COLUMN-EU biofuel shift could apply to tar sands: Wynn

(The author is a Reuters market analyst. The views expressed
are his own.)
By Gerard Wynn
LONDON, Oct 23 (Reuters) - The European Commission has
proposed phasing out support for food-based biofuels in a move
that not only undermines the industry but provides a possible
roadmap for addressing the wider implications of producing crude
oil from tar sands.
The conventional biofuel industry was put on notice that
subsidies will be phased out from 2020 under proposals last week
which also showed many biofuels are more carbon-emitting than
gasoline.
What the proposals do is lay out a fuller picture of carbon
emissions from producing biofuels from food crops by taking into
account indirect emissions from displacing food production which
then moves on to idle land elsewhere.
Their major concession is that while the proposals would
force fuel suppliers to report those higher emissions, these
would not count against binding emissions reduction targets.
Under the EU's fuel quality directive, refiners have to cut
the carbon emissions of road fuels by 6 percent per unit of
energy by 2020 versus 2010 levels.
Under the proposals there is a stepped approach, where
biofuel suppliers will report the higher emissions, but these
will not count them against the 6 percent target.
The same approach could be used for tar sands.
The European Commission has already developed estimates for
their higher emissions compared with conventional crude,
incurring the wrath of federal and provincial governments in
Canada in the process.
Tar sand crude is not presently refined in the EU, but
Canada fears other countries or regions, notably California, may
adopt similar carbon labelling schemes.
Yet a compromise similar to the EU's approach to biofuels
may work, where producers initially only report the higher
emissions from tar sands, but these do not immediately count
against carbon-reduction targets.

COMPROMISE
The biofuel proposals force suppliers to report emissions
from what is referred to as indirect land use change (ILUC), as
well as from direct emissions from crop cultivation and
processing which are already reported and counted against
emissions targets.
Crop-based biofuels divert food production, ultimately
incurring additional carbon emissions from ploughing up soil and
plants.
Yet the higher emissions do not have to count under either
the EU fuel quality directive or so-called sustainability
criteria, which decide whether a biofuel can count towards
national renewable energy targets and qualify for subsidies.
Under the EU directive, biofuels must cut carbon emissions
by at least 35 percent versus fossil fuels and by 50 percent
from 2017 to qualify as renewable fuels.
The following table illustrates how important the compromise
is to the biodiesel industry, where most biodiesel is actually
more polluting than fossil fuels (EU assumed emissions of 83.8
grams of CO2 per megajoule) once the assumed ILUC emissions are
taken into account.
That contrasts with Brazilian sugar cane ethanol, partly
because of the efficiency of its production. European sugar beet
and biofuels from cereal crops are in between.
Feedstock Direct New ILUC Total Saving vs
emissions emissions emissions fossil fuels
gCO2/MJ PCT
Sugar cane 24 13 37 -55.85
ethanol
Sugar beet 40 13 53 -36.75
ethanol
EU corn 43 12 55 -34.37
ethanol
Cleaner wheat 44 12 56 -33.17
ethanol
Cleaner palm 37 55 92 9.79
oil biodiesel
Rape seed 52 55 107 27.68
biodiesel
Soybean 58 55 113 34.84
biodiesel

TAR SANDS
The proposed amendments require ILUC reporting by suppliers
from next March 31, including "the biofuel production pathways
(production process), volumes, and the life cycle greenhouse gas
emissions per unit of energy, including the estimated indirect
land use change emissions".
The Commission allows for a review of ILUC reporting in
2017, pending possible inclusion in binding emissions targets.
A report at that stage would "if appropriate, be accompanied
by a legislative proposal" that would introduce estimated
indirect land use change emissions factors into sustainability
criteria from January 2021.
It is a small leap to require the same of producers of tar
sands crude. They could first report tar sands emissions, which
would count against legal targets later.
The Commission has already estimated the CO2 emissions of
tar sands compared with conventional crude, as follows:
Feedstock Direct emissions
gCO2/MJ
Conventional crude 88
Tar sands 107
Coal converted to liquid 172
Gas converted to liquid 97
Tar sand crude is more carbon-emitting than conventional
crude because of the carbon-intensive process of strip-mining
sand and treating it, or using energy-intensive steam extraction
of the oil from sands underground.
The European Commission is presently doing an industry
impact assessment of labelling the carbon emissions from tar
sands, in a drawn-out process which has delayed a vote by member
states until next year.
Given the scale of opposition from Canada and major oil
firms, merely reporting the higher emissions offers the prospect
of an interim compromise.
It would also, as is now proposed for crop-based biofuels,
signal to investors that change is around the corner.

(Reporting by Gerard Wynn; editing by Jason Neely)