Bridges Trade BioRes • Volume 8 • Number 9 • 16th May 2008
Brazil Concerned Over Trade-Distorting Biofuels Criteria
The development of sustainability standards for biofuels is turning into a bone of contention between trade partners. The EU process for defining sustainability criteria is progressing at a slow pace. Brazil, meanwhile, is becoming increasingly vocal in its objections against any criteria that might pose trade barriers. An EU working group has been set up to develop sustainability criteria for biofuels (see Bridges Trade BioRes, 18 April 2008, http://www.ictsd.org/biores/08-04-18/story2.htm) as part of a wider process towards the adoption of a final legislative package on climate change and trade in late 2008. Ambassadors from EU member states met to discuss draft sustainability criteria on 7 May, but failed to make much progress, as divisions emerged among countries.
How large are the greenhouse gas savings that biofuels provide?
One of the key issues discussed among EU ambassadors was a draft requirement for biofuels to provide a minimum of a 35 percent reduction in greenhouse gas emissions as compared to conventional fossil fuels. The threshold would later be raised. Reportedly, the UK, Netherlands and Germany pushed for tighter thresholds than the 35 percent proposed, while France and Spain favoured the lower threshold, as this would allow for the inclusion of their domestic biofuels industries. A recent report prepared for the European Parliament — which has to approve the European climate and energy legislation that includes the biofuels target — supported a higher threshold. “A dynamic greenhouse gas threshold should be introduced, which should target at least 55 or 60 percent greenhouse gas savings, combined with a system … that creates a financial incentive for the best performing (fuels),” according to the report. Environmental group Greenpeace also called for a threshold of 60 percent at a minimum. “What is curious is how many of the biofuel crops that can be grown in Europe hover at around or not much above a 35 percent savings. This is where this figure comes from. Biodiesel made from rapeseed for example has a savings on oil of 36 percent according to commission figures,” said Frauke Thies, a renewables campaigner with Greenpeace. Greenpeace spokesperson Mark Breddy added that “The question is: Do we adjust biofuels targets to ensure sustainability or do we adjust sustainability criteria to match our biofuels targets?” Many member states are developing their own biofuels industries. There are exceptions, however. Sweden’s biofuel programme, for example, relies heavily on imports from Brazil. Overall, all the ambassadors were hopeful that second generation biofuels derived from agricultural residues and algae would provide greater greenhouse gas emissions reductions — at which time the sustainability criteria could be tightened.
Social and environmental standards?
At the 7 May meeting, ambassadors also discussed how environmental, social and labour conditions associated with imported biofuels could be monitored. In this area, the working group had proposed three options: one, requiring exporting countries to be signatories to key international environmental and labour treaties; second, requiring exporters to pass ’sufficient’ domestic legislation in these areas; and third, requiring exporter to report on environmental and social standards. Reportedly, some ambassadors at the meeting expressed concerns over whether such requirements would be WTO compatible. Others wanted to take the issue further. The Greenpeace campaigners were particularly worried about how to account for indirect land-use changes triggered by biofuels production. The report produced for the European parliament on the topic called for a ban on using arable farmland for biofuels, in order to address problems related to rising food prices.
Brazil warns against trade distortions
Brazil — the world’s top exporter of ethanol — has been following the development of biofuels criteria in Europe and elsewhere with great interest. Brazilian ethanol, produced from sugarcane in factories fuelled by bagasse, an agricultural residue, is efficient and provides substantial greenhouse gas reductions compared to many other biofuels. Andre do Lago, director of the energy department in Brazil’s foreign ministry, recently stressed that this needs to be taken into account. “If Brazil is looking to export ethanol to Europe, it is important that Europe considers our ethanol to be sustainable,” he said. Do Lago added that if Europe introduced a discriminatory sustainability scheme, Brazil would not hesitate to challenge it at the WTO. According to do Lago, “the issue is, as we all know, that all the countries in the world have a natural tendency to try to find ways to create barriers to protect their own interests and products.” Brazilian President Luiz Inacio Lula da Silva has said that he is open to a debate about the sustainability of biofuels, but that it needs to go beyond “half-truths” but forth by constituencies that are fearful of Brazilian competition and only looking for their own trade interests. Meanwhile, Brazil is also targeting US tariffs on Brazilian ethanol. Brazil has long held that current US tariffs of 54 cents per gallon on imports are unfair and in breach of WTO rules. The tariffs mainly serve to protect inefficient corn-based ethanol production in the US, according to Brazil’s chief trade negotiator, Roberto Azevedo. As the new US farm bill — already overdue for adoption — would extend these tariffs by two years, Brazil has warned that they might proceed with a WTO challenge. Azevedo said Brazil may also target subsidies that the US pays to support ethanol blending. “In the light of WTO rules, the (import) tariff is questionable. We’ve been studying its compatibility with WTO rules,” stressed Azevedo. “We may have no other option but to solve our differences at the WTO. We’ve been offering common-ground, consumer-oriented solutions but the response from the U.S. Congress is more trade-distorting protectionism,” agreed a Brazilian industry representative.
ICTSD reporting; “EU still far from agreeing biofuel standards: diplomats,” AFP, 7 May 2008; “EU May Tighten Rules on Biofuels,” EURACTIV, 9 May 2008; “Brazil warns Europe against biofuel import barriers,” AFP, 9 May 2008; “Brazil could challenge new US ethanol rules at WTO,” REUTERS, 8 May 2008; “Merkel Says Brazilian Biofuels Must Respect Amazon,” REUTERS, 15 May 2008; “Key lawmaker urges EU to scrap 10 pct biofuel target,” REUTERS, 16 May 2008.