* EU documents reveal worries over biofuels impact
* Draft reports predict "shock" for commodity markets
By Pete Harrison
BRUSSELS, March 4 Biodiesel and other "green" fuels that Europeans put in their cars can have unintended consequences for tropical forests and wetlands, European Union reports show -- the first evidence of EU misgivings.
The EU aims for its 500 million citizens to get about a tenth of their road fuels from renewable sources such as biofuels by 2020, but some EU officials want the target reduced in a review in four years time.
Modelling exercises are starting to show unwanted impacts spreading across the planet via commodity markets.
"The simulated effects of EU biofuels policies imply a considerable shock to agricultural commodity markets," warns one draft report produced to advise policymakers.
"Current and future support of biofuels...is likely to accelerate the expansion of land under crops, particularly in Latin America and Asia," warns another, one of 116 documents released to Reuters under freedom of information laws. More are still awaited.
"It carries the risk of significant and hardly reversible environmental damages," adds the draft.
The warnings are not new. Environmentalists have been making them for years.
But the impact studies and emails show for the first time that European policymakers are also seriously worried about the impact on tropical forests, wetlands and savannah. However, they are struggling to quantify the likely damage.
"The large amount of documents and their detailed content show the Commission have been considering indirect land use change impacts very seriously," said a spokeswoman for European Energy Commissioner Guenther Oettinger.
"There is no definitive and official answer on the size or character of this issue at this stage," she added.
Lobbyists from bioethanol industry group, ebio, have seized on the confusion, demanding policymakers "reject the concept".
Meanwhile, in the European Commission, which instigates EU policy, officials are split over the wisdom of continuing with a target that was set in 2008 and already prompted billions of dollars of investment globally.
One internal letter from an agriculture official warns that taking account of the full carbon footprint of biofuels could "kill" an EU industry worth about 5 billion euros a year ($6.8 billion).
LAND USE CHANGE
At the centre of the debate is an issue drily referred to as "indirect land use change", which has put palm oil producers in Malaysia and Indonesia in the cross-hairs of environmentalists.
Critics say that regardless of where they are grown, biofuels compete for land with food crops, forcing farmers worldwide to expand into areas never farmed before -- sometimes by hacking into tropical rainforest or draining peatlands.
Satisfying the EU's thirst for biofuels would need 5.2 million hectares of land by 2020, reads one report -- a bigger area than the Netherlands. But where to find that land?
Burning forests to clear the land can pump vast quantities of climate-warming emissions into the atmosphere, cancelling out any theoretical climate benefit from the fuel. Iconic species such as Orangutans are also put under renewed pressure.
"Many decades may be needed before the initial induced carbon losses are compensated by the savings due to greater biofuel use," reads one draft study by agriculture experts.
Draining peatlands can have a similar impact as soils rot and release methane gas into the atmosphere.
If just 2.4 percent of European biofuels came from palm oil grown on former peatlands, for example in Indonesia, the entire climate benefits of EU biodiesel would be wiped out, says a report by the Commission's own research centre.
"The problems are only going to get worse unless the EU rewrites its law to allow only biofuels that bring benefits to be sold in Europe," said campaigner Nusa Urbancic at environment group T&E. "This information must be brought out into the open so there can be a proper debate."
If the issue wasn't complicated enough, policymakers will have to take account of numerous mitigating factors.
Increased demand for the cereals and oil seeds from which biofuels are made does not always result in farmers expanding agricultural land. Sometimes they can increase yield by using fertilisers, pesticides and irrigation.
Pressure on the land can also be relieved by using the spent grains from biofuels to feed animals -- substituting some of the maize or other feed grains that might have otherwise been grown. (Editing by Sue Thomas)