EU biofuel targets draw imports, food crops safe

By Jeremy Smith

BRUSSELS (Reuters) - Europe's ambitious targets to encourage greater use of biofuels are unlikely to spark a battle for raw materials between the food and fuel sectors but should attract far more imports and probably frustrate local producers.

While Europe's biodiesel industry remains the world's top producer with a market share of around 80 percent, there will still be a need for more imports over the next decade -- both of processed biofuel products and raw feedstock materials.

Last week, the European Commission unveiled new targets for including a minimum 10 percent biofuels within vehicle fuels by 2020: an ambitious goal that would create an import requirement likely to be filled by countries such as Brazil and Indonesia.

The EU now has non-binding targets for its member countries to replace 5.75 percent of petrol and diesel with biofuels by 2010. While the EU's executive Commission expects substantial progress by then, it says the target will still not be met.

Biofuels can be substituted for fossil fuels and are seen as a way to cut emissions of greenhouse gases believed to contribute to global warming. Feedstocks used to make biofuels include grain and vegetable oils as well as sugar beet and cane.

To meet the targets, the EU biodiesel industry says it will have to raise output by 15 percent each year and rely mostly on EU-grown rapeseed and sunflowerseed oils up to 2020. Only 20 percent of the raw materials would come from imports, it says.

"There will be more room than today for imports," Raffaello Garofalo, secretary-general of the European Biodiesel Board (EBB), told the Reuters Global Biofuel Summit this week.

"But the European raw material will remain the main one and rapeseed oil will remain the main material for the next few years," he said.

BATTLE BETWEEN FOOD AND FUEL?

Soaring crude oil prices and growing use of diesel cars in Europe have made biodiesel produced from vegetable oils even more attractive in the EU, where tax incentives in some countries have further stimulated green fuels production.

Most of Europe's biodiesel is produced from rapeseed. But expanding capacity has raised competition with the food industry for raw materials, which has sharply raised prices and created room for imports of cheaper oils such as palm oil.

Bioethanol may be a different matter, where Brazil -- the leading supplier of the green fuel that it produces from sugar cane -- is an obvious candidate to increase its EU exports.

Europe's latest goals, to be mandatory if EU ministers agree, have raised fears among Europe's food processing industry and biofuel producers that EU markets may get flooded by cheap imports, with the risk of shortfalls in local food production.

Analysts and industry officials, however, expect the EU to remain protective of its domestic industries and try to limit imports so as to keep powerful farming lobbies content.

"While we can increase (production) domestically within Europe, we are also going to have to rely to a certain extent on imports to fulfill our 10 percent targets," EU Commission agriculture spokesman Michael Mann said.