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Eu Adjusts Biodiesel Policy
- Jul 06, 2018 -

The introduction


Recently, the price of crude oil has increased, and the concept of biodiesel has warmed up again, thus boosting the oil price.Through the analysis of the main production of biodiesel is the main consumption areas - the eu policy and pattern of supply and demand, think the eu will reduce biodiesel blend limit, by 2030, could reduce the nearly half of the biodiesel usage.This, in contrast, has reduced consumption of vegetable oil and palm oil.



The picture shows the price of crude oil and the growth of global biodiesel production



The picture shows the eu biodiesel production and import volume



The picture shows the eu biodiesel production capacity and the number of enterprises



The picture shows the growth rate of eu biodiesel production and capacity utilization rate



The figure shows the proportion of biodiesel consumption in eu member states


Changes in the price of crude oil affect the growth of biodiesel production


Biodiesel is a kind of renewable biomass fuel produced from vegetable oil, animal oil, waste oil, etc.Biodiesel can partially replace fossil fuels and is a renewable clean energy source. It is one of the strategic products of the bioenergy industry.Oil price and the price of crude oil has a high correlation, the change of the price of crude oil mainly through the influence of biodiesel production and demand to change the oil supply and demand structure, ultimately drive the oil price fluctuations.The major oil producing countries to use its low cost of development of biodiesel raw materials, such as Indonesia and Malaysia major palm oil producing countries, the major soybean producing countries the United States, Brazil and Argentina, Canada's major oil producing countries.


When crude oil prices rose sharply, the growth of biodiesel production accelerated.When the price of crude oil drops sharply, the growth of biodiesel production slows down and even grows negatively.In 2008 and 2011, for example, crude oil prices rose sharply, break through $100 a barrel, is close to $150 a barrel in 2008 historic highs, biodiesel profitable, global biodiesel production growth in 2008 and in 2011 reached 60% and 33%, respectively.In 2015, the price of crude oil dropped sharply, and the profits of biodiesel were in the red. In that year, the production of biodiesel only increased negatively in 10 years.


Over the long term, global biodiesel production has gradually increased, from 9 million tons in 2007 to 38.4 million tons in 2018.Among them, from 2007 to 2011, the operating center of crude oil price was constantly rising, and the production of biodiesel increased rapidly, with an average annual growth rate of 27%.From 2012 to 2018, the price of crude oil stagnated and fell, and the growth rate of biodiesel production slowed down, with an average annual growth rate of 8%.


At present, biodiesel production accounts for 20% of global vegetable oil production, and changes in the biodiesel market largely affect the supply and demand structure of the whole oil market, and even the oil price.Crude oil prices are temporarily below $80 a barrel and global biodiesel growth is expected to remain at an average of 10 per cent.


The European Union's share of global biodiesel production has fallen


The United States, Brazil, Indonesia, Argentina and the European Union are the major countries and regions producing biodiesel globally.The eu now produces 37 per cent of the world's biodiesel, the us 8 per cent and Brazil 2 per cent.Back in 2005, however, the European Union produced 85 per cent of the world's biodiesel.With the expansion of global soybean and palm-oil plantations, the output of soybean oil and palm oil in increasing the proportion of the global oil market, the increase in the number of used in biodiesel industry, the americas and Asia Pacific biodiesel production proportion is also on the rise, and Europe's market share in the fall.While the eu is still the world's largest producer of biodiesel, the soya rich us, Brazil and Argentina together account for 32 per cent of biodiesel production, about the same as the eu.


In 2017, eu biodiesel consumption was 13.55 million tons, and is expected to increase by 5.3% to 14.27 million tons in 2018.Since 2011, eu biodiesel consumption has been relatively stable, fluctuating around 13 million tons.


In 2017, the eu produced 13.46 million tons of biodiesel, and it is expected to increase by 5.4 percent to 14.19 million tons in 2018.


Eu biodiesel production enterprise quantity reduced from 2011 in 365 to 2018 in 193, 72 companies out of the market, the average production enterprise is not much change, an annual production capacity of 90000 tons.Due to the withdrawal of a large number of enterprises, the eu's biodiesel production capacity has also been greatly reduced, from a peak of 22.15 million tons in 2012 to 1789 million tons in 2018.


Since 2012, with crude oil prices lower, especially since 2014, the price of crude oil directly from a high of $100 / barrel fell below the $40 a barrel, biodiesel production falling profits, the decrease in the number of enterprises, the eu biodiesel production shrink.


In 2014, the number and production capacity of European Union biodiesel enterprises were greatly reduced, with 26 enterprises reduced and the production capacity decreased by 212 million tons. In that year, the output of biodiesel increased by 15% against the trend.The reason for this is that the capacity utilization rate of enterprises has increased greatly.In 2014, the capacity utilization rate of eu biodiesel enterprises was 64.31%, up nearly 14 percentage points from 50.33% in 2013, and the growth rate was 27.78%.Since 2013, capacity utilization rate has grown faster than output, with an average annual increase of 4 percentage points.


In the process of the decline of the number of enterprises in the eu and the overall level of production capacity, the capacity utilization rate of enterprises has been continuously improving, from 45.56 percent in 2011 to 79.33 percent in 2018.In eight years, eu biodiesel companies increased capacity utilization by 33.77 percentage points.Companies are increasing biodiesel production by increasing capacity utilization to meet domestic consumer demand.


Import tariffs will be raised to curb biodiesel imports


The eu is expected to import half a million tonnes of biodiesel in 2018.Since 2014, the import volume of biodiesel in the eu has basically maintained at 500,000 to 600,000 tons.In previous years the eu had imported almost 3m tonnes of biodiesel.In 2013, the eu imported 1.23 million tons of biodiesel, down 1.67 million tons from 2.9 million tons in 2012, a drop of 57.7%.In 2014, imports fell a further 563 per cent to 560,000 tonnes.


The eu's biodiesel tariff policy has been continuously adjusted. Before 2008, the import and export of biodiesel between eu member states was exempted from tariff, and the import of biodiesel from other countries was subject to a tariff of 6.5%.In 2008, the European commission decided to launch anti-dumping and countervailing investigations into imports of biodiesel from the United States.In 2009, the European commission imposed provisional anti-dumping and countervailing duties on U.S. biodiesel.In 2015, it decided to extend anti-dumping and countervailing duties on us biodiesel until 2020.


In 2013, the eu imposed provisional anti-dumping duties on Indonesia and Argentina's biodiesel, 6.8 percent to 10.6 percent on Argentina's biodiesel and 2.8 percent to 9.6 percent on Indonesia's biodiesel.


The eu tariff policy adjustment in biodiesel imports lose price advantage, after 2013, eu biodiesel imports declined obviously, reduced from 2012 tonnes in 2.9 million to 2017 tonnes in 500000.


Adjust biofuel policies to develop renewable energy


The decline in the European Union's share of the global market for biodiesel production is largely due to its policy on biofuels.


Since the 1990s, the eu has actively formulated policies to improve the international climate.In 2001 issued the instruction, to promote the development of renewable energy by 2010 will increase to 12% the proportion of renewable energy, and in 2009, the European council plan by the European Union's energy and climate change, renewable energy directive is part of the content, the goal of this instruction is to ensure that all members of the European Union in 2020 to 20% biofuel blending rate, at the same time stipulated in the transportation fuel used in mixed target of 10%.Blending rate refers to the percentage of biofuels in the blend of fossil fuels and biofuels, for example, B100 represents 100% biofuels, B5 represents 5% biofuels and 95% fossil fuels.


Biofuels are divided into the first generation of biofuels and the second generation of biofuels.The first generation of biofuels means based on food crops or vegetable oil production of biofuels, including biodiesel made from vegetable oil and ethanol from corn and sugar cane production, eu biodiesel production accounted for 70% of the first generation of biofuels production, ethanol 25%, other 5%.The raw material of the second generation of biofuels is main non-staple crops, it is to use animal fats and used cooking oil production of biodiesel and with straw, hay, wood chips and other waste production of cellulosic ethanol.The most important difference between the second generation of biofuels and the first generation is whether food crops are used as raw materials.


Due to grow biofuel crops will grab food of arable land, pushing up food prices, recently, the research of biofuel feedstocks, a single work confirmed that use a vegetable oil for biofuel's greenhouse gas emissions to be significantly higher than that of biofuels in starch or sugar as raw materials, total emissions in some biofuels could even higher than fossil fuels, and non-food crops as raw materials of advanced biofuels, generally have lower greenhouse gas emissions.In some areas, large areas of natural vegetation and forests have been cleared and burned to grow soybeans and palm trees to make biodiesel.


The European commission strongly supports increasing the mix of biofuels, but sets a cap on the mix of first-generation biofuels.The European commission is trying to reconcile the differences between eu environmentalists and producers over the first generation of biofuel blending rates through internal agreements.In 2012, the European commission proposed that biofuels based on food crops be no more than 5 per cent blended.In 2013, the European parliament narrowly voted to cap the use of food-based biofuels as transport fuel at 6 per cent.On June 14, 2014, the eu countries reached a temporary agreement, provisions of the transportation vehicles shall not exceed 7% of the proportion of the first generation of biofuels, in order to protect the crops planting area and yield.On April 14, 2015, members of the European parliament's environment committee signed a compromise agreement, for use by the department of transportation based on food crops for biofuel made explicitly limit, demanded that the European Union member states to limit in the transport sector to use the proportion of the first generation of biofuels, fell to 7% by 2020.


On November 30, 2016, the European commission announced a in 2021-2030 during the execution of the second renewable energy directive, based on the mixed food crops of the first generation of biofuels cap is decreased from 7% in 2021 to 3.8% in 2030.The directive calls for a reduction of 0.3 percentage points in the mixing ceiling for the first generation of biofuels from 2021 to 2025 and 0.4 percentage points per year from 2026 to 2030.Meanwhile, the lower limit for second-generation biofuels will be raised from 1.5% in 2021 to 6.8% in 2030.After 2020, the consumption of biodiesel and bioethanol from the first generation of biofuels will gradually decrease, and the consumption of the second generation of biofuels will increase substantially.


The top three producers of biodiesel in the eu are Germany, France and Spain, accounting for 28 per cent, 19 per cent and 12 per cent respectively.These three countries account for 59 per cent of the eu's total biodiesel production.


At present, the rapeseed used in the production of biodiesel in Germany has grown over one million hectares, and biodiesel already accounts for more than 60% of the German renewable energy market.The German government actively encourages the production and application of biodiesel and provides certain subsidies for farmers to grow rapeseed.In addition, Germany has more than 1500 biodiesel gas stations, and from 2004 onwards for biodiesel adopted a policy of tax exemption, shall be exempted from biodiesel or mixed with regular petroleum diesel to diesel consumption tax, mix oil tax exemption according to proportion of biodiesel.This has further boosted the production and use of biodiesel in Germany.Biodiesel has replaced diesel in Germany as fuel for buses, taxis and agricultural machinery.


The French government has been promoting the development of bioenergy since 2003.The design of the automobile engine is mainly the biodiesel engine, accounting for 63% of the car ownership in France.


Italy is a big importer of energy, accounting for 80% of its energy needs.Currently, Italian biodiesel is mainly made from rapeseed from France and Germany.


Curbing biodiesel consumption is bound to hit the oil market


The raw materials of biodiesel in eu include vegetable oil, palm oil, waste cooking oil, animal oil, soybean oil, etc.Among them, vegetable oil is the main raw material for biodiesel production in eu, accounting for 43%.However, in 2008 the eu biodiesel raw material, vegetable oil accounted for as high as 72%, as America later soy and palm oil production increase of southeast Asia, the European Union imports increase in the number of soybean oil and palm oil, the proportion of vegetable oil that is used in the production of biodiesel.Even so, the eu remains the world's leading producer of biodiesel from vegetable oil.About 80 percent of the biodiesel produced by vegetable oil is consumed in the European Union.


Palm oil is the second most used form of biodiesel in the European Union, mainly imported from Indonesia and Malaysia.Spain, the Netherlands, Finland, Italy and France produce biodiesel from palm oil, while Germany, Portugal, Romania and Poland do much less.In 2017, the eu will import 2.3 million tons of palm oil for biodiesel production, accounting for 35 percent of the eu's palm oil imports and 3.71 percent of global palm oil consumption.


Indonesia to plant more trees cut down a lot of tropical plants, destroyed the ecological balance, goes against the original intention of development of biodiesel, the eu will decrease in the amount of palm oil used in biodiesel, beginning in 2030, the eu may stop the use of palm oil in the transportation fuel.


Based on grain crops, according to the eu renewable energy policy of the first generation biofuel blending limit decreased from 7% in 2021 to 3.8% in 2030, biodiesel production will be halved, to reduce the amount of 7 million tons.Vegetable oil and palm oil used to make biodiesel together account for about 62 per cent of the total, and their combined use is down by 4.3m tonnes by 2030.Based on the eu's policy adjustments, predicts 2030, palm oil usage in biodiesel decrease rate than canola oil, palm oil consumption is expected to reduce 2.3 million tons, accounting for 3% of the world's palm oil consumption;The consumption of vegetable oil is expected to decrease by 2 million tons, accounting for 10% of global consumption.


Overall, the marginal effect of eu biodiesel production on crude oil prices has been reduced due to the adjustment of eu biofuel policy.In the next 10 years, the amount of vegetable oil and palm oil used to produce biodiesel in the eu will decrease and the demand for oil will be increased.