XXXII International IAEE Conference Biofuels in Europe: Overview and Features of a New Industry June 23rd, 2009 San Francisco Pietro Lanzini, Iefe-Bocconi University
European framework: - Directive 2003/30/EC : Indicative target of 5.75% biofuel in transport by 2010 - 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)
Where are we at? 0.00 2.00 4.00 6.00 8.00 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 2005 2006 2007 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) -- 2008: decrease in growth rates (B99, changed overall attitude towards biofuels)
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) 2007-08 2008-09 Difference Obligatory set-aside 3881 0-3881 Voluntary set-aside 2818 4836 +2018 Total idle land 6699 4836-1863
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
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
Structure of biodiesel industry
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.
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
Company Origin Capacity (ton) Dimensions ADM Agricolture, food & 900,000 700 employees feed (biodiesel ) 27,000 employees (worldwide) Verbio Biofuels 400,000 423 mio Cargill Agriculture and food 326 employees 370,000 1600 employees () 160,000 employees (worldwide) Biopetrol Biofuels 350,000 135 mio 95 employees GATE Biofuels 260,000 Germany Company Origin Capacity Dimensions (ton) Diester Industrie Agriculture, oilseeds 2,000,000 1281 mio 40 employees Cognis France Chemicals 310 mio 550 employees Ineos Enterprises Chemicals 220,000 116 mio 127 employees Daudry Vegetable oils/fats 150,000 84 mio 31 employees France
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
Thank you for your attention pietro.lanzini@unibocconi.it