demanding about the qual- solution in view of the small quanti- Cour des Comptes des Cour ity of oils used in making VOME. In ty produced in France. Adapting dis- particular, the resistance of oils to tribution facilities for the direct use cold varies with their origin, which of ethanol should not prove too dif- can be detrimental to engines. The ficult as the cost involved is relative- best compromise from this point of ly low. Competition is tougher than view is oilseed rape, although it has for biodiesel as there is a genuine the drawback of a low energy yield world market for this product, which per hectare. Consequently, this com- represents 75% of all biofuel avail- modity has nearly reached its limits able. As a result, the extra cost to be in Europe in terms of usable land paid compared with petrol is only area. In addition, as the use of diesel $100 to $200 per tonne. oil continues to grow, additional Total estimates that by 2020 of the Public Thematic Report by the resources must be sought, either ethanol will still be the reference through imports or the use of ani- biofuel and that Brazil will become mal fat or used oils. the swing producer, capable of Summary

13 Stakeholders

supplying ethanol at a competitive price, explains why manufacturers are losing while meeting the sustainability criteria interest in biofuels. It also explains the set out in the new European directives. disappearance of Flex-Fuel Vehicles One way of reducing the extra cost (FFVs) in France, which were subject to of biofuels might be to make incorpora- a CO2 emission penalty. tion rates a little more flexible by raising The second problem concerns the them when there is a slump in agricul- lack of stability in regulations issued by tural commodity prices and lowering the European and French authorities. them in the opposite case. The various policies implemented in this area are subject to considerable Car interruptions and inconsistencies. Renault, for example, developed a range manufacturers of vehicles using alternative energy Manufacturers in the automotive sources, E85, B30 and LPG for the industry are closely concerned by any- most part. The range is considerable thing to do with biofuels, since engine and includes ten models running on guarantees also apply to any fuel- E85 and six, including two utility vehi- induced mechanical problems. Car man- cles, running on B30. These vehicles ufacturers feel they are up against two never found a market, however, for types of problem. want of adequate support measures, and The first is to do with engine CO2 production was discontinued after only Cour des Comptes des Cour emissions. Their gradual reduction will a few hundred or few thousand vehicles represent an unprecedented additional had been sold. burden over the next ten years. Until Long-term visibility is by far the 2008, CO2 emissions due to engines and most important factor. Engine manufac- fuels were considered together. As bio- turers claims that it is easier and less fuels performed very well in this costly for them to work on a limited respect, they eased the pressure on incorporation range, even at a high engine manufacturers regarding incorporation rate, than on a broader emissions. range. In other words, over a period of Since 2008, however, European reg- five to eight years, they could produce ulations have made a distinction engines compatible with fuel blends

of the Public Thematic Report by the between these sources of emission. ranging from E10 to E30. It would be Consequently, manufacturers investing much harder to make an engine capable in a vehicle that can run effectively on of absorbing blends ranging from E10

Summary biofuels will not be rewarded for their to E85. efforts to cut CO2 emissions. This

14 and 0.8 million m million 0.8 and idee:19 ilo m million 1.9 in biodiesel: granted for demand approvals growing the met and 2009 of the 78% won firm The dominated 2010. until market biodiesel Industrie Diester producers Biodiesel in 2011. This was due to the increased the to due was This 2011. in so more even and 2010 in however, ly, rapid- changed situation for The VOME. prices forced high accept This to distributors esterification. for rather than purposes cooking pro- for to oil duce interest Sofiprotéol’s in was it for oil, cooking competition. of price tougher high the by even real made any were Conditions of lack prices for Sofitprotéol’s accept to com- pelled were distributors TGAP, from pressure Under recently. compa- until flictual oil con- quite been and have nies/distributors Industrie Diester rule. the of double-counting advantage take ani- and waste treat mal that companies mainly are newcomers the that and sector this late to came competition that fact a less nonethe- is It certain. from far was tor sec- the of a profitability the at when time business was into go it to firm that first the stressing by this domination explains It Europe. more in six elsewhere and France in plants seven oirto ad t subsidiary its and Sofiprotéol eain bten Sofiprotéol/ between Relations 3 for export. It has It export. for 3 n France in bers, the sector invested €1 bn from bn €1 invested mem- sector its the to bers, According com- assets. Béghin-Say pany former of part of association acquisition the from largely and cooperative resulting a association; Téréos, agricul- organizations: cooperative an to tural a belonging with two stake company 55% public a by Cristanol, domi- is nated It and exists. sector competition some biodiesel the than sified producers Bioethanol re rcniee te ue in rule application. its ited the lim- significantly and 2011 September reconsidered Order French A from Commission. rebuke European the any escaped far so and it ignored has while example, for trans- legislation, Germany, been French into has posed rule this directive, European a by double- least Introduced at the or restricted. abandoned see rule to counting like would firm The therefore imported tallow. of t competitors 350,000 its that fact the to in largely t due production, 700,000 VOME estimated an lost had it Asia. and Argentina from veg- imports ester of even and oil growth etable the to and rate, tion incorpora- the in oils, double cooking count which used and tallow of use The ethanol sector is more diver- more is sector ethanol The In 2011, Diester Industrie claimed Industrie Diester 2011, In Stakeholders

15 Summary of the Public Thematic Report by the Cour des Comptes Stakeholders

2005 to 2010 to build five produc- particular, it has set up plants in tion units. These supply 13 of the 45 Brazil to benefit from the country’s million hl of ethanol produced in thriving sugar sector and from the European Union. incentives aimed at promoting the The stakeholders appreciate the use of ethanol fuel. Oil groups have new opportunities provided by adopted the same strategy. ethanol and by-products intended for livestock feed. Bioethanol pro- Farmers’ vides sugar beet growers with better prices for the part of their produc- federations tion that does not go into sugar pro- Farmers’ federations have a duction. Similarly, ethanol stabilizes rather positive outlook on both sec- cereal growers’ income by adding tors. Production was initially devel- value to wheat when prices are low. oped as a matter of agricultural pol- Although this is not the situation icy, aimed in particular at making use today, as wheat is currently worth of the fallow land imposed by the between $250 and $300 per tonne on first reform of the Common world markets, operators point out Agricultural Policy. Today, however, that when the bioethanol sector the focus is on biofuels as a renew- started up in 2005-2006, it was able energy source and on reducing Cour des Comptes des Cour traded at no more than $80-$90/t. greenhouse gas emissions. Stakeholders in the sector are Biofuels offer the following concerned about Europe’s domestic advantages: market protection being circumvent- - they provide farmers with an ed. Circumvention practices induced additional outlet which is bound to by the difference in customs duties have a positive impact on selling applied to ethanol and blends have prices and, therefore, on income. seen a considerable increase. Apart Furthermore, production unit pro- from the antidumping measures curements are agreed on a contractu- taken against the United States, the al basis, thus enabling farmers to sta- European Commission is neither bilize their relations with their back- of the Public Thematic Report by the able nor willing to take effective end operations. Be that as it may, action against such practices. Rather prices are determined principally by than adopt a purely defensive atti- world market factors. This makes it Summary tude, the French ethanol sector has hard to establish any direct link looked beyond Europe’s borders. In between the tax advantages granted

16 critical about the whole issue: whole the about extremely is critical and all at optimism this paysanne Confédération land fallow crops. the for used of being some In with avail- is able land target. of ha 400,000 with addition, incorporation even 2010 intact the remains and cereal exporter a as Europe vocation in France’s France. biofuel used produce crops to and crops food between border up. effective set simply is be protection unless out could wiped years the over seven made past efforts the All tors. competi- new from threat under less inputs. fertility reduce pro- soil helps and and growing biodiversity motes sunflower and rape be a cannot in relocated. definition, jobs by that, 18,000 sector around maintain or in feed; wheat from livestock crops increasingly over taking are other by-products biofuel exports: impacting with- crops out oilseed to over given be making in used them; of commodities price market the the and biofuels to h Fec fres union, farmers French The conflict no is there Lastly, neverthe- are advantages These oilseed terms, environmental In or create to helped have they - to land more allowed have they - , does not share not does , biodiesel is made from rapeseed oil. rapeseed from made is all goes biodiesel not biofuels. but rapeseed production, biodiesel on French into all depends Virtually that of is days everyone incorporation these in “compulsory” problem The need if be. cereal acceptable, be a a would of surplus as event the in biofuels fossil valve safety of Producing those oil. twice diesel be are to emissions found GHG biodiesel land consideration, into indirect taken are and changes use direct If expec- of tations. short well falls biofuels of table ( round by environment defined French the agriculture in used pesti- of cides amount the halving of the goal to counter runs and particular, in pesticides time. inputs, long many that for a calls This plant ground the fragile addition, in a remains In is is rape animals. oilseed cake, to rapeseed 1992 harmful by-product, the the reform, Policy Agricultural following crop Common oilseed on bear production pressure to the came that sidestep to possible made it rape oilseed growing concerns. Although the these meet upon that seized objectives has lobby have cultural agri- the stage, concerns centre to back moved environmental trends. As momentary in variations but requirements, real reflect not do gets Grenelle de l’environnement de Grenelle - the environmental performance environmental the - tar- the that considers it first, - Stakeholders );

17 Summary of the Public Thematic Report by the Cour des Comptes 18

Summary of the Public Thematic Report by the Cour des Comptes cetss n icue ad use land negative the include deforestation, and changes, of scientists concerns the reasons match often The this for them. not towards if hostile, reserved, biofuels. more now of are favour They in be to tended biofuels, environmental performance. of of terms in especially analysis a conduct to cost-benefit difficult extremely would be it Furthermore, costly for resources. need tax the without - from ticular par- benefit in Brazil from - ethanol would imported rea- price a at sonable biofuel purchasing consumers French conditions, these were Under producers. incentives of above advantage the to tax mainly the to biofuel According article, topic. the on studies published in-depth of way the in have little associations sumers “ groups Environmental associations Consumers the in countries. disastrous balance producing has ecological also on effects which of comes production the oil, palm proportion imported from increasing An F-u cosr ? choisir UFC-Que Stakeholders ntal, ot re associations green most Initially, review the in article an from Apart i 20, con- 2007, in ” rp ad od rp. h French The energy union, crops. farmers food between and crops competition the to issue. the approach new a adopt to great pressure under European currently The is Commission respect. solu- this in possible a tion yet to as has reached consensus been no to and difficult measure extremely is it real a as problem, seen is change use indi- land rect green- Although high emissions. gas peatlands, house generates the and process in with this forests reserves carbon grasslands, combined of the destruction If of part another world. of to in over crops amount given food same being land the unfarmed to crops lead conven- energy can into of crops food tional conversion the situation a Indirect where to refers change. change use use land land is issues countries. developed less of tion exploita- and crops food competition human with biodiversity, on impact human race would be disastrous for growers.” cereal disastrous be would the race for human good The “what’s It that true. double. also concludes is to phenomenon market prices reverse the cause on can cereals small a of that rela- shortage means in demand to prices tion commodity food elasticity of extreme the that considers nte hty eae tpc is topic debated hotly Another controversial most the of One Confédération paysanne Confédération , recycling animal waste and the the and waste animal a Similarly, recycling weak. undermine already is to that sector bound is is in rise a imports sharp capacity too and exploited production not ethanol 53% of estimated espe- an as be damaging to cially It situation this protection. considers tariff of is cir- the cumvention about ministry concerned The the particularly protect market. to need domestic the meets production and biofuels of in sectors operators both repre- to it as commitment a sents justified is biofuels ing Agriculture viable. socially and environmentally economically, the are most they where grown and produced are materials renewable raw their that and fuels so markets international up opening and incorporation, compulsory and The subsidies abolishing increases. towards lean made price recommendations to the contribut- factor a is that ing biofuels accept for demand The conclusions controversies. G20 con- these a to as serve clusion also in can Paris 2011, in June held agriculture, on G20 departments ministerial different of views diverging The h Fec Mnsr of Ministry French The the of conclusions cautious The considers that support- that considers eore - hud e tde more water studied be on should - - impact resources crops their energy external by particularly that induced and factors subsidies prolonging costly pointless is it that climat siders du et l’énergie de tax ( Climate and Energy energy European systems. within dardize stan- to initiative them an of framwork the maintaining or reducing them, gradually 2012, of as exemp- tax tions abolishing totally narios: effects. other by is crops diminished biofuel from benefit TIC expected be to environmental reduced any a that serves with and level purpose excessive little at TGAP currently the harm- its that considers that It environmentally ful”. loophole be tax a “might as Sustainable exemption durable développement for ( Development Commission land change. and use prices commodity biofuels food of on impact the to as reached taxes. reform and energy units investments production new recoup in more to justified still with approached have forethought. should been rule double-counting h Gnrl ietrt for Directorate General The sce- future possible three sees It Ecology of Ministry the At be can conclusion final No are exemptions tax Consequently, Stakeholders Commissariat général au général Commissariat , CGDD) sees tax sees CGDD) , Direction générale Direction DE) con- DGEC) , , the ,

19 Summary of the Public Thematic Report by the Cour des Comptes Stakeholders

closely. It shares the view that the facilities is written off, there will no impact of biofuels on world food longer be any justification for con- prices is hard to ascertain because of tinuing public support, even for the many factors involved. It recom- ethanol. mends continuing research into the While the Treasury Directorate effect of indirect land use change. accepts bioethanol producers’ calcu- Lastly, it believes that second-gener- lations concerning the extra tax col- ation biofuels will not be available lected by the government due to the until 2015-2020 in view of the R&D lower energy density of this fuel, it work still required before leaving the considers that they make no laboratory and proceeding to allowance for certain “general equi- production on an industrial scale. librium” effects, a term referring to At the Ministry of the reduced consumption (and therefore Economy, the Directorate General tax revenue) in other areas as a result of the Treasury (Direction générale du of pressures on household budgets. Trésor) considers that the high penal- Although importing low-cost ty imposed by the TGAP and the American biofuels subsidized by for- fact that it can be passed on to the eign taxpayers may seem to make consumer provides biofuel produc- economic sense, using tariffs to pro- ers with a captive income that can be tect the domestic market should help likened to a subsidy. It also finds it to develop sufficient production Cour des Comptes des Cour rather inappropriate to implement a capacity to generate economies of biofuel support policy as an agricul- scale and compete with imported tural development tool in that the biofuels. More broadly speaking, it farms concerned are already among might be wise to promote better- the wealthiest and enjoy higher-than- integrated biofuel markets in order average public support under the to import biofuels at a lower price. Common Agricultural Policy. Lastly, although the connection This analysis needs to be adjust- between biofuel production and ris- ed according to the sector con- ing food commodity prices has by no cerned, however, as the ethanol sec- means been proven, it might justify tor is more fragile and more exposed modulating incorporation rated

of the Public Thematic Report by the to international competition. Once according to the price of these the cost of almost all production commodities. Summary

20 Cour des Comptes

Results, costs and relevance of the biofuel 3 support policy

Many instruments of The most effective instrument for ensuring that targets are met is the diminishing TGAP; its very high rate discourages effectiveness distributors and oil companies from not incorporating biofuels. The biofuel plan was complied with Lastly, domestic market protection up to 2009 as regards ethanol incorpora- is more imaginary than real. Ethanol is tion; the requirements for biodiesel poorly protected because of circumven- incorporation were only fulfilled from tion of tariffs by blended products, but 2010 when so-called “off-road” diesel biodiesel is better protected, not by non- oil, i.e. diesel oil used by trains, bulldoz- existent tariff barriers but by a lack of ers and tractors, was taken into account competition on product quality. under the Renewable Energy Directive. However, this situation is changing very However, this was a mere statistical quickly with the emergence of interna- manipulation. tional competition, particularly from Some of the approved production Argentina, which is indirectly subsidized. units have been built, with an indis- In addition to this, the vegetable oil Comptes des Cour putable success from the point of view sector has suddenly been thrown out of of agro-industry. However, approvals balance by competition from animal fat have been vastly in excess of require- and used cooking oils, which have the ments, particularly for bioethanol which double-counting rule in their favour. remains financially weak. A number of This means that, when it comes to pay- projects have been either abandoned or ing the TGAP, their actual incorporation redirected towards another use. Some rate counts as double. The rule was existing units have been shut down transposed into national law without any because they are unprofitable. impact assessment, and implemented The targets set up by the French immediately as from 2010. With it came authorities, which were higher than the

methods of circumvention and in 2011 of the Public Thematic Report by the European ones, are now impossible to it led to a 20% to 30% drop in the pro- meet because of the lack of an adequate duction of VOME and the shutdown of distribution network and because of some production units. The rule was Summary technical difficulties related to fuels with suspended in September 2011. a high biofuel content (E85).

21 Results, costs and relevance of the biofuel support policy

From the point of view of environ- The biodiesel sector mental policy, the legal qualification of the description of national biofuels as has benefited from sustainable was confirmed by the life a large captive cycle analysis conducted by ADEME, with a greenhouse gas emission saving income of 35%, already required, and even of It was able to set advantageous 50% required for 2017. prices in the first few years after the TGAP was introduced in 2005, because The ethanol sector of the lack of any real competition. has generated It has benefited from support worth more than the cost of its investments. revenue for the In the end it had a net cost to the government despite taxpayer of €1.29 bn (the difference between tax expenditure of €1.8 bn and remaining fragile €0.5 bn in additional tax revenues from It has benefited from a substantial extra consumption plus €0.01 bn in tax exemption giving it partial protec- TGAP). tion in the beginning from imports and It benefited from a captive income from higher production costs than fossil due to the threat from the TGAP but is petrol, and this has ensured that it could now exposed to competition both from Cour des Comptes des Cour cover its investment costs. animal and used oil and from high This was also facilitated by fixing quality imports. commodity prices such as to balance the operating costs of the production units, The total cost of both therefore at a lower level than current sectors to the tax- market prices. The government’s support budget is payer will have been currently in the black at €0.47 bn (the no more than difference between the reduction in the TIC and the extra tax revenue generated €820 million from as a result of the lower energy value of 2005-2010 and will of the Public Thematic Report by the ethanol, plus €0.32 bn in TGAP). generate revenue in the future Summary In the future, if TIC exemptions are extended until the end of the approvals in 2015 as the government has prom- 22 Results, costs and relevance of the biofuel support policy

ised, the cumulative amount should Relevance that has reach €350 million and €170 million respectively for the two sectors over the fallen victim to too 2012-2015 period, assuming the many objectives exemptions are kept at the same level. Over the same period, the govern- As with any policy that has multiple ment should collect extra tax of more objectives, it is difficult to attribute the than €0.5 bn from extra consumption of effects to only one of them and the dis- diesel oil and more than €1 bn from tribution criteria between the objectives extra consumption of petrol, giving a are themselves very difficult to work positive balance of €0.98 bn excluding out. the TGAP. A mixed result, It is the consumer erring on the who foots the bill in positive for the end agriculture Because of extra fuel consumption From this point of view the results and the TGAP, over the 2005-2010 peri- seem to be mixed. For the majority of od, consumers paid nearly €3 bn extra those involved, the results are positive, (€1.54 bn for consumption and addi- but they are becoming increasingly con- Cour des Comptes des Cour tional taxes, €0.32 bn in TGAP for troversial. Although the objective of ethanol, €0.9 bn for consumption and bringing set-aside to an end has been additional taxes, and €0.01 bn in TGAP achieved, the objectives concerning for biodiesel). Added to this, is the high- effects on agricultural income are much er price of biofuels at the pump, con- more difficult to measure, since farmers’ tributing in 2010 to an estimated rise of income can change for many other between €0.5 and 0.7 bn. reasons. The total extra cost of bioethanol The diversification of market incorporation into petrol when filling up opportunities has been good for beet, with 50 litres, for the same mileage, is extremely modest for wheat, and slight- approximately €2.3. For biodiesel, the ly better for maize. The question does of the Public Thematic Report by the extra cost under the same circumstances not even arise for oilseed rape, for is close to €0.60. which biodiesel is by far the main market. The impact of by-products, espe- Summary cially rapeseed cake, on livestock farm- 23 Results, costs and relevance of the biofuel support policy

ing has been significant but is disputed. processes (esterification of vegetable Some believe they have a negative effect oils, distillation of wheat and beet, dry- (Confédération Paysanne), but others ing of draff). The problems posed by (FNSEA) see them as having positive distribution are relatively easy to solve. consequences. Although slightly less At fairly low incorporation rates, such as beneficial from a nutritional point of those practised in the European Union view, rapeseed cake has, in part, taken at the moment, engine adaptation prob- the place of cake made from soya in lems do not arise, or arise very little. The feeding livestock, its price having continuing rise in the price of a barrel of dropped dramatically. oil is making biofuels more competitive, As far as the impact on food prices particularly as they demand less fossil is concerned, those who believe it has energy in their life cycle. only been slight, argue that prices varied Having said that, to make a signifi- significantly between 2007 and 2010 (up cant impact in terms of energy inde- first, then down, and then up again) pendence, higher incorporation rates despite the volumes used for biofuels would be needed. This would cause a not changing much. However, this does number of problems as regards both not constitute proof that they have had engine adaptation and the amount of little impact, because it is not known land necessary to meet the need. whether the prices would have stayed For example, if France wanted to the same without biofuels. Conversely, replace all of its diesel oil consumption

Cour des Comptes des Cour in the absence of biofuels, there is noth- with B30, 30% of its agricultural land ing to say that producers would not have would have to be given over to this. adjusted production as a result. From an environ- Not as good an mental point of energy source as it view, relevance is might seem very difficult to Despite cautious estimates and measure and some controversy, the ratio of fossil energy used to energy produced is con- increasingly of the Public Thematic Report by the sidered positive. Moreover, the energy controversial efficiency of both products is constantly improving, due to both the inputs There is controversy over the envi- Summary (genetic improvements to beet, higher ronmental impact of biofuels on several oilseed rape yields) and the production levels. 24 Results, costs and relevance of the biofuel support policy

The first is the argument that the which (especially for the latter) is aim in terms of transport is to travel impossible to quantify seriously. less, and biofuels are simply an excuse for continuing to drive around as much Simulating the as before, despite fossil fuels running out and biofuels destroying biodiversity. allocation of From the point of view of green- support to the house gas emissions, the debate still different objectives rages over how the relative energy content of biofuels and their by-products is Because no robust method exists for worked out. This method is very sensi- accurately apportioning the cost of a tive to changes in the defenition of a policy to its different objectives, the product: a useful product contributes to decision was made to produce a brief the positive impact, but the same prod- approximation by allocating a third of uct categorized as waste has a negative the total costs to each of the three impact. objectives, agricultural, energy and One method of quantifying the environmental. reduction in greenhouse gas emissions Based on total public expenditure of economically is to use the cost per tonne €2.65 bn over the period 2005-2010, a of carbon dioxide saved. Taking as a ref- third is approximately €850 million. erence the target price set by the Dividing this by the average amount European Commission of €32 in 2010 of land used over the same period for Comptes des Cour and €56 in 2020, several independent biofuels i.e. approximately 1.7 million studies estimate that the price resulting hectares, it gives a cost of €500 per from the introduction of biofuels to hectare over 6 years, or €80 per hectare replace fossil fuels is around €186 to per year. This can be compared, for €259 for ethanol produced from beet example, with the energy crop premium and €263 to €347 for biodiesel produced introduced by Brussels from 2004 to from oilseed rape. 2009, of €40 per hectare per year. If Since these figures seem very high, it account is taken of the jobs retained, should be pointed out that the price per the amount of the support is obviously tonne of carbon dioxide saved is always lower. higher for transport than for other As far as hydrocarbon imports are of the Public Thematic Report by the sectors of the economy. concerned, it can be estimated that the Finally, these analyses do not take production of biofuels has saved

account of the issue of land use change, 11.5 million tonnes from being import- Summary whether direct or indirect, the impact of ed. It can therefore be inferred from this

25 Results, costs and relevance of the biofuel support policy

that the cost per tonne not imported is Biofuels can only be labelled as sustain- €74, only a fraction of the market price able when they have achieved ethical over the period, which fluctuated and social acceptability. A number of between €200 and €600/tonne for countries, particularly the UK, take crude and €300 to €750/tonne for account of these factors in their public refined diesel oil. policy on the environment. The moral The contribution per tonne of car- values under debate are global equity, bon dioxide emissions avoided can also climate change, environmental ethics be estimated. Based on an estimate of (especially effects on biodiversity), 20 million tonnes of CO2 emissions respect for human rights, and solidarity avoided, a figure of €42.5/tonne is with vulnerable populations, particularly obtained, to be compared with the fig- as regards the acquisition of land in ure of €32/tonne used by the European developing countries by large western Commission for 2010. companies. Biofuel support, The prospects for world hunger, new generation ethical issues biofuels In the absence of any certainties Leaving aside any considerations of concerning competition between crops economic feasibility, the new generation destined for biofuels and crops destined biofuels, which rely on the non-edible for human or animal foodstuffs, most of parts of plants or on algae, will clearly the recent reports on this subject rec- not be available on a large scale for Cour des Comptes des Cour ommend, as a precaution, relaxing the another 10 or 15 years. Moreover, no incorporation rules in developing coun- serious study has yet been done of tries and stopping the various subsidies future industrial processes, in terms of supporting biofuel production. life cycle analysis. Similarly, the concept of sustainabil- Consequently, in the short and ity is increasingly being linked with the medium term the first generation biofu- concepts of social equity and ethics as els will in all probability remain the public awareness of these issues grows, main, if not the only, means of meeting particularly through the work of NGOs. the European targets for 2020. of the Public Thematic Report by the Summary

26 Conclusion and recommendations

Findings The finding is that after 15 years of their effect on the environment, the policies in favour of biofuels, with controversy surrounding this issue in intensified commitment to biofuels in other countries has been much larger the last six: and continues to grow; substantial amounts of the only equilibrium that has money, estimated for the first time by really been changed by these policies the Cour des Comptes, have been has been agricultural (growing of transferred from consumers/taxpayers oilseed rape, production of cooking oil into the hands of agro-industry (farm- and rapeseed cake, new markets for ers and biofuel producers). These beet); transfers have enabled the construction no other equilibrium, whether of raw material transformation and energy independence or the reduction biofuel production facilities of signifi- of greenhouse gas emissions, has been cant size (capacity 1.91 million m3 of altered a great deal, if at all; biodiesel and 1.25 million m3 of while, in France, there has been bioethanol) to be set up, but their some criticism of the cost/benefit of financial stability is not entirely assured biofuels from the point of view of today.

Recommendations The Cour des Comptes makes the them to the technical constraints of

following recommendations: both distribution (network adaptation) Comptes des Cour and engine manufacturers. Engine continue supporting production manufacturers can obviously adjust to and sale of first generation most constraints, provided that they biofuels, while meeting the following are clearly expressed (incorporation conditions: ranges of N% +/- 10%) and stable over time. recognise that the French authorities’ desire to be more ambi- this could be compatible with tious than their European partners has introducing flexible incorporation rates resulted in incoherent objectives which within these ranges to take account of

are now making it impossible to meet fluctuations in food prices, as suggest- of the Public Thematic Report by the the targets for incorporating biofuels ed by the preparatory work for the into fossil fuels. meeting of G20 agriculture ministers

in Paris in June 2011. Summary redefine these targets to make them more realistic, while adapting 27 Conclusion and recommendations

- despite the fact that the large - the relative fragility of the fluctuations in the price of staple ethanol sector, which caters to limit- foods observed in the last few years ed and shrinking French and cannot reasonably be attributed European markets justifies this dif- directly or solely to the growth of ference. Taxation of energy based crops for biofuels, it would be equal- on energy value and CO2 emissions, ly foolish to think this is not putting which the European Union is any pressure on demand when other preparing for, seems the best solu- factors are pushing prices up and tion for preventing ethanol, which is therefore making foodstuffs scarcer. considered less polluting in terms of CO2, from being taxed more than - If these conditions are met, fossil fuel as is the case now. then public support for the production/distribution of biofuels should keeping TGAP at a fairly high include the following: level, guarantees that incorporation targets will be met even though they development of a genuine are not compulsory, particularly as knowledge, which is still lacking, of the windfall effects at its launch no the financial data for the sector; longer exist because of a more competitive environment. - reduction of the current support, for both ethanol and biodiesel Apart from tax and customs from 2012, to below the level of the measures, a biofuel support policy additional tax revenues generated as should also meet a number of Cour des Comptes des Cour a result of extra consumption, which requirements. is itself a result of the lower energy potential of the biofuels. first of all, it should meet the requirement of consistency. The when the cost of most of the experimental nature of policy over production facilities is either paid the last few years cannot be used as off (in the case of the older ones) or an excuse for the inconsistencies is about to be paid off (in the case of that have affected that policy, and the most recent), acceleration of the this is even more the case for the reduction in TIC exemption, while years to come. Incorporation rates maintaining the current difference should be clearly defined, along with of the Public Thematic Report by the between biodiesel and ethanol until whether they are binding or not. the tax exemption disappears, which Sustainability criteria, including the should be envisaged without any double-counting of animal fat,

Summary new approvals for 2015; should be clarified in the light of rel- evant European directives and the feasibility of checks. Engine manu- 2828 Conclusion and recommendations

facturers should not be at the mercy thirdly, increase our presence of changing fashions, which affect on the subject at the European level. fossil fuels (LPG) as much as alternative fuels (E85); - The interests need to be defended of: - the targets defined (biofuel type, consumption level, production - the sector as a whole has to be date) should be compatible with the protected against subsidised imports time scales for the design and indus- or imports that circumvent the rules, trial development of vehicles and while ensuring strict respect for sus- should, more generally, be part of a tainability criteria on the part of comprehensive and sustainable these imports and their verification; overview of fuel use. - French manufacturers (car manufacturers and oil companies), then, it should meet trans- have to be supported by promoting parency requirements in relation to harmonization of the rules or curbs the public, consumers and taxpayers, on the diversity of fuels, which can by making it clear to the public introduce complexity and extra costs whether biofuel policy is a genuine without any real environmental component of an environmental benefits. protection policy or whether it is simply part of a policy to support lastly, planning ahead for the agro-industry. future.

- herein lies the credibility and - Important negotiations will be Comptes des Cour acceptability of the package. It starting with our European partners would be sensible to rely on a on energy taxation, which will pro- detailed opinion like the English foundly affect the current gap report on biofuels and ethics, written between diesel oil and petrol and by an independent body like the also biofuels. The future beneficiar- national ethics committee, and to ies of the taxation differences promote a quantification of the should be identified to ensure the effects of biofuels on biodiversity in policy offers incentives and not this context. undue captive income. of the Public Thematic Report by the Summary