The European biofuels policy disconnect: Q&A with Eric Sievers
Eric Sievers is Director of Investments at Ethanol Europe, an investment vehicle responsible for the largest ethanol production facility in Europe, Pannonia Bio in Hungary. We caught up with Eric at the World Ethanol & Biofuels conference in Brussels to discuss the state of European biofuels policy, and the drawbacks of shifting the focus from first generation ethanol production to cellulosic and waste-based fuels.
“The initial arguments about cellosic ethanol being incredibly cheap were just plain wrong – they were absolutely wrong… there’s huge capex, and that capex needs to be recovered.”
I think we should kick off by talking about policy in Europe. If you look at the recent EU Bioeconomy Strategy and the Renewable Energy Directive II, what are their shortcomings in your opinion?
The shortcomings are really what we’ve seen all decade, which is a feeling that there is actually something bad about growing things, and about agriculture. And this has been completely rebutted, both by what we actually see in agricultural markets, and also by the fact that in October, the International Energy Agency dedicated its annual review of renewables to bioenergy, and made very clear that almost all of the arguments against bioenergy are not founded in any rational science or arguments. It’s really an aesthetic. And that false aesthetic is really what powers the EU bioeconomy strategy, instead of a robust understanding of agriculture, agricultural markets, and agricultural problems.
I think there’s also a disconnect – if you look at the recent IEA report, and the IPCC report, they both emphasise massive scale up in bioenergy, and I don’t think we’re seeing the same thing on the European policy level.
Yes, that’s exactly right. In fact the greatest disconnect is between the European rhetoric of being leaders on all things renewable and all things climate, and a report like this recent IEA report, which made clear that the only region in the world that actually has decreasing amounts of renewables in the transport sector is likely to be Europe in the coming years.
You’re an American, but you’re working in Europe. When you look at how biofules policy is done in Europe and how it is done in the US, is there anything that Europe could learn from America?
Yeah – it seems strange to say as an American that you could learn something from America these days. But certainly in biofuels there’s a lot to learn. The first lesson is that these very abstract, difficult causation chain arguments about something being potentially, maybe dangerous or wrong – these need to be taken with a grain of salt. So in America those kind of arguments never really got as much traction, and that’s good. Because in America today you see with the corn ethanol industry less acres under corn today than there were one hundred years ago, you see more exports of corn and corn products like distillers grains than you had twenty years ago, so there isn’t really any displacement of land or crops for biofuels – this is all just extra production. It’s sustainable intensification; getting more out of the same acre with fewer inputs, so a lower GHG footprint. And that was all created because there was an investable environment. Farmers believed that this biofuels policy would actually be adhered to, so farmers invested in their land, and that link of getting farmers to invest in their land – that’s what’s entirely missing from Europe. So in Europe there’s been no reason for farmers to invest, so you see the gap in productivity between America and Europe just growing every year. And in Europe we like to say that that’s because of the scale of the farms in the US, and multinationals, and GMO and all the rest of it, but that’s actually not the reason. It’s a very simple thing of farmers in Europe have no reason to invest in their land.
I want to pick you up on one of the things you mentioned there, which was land displacement. I think that might be behind the focus on cellulosic ethanol in Europe. Is this the right approach in your opinion, and how far away are we from achieving some kind of expansion of cellulosic ethanol production in Europe?
You’re exactly right – so there’s a continuing trend in Europe for, if something’s good, if there’s anything that might be bad about it then to look for something else. The end result of that is making something out of thin air so there’s no externalities – of course that’s not going to happen. But on cellulosic yes, certainly there’s a feeling that it must be better than crop-based biofuels, if it uses residues (which are equated to waste, which is wrong). But the problem is that there’s less cellulosic production in Europe now than there was two years ago or three years ago. And currently the biofuels markets around the world have lots of supply and low prices. And the initial arguments about cellosic being incredibly cheap were just plain wrong – they were absolutely wrong. There may be low actual production costs, not necessarily lower than first generation fuels, but there’s huge capex, and that capex needs to be recovered. So at least for ten or twenty years there needs to be frankly fairly high biofuel prices. By talking against first generation biofuels and limiting the demand for those, you push down the prices for those fuels and make cellulosic completely unbankable, completely uninvestable. So today, if someone were producing large amounts of cellulosic, they wouldn’t be able to get enough money for their product to justify their investment. And that’s the fundamental issue – is that there isn’t any sort of real competition between cellulosic and conventional – or any sort of advanced biofuel and conventional biofuels – but you need to have a robust, and healthy, and growing conventional market, in order to have the kind of price signals you need to get advanced.
