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The Gallagher Review of the Indirect Effects of Biofuels Production
By Ed Gallagher, Chair – The Renewable Fuels Agency.Executive Summary
Biofuels have been proposed as a solution to several pressing global concerns: energy security, climate change and rural development. This has led to generous subsidies in order to stimulate supply. In 2003, against a backdrop of grain mountains and payments to farmers for set-aside land, the European Union agreed the Biofuels Directive. Under this directive, member states agreed to set indicative targets for biofuels use and promote their uptake. Many environmental groups hailed a new revolution in green motoring.
Five years later, there is growing concern about the role of biofuels in rising food prices, accelerating deforestation and doubts about the climate benefits. This has led to serious questions about their sustainability and extensive campaigns against higher targets.
Concern was further raised among policy makers when the paper by Searchinger1 asserted that US biofuels production on agricultural land displaced existing agricultural production, causing land-use change leading to increased net greenhouse gas (GHG) emissions.
A slowdown in the growth of biofuels is needed
This review, by the independent UK Renewable Fuels Agency has been prepared for the UK Government in response to these concerns. The aim has been to examine the scale of the indirect effects of current biofuels production, and to propose solutions. The review has examined the sometimes inconsistent and limited evidence base. We have sought the views of leading experts in the field.
We have concluded that there is a future for a sustainable biofuels industry but that feedstock production must avoid agricultural land that would otherwise be used for food production. This is because the displacement of existing agricultural production, due to biofuel demand, is accelerating land-use change and, if left unchecked, will reduce biodiversity and may even cause greenhouse gas emissions rather than savings. The introduction of biofuels should be significantly slowed until adequate controls to address displacement effects are implemented and are demonstrated to be effective. A slowdown will also reduce the impact of biofuels on food commodity prices, notably oil seeds, which have a detrimental effect upon the poorest people.
There is probably sufficient land for food, feed and biofuels
The review has examined both the likely levels of future demand for agricultural land and how much land might be available. There remains much uncertainty. At present, feedstock for biofuel occupies just 1% of cropland but the rising world population, changing diets and demand for biofuels are estimated to increase demand for cropland by between 17% and 44% by 2020. However, the balance of evidence indicates there will be sufficient appropriate land available to 2020 to meet this demand. Better datasets for land use will become available later in 2008 and should help further to inform this question. The review has not examined the situation beyond 2020 when current trends are anticipated to continue and climate change will affect land productivity. The long-term potential of bioenergy using land suited for agricultural production therefore requires further consideration.
Biofuels production must target idle and marginal land and use of wastes and residues
Although sufficient suitable land is probably available, current policies do not ensure that additional production occurs in these areas. Policies must therefore be focused upon ensuring that agricultural expansion to produce biofuel feedstock is directed towards suitable idle or marginal land or utilises appropriate wastes, residues or other non-crop feedstock. Although there are high levels of uncertainty in the data, the science and in the modelling of the indirect effects of biofuels, the balance of evidence shows a significant risk that current policies will lead to net greenhouse gas emissions and loss of biodiversity through habitat destruction. This includes effects arising from the conversion of grassland for cropland.
Specific incentives must stimulate advanced technology
Advanced technologies have the potential to produce biofuels with higher greenhouse gas savings and have the benefit of being able to use a wider range of feedstocks. However, as with current technologies it is essential that feedstock production avoids the use of land that would otherwise be used for food production. Some feedstocks for advanced technologies require more land than current biofuel feedstocks, and consequently have the potential to induce more indirect land-use change. This is because current technologies use feedstocks that also result in the production of co-products that avoid land use (such as protein substitutes in animal feed that replace the need for soy cultivation). Advanced technologies are currently immature, expensive and will require specific incentives to accelerate their market penetration.
This review has proposed a specific EU-wide obligation to encourage these technologies to commence in 2015 rising to 1-2% by energy in 2020. Biofuels supplied to comply with this obligation would need to deliver high GHG savings from appropriate wastes, residues, crops grown on marginal land, or feedstock, such as algae, that do not require agricultural land.
Biofuels contribute to rising food prices that adversely affect the poorest
The review has also found that increasing demand for biofuels contributes to rising prices for some commodities, notably for oil seeds, but that the scale of their effects is complex and uncertain to model. In the longer term higher prices will have a net small but detrimental effect on the poor that may be significant in specific locations. Shorter-term effects on the poor are likely to be significantly greater and require interventions by governments to alleviate effects upon the most vulnerable. There is some potential for the poor to benefit from biofuel production in some areas where land is available and the necessary infrastructural investment is forthcoming. Lower targets and shifting production for biofuels away from agricultural land used for food production should reduce price rises on affected food commodities.
A genuinely sustainable industry is possible
This review concludes that it should be possible to establish a genuinely sustainable industry provided that robust, comprehensive and mandatory sustainability standards are developed and implemented. It further concludes that the risks of indirect effects can be significantly reduced by ensuring that the production of feedstock for biofuels takes place on idle and marginal land and by encouraging technologies that utilise appropriate wastes and residues. A framework for such policies is proposed, but significant challenges remain in the detailed design, implementation and enforcement. These challenges are complex and will take time to overcome.
The evidence gathered in this review does not provide assurance of the sustainability of any particular level of target and the creation of a sustainable biofuels industry cannot be assured. The RFA judgement, based upon the balance of evidence is that if all subsidies and other support for biofuels were removed entirely, this would reduce the capacity of the industry to respond to the challenges of transforming its supply chain and investing in advanced technologies. However, the rate of introduction of biofuels should be slowed until adequate controls are established.
Lower targets and stronger controls are needed
The RFA proposes that the current RTFO target for 2008/09 (2.5% by volume) should be retained, but the proposed rate of increase in biofuels be reduced to 0.5% (by volume) per annum rising to a maximum of 5% by volume by 2013/14. This compares with the RTFO’s current target trajectory of 5% by 2010. We recommend that the RTFO is further reviewed in 2011/12 to complement and coincide with the 2011/12 EU review of member states’ progress on biofuels targets. During the period to 2011/12, comprehensive, mandatory sustainability criteria within the EU Renewable Energy Directive should be implemented for biofuels and bio-energy, including requiring feedstock that avoids indirect land-use change.
Targets higher than 5% by volume (4% by energy) should only be implemented beyond 2013/14 if biofuels are shown to be demonstrably sustainable (including avoiding indirect land-use change). This milestone should be applied both at EU and UK level. If the industry fails to deliver demonstrably sustainable biofuels by 2013/14 the level of the target could also be reduced for subsequent years. A portion of growth beyond 2020 would arise from the proposed new obligation for feedstock to be used by advanced technologies. This would be implemented in 2015/16 and rise to 1-2% by 2020.
A sustainable level of target for the EU in 2020 will depend upon the availability of appropriate land and the success (or otherwise) of ensuring that only demonstrably sustainable feedstock is used. The penetration of biofuels utilising advanced technologies will also be important. Current evidence suggests that the proposed EU biofuels target for 2020 of 10% by energy is unlikely to be met sustainably and the introduction of biofuels should therefore be slowed while we improve our understanding of indirect land-use change and effective systems are implemented to manage risks. The immediate focus for policy should be on implementing the necessary controls and conditions that will enable the industry to develop sustainably.
Based on our judgement, we therefore propose targets for renewable transport fuels of between 5% and 8% (by energy) for the EU for 2020 (including 1-2% from advanced technologies). In the event that sufficient controls are enforced globally and new evidence provides further confidence, a higher aspirational trajectory starting in 2016 and rising to 10% by energy in 2020 could be possible. These targets and trajectories are illustrated graphically in the figure below. The proposed EU Fuel Quality Directive should not imply a higher level of biofuels, or faster rate of introduction, than that indicated by this review.
We recommend the replacement of volume or energy based targets with comparable greenhouse gas saving targets as soon as practicable to incentivise the supply of fuels with a lower carbon intensity. However, current greenhouse gas lifecycle analysis fails to take account of either indirect land change or avoided land use from co-products. Failing to include these factors may create perverse incentives which lead to higher greenhouse gas emissions by encouraging feedstocks that lead to higher net land use. These factors need to be better understood before the basis on which targets are calculated is changed.
Stronger, enforced global policies are needed to prevent deforestation
Lower targets for biofuels, with slower increases in penetration and shifting production to idle and marginal land will reduce pressure for land change and reduce the pressure on food price increases. But biofuels are only part of the problem causing damaging land-use change and the measures that we propose here can therefore only form part of the solution. Stronger policies are needed to slow rates of deforestation particularly in South America, Africa and parts of South East Asia. This must form part of the next global climate agreement. Sustainability standards should also be extended beyond biofuels to all agricultural production. Finally, investment in agriculture and short-term assistance to the vulnerable is essential if the current food crisis is to be alleviated.
1 Searchinger et al 2008
Further Reading
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July 2008
