Biofuels in Europe: Overview and Features of a New Industry

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1 XXXII International IAEE Conference Biofuels in Europe: Overview and Features of a New Industry June 23rd, 2009 San Francisco Pietro Lanzini, Iefe-Bocconi University

2 European framework: - Directive 2003/30/EC : Indicative target of 5.75% biofuel in transport by Directive 2009/28/EC: Binding target: 10% renewables in transport by 2020, in each Member State Binding targets Renewables, not only biofuels Certification is required for biofuels to be eligible for quota achievement (-35% GHG, no cropping on highly bio-diverse areas, etc) Advanced biofuels count twice as much (no food)

3 Where are we at? Germany Bulgaria Sweden Lithuania Austria France Portugal The Netherlands Luxembourg Greece Spain Malta Belgium Poland UK Slovenia Slovakia Ireland Czech Rep. Italy Hungary Latvia Denmark Estonia Cyprus Finland Romania Biofuels in 2006: 1.8% Biofuels in 2007: 2.6% Prediction: biofuels in 2010: 4.2% -Market is very concentrated (5 MS account for 80% of consumption) : decrease in growth rates (B99, changed overall attitude towards biofuels)

4 Competition for land In competition Agricultural feedstock to be exploited for: - Food - Feed - Industrial products (eg: tobacco) - Energy products (BIOFUELS) Possible implications: price rises deforestation.. Land to be dedicated to energy crops (10% target): - Diverging opinions - Doomsayers vs optimists EC DG Agriculture, 2007: Land required: 17.5 mio ha (15% arable land) Recovering to former set aside land (.000ha) Difference Obligatory set-aside Voluntary set-aside Total idle land

5 GHG emission savings Compared with fossil fuels Wide range even within a given feedstock. To date, Brazilian ethanol from sugarcane displays best results, while US ethanol from corn has modest GHG savings. GBEP Environmental benefits in EU27 (2007) Biofuel share 2.6% GHG savings 1.27% CO 2 avoided 11.9 bil Kg Iefe elaboration

6 Member States Policies E.G Italy: - tax relief 20% accise for a biodiesel contingent of 250,000 tons - blending obligation (1% in 2007, increasing on a yearly basis) on operators placing fuel on the market

7 Structure of biodiesel industry

8 Agricultural world industrial producers relationship - the typical feedstock supply relationship is represented by spot contracts - this is due to the great uncertainties surrounding the demand of biodiesel (e.g: B99) that make producers fearful of binding themselves with long-term contracts that might lead to unsold production - only larger organisations exploit their structure to integrate activities within the value chain - for instance, ADM and Cargill exploit their activity as agricultural commodities traders, while Diester has its own agricultural land to grow energy feedstocks.

9 Biodiesel industrial producers Sector of origin of biodiesel companies Biodiesel main players (EU) Iefe elaboration, sample of companies from main MSs Data source: Amadeus database

10 Company Origin Capacity (ton) Dimensions ADM Agricolture, food & 900, employees feed (biodiesel ) 27,000 employees (worldwide) Verbio Biofuels 400, mio Cargill Agriculture and food 326 employees 370, employees () 160,000 employees (worldwide) Biopetrol Biofuels 350, mio 95 employees GATE Biofuels 260,000 Germany Company Origin Capacity Dimensions (ton) Diester Industrie Agriculture, oilseeds 2,000, mio 40 employees Cognis France Chemicals 310 mio 550 employees Ineos Enterprises Chemicals 220, mio 127 employees Daudry Vegetable oils/fats 150, mio 31 employees France

11 What about oil companies? To date, marginal role (blending and selling) Heavy R&D investments in advanced biofuels Future scenarios: M&As, joint ventures with incumbent or sheer competition? Oil Company Branches of investment BP Neste Oil Shell Eni Jatropha, cellulosic ethanol Hydrotreated vegetable oil Algae, cellulosic ethanol Algae, Fischer Tropsch technology Total Hydrotreated vegetable oil, cellulosic ethanol Cellulosic ethanol Petrobras Chevron Cellulosic ethanol

12 Thank you for your attention