Grandfathering Options Under an EU ILUC Policy

The European Commission is expected to publish an Impact Assessment and legislative proposal on the issue of Indirect Land Use Change (ILUC) associated with biofuel production. The introduction of an ILUC policy measure in the Renewable Energy Directive (RED) and Fuel Quality Directive (FQD) could impact current investments and jobs in the EU biofuel industry. Ecofys investigated on behalf of Transport and Environment to what extent the biofuel sector may need protection - so called 'grandfathering'- against the introduction of an EU policy measure.

The report starts with an overview of the EU biofuels market and sector and analyses the impact of possible ILUC policy options on the sector and the level of protection of current investments and jobs that would be required. Subsequently, the report analyses the grandfathering clause as currently included in the RED and FQD as well as other possible grandfathering options.

The study concludes that the introduction of an ILUC policy measure is possible while maintaining employment and paying back current investments in biofuel production installations if the 2010-2012 EU biofuel consumption level would be exempted from ILUC policy up to 2020. This means that an ILUC policy option would be targeted towards the future increase in biofuel production until 2020. The ILUC policy would not significantly reduce the total quantity of biofuels used in the EU because the RED and FQD 2020-targets will remain unchanged. Yet the EU biodiesel sector could face challenges if for example ILUC-factors are introduced or the minimum required greenhouse gas thresholds raised. Grandfathering of the current biofuel consumption level would address this and protect current investments and jobs.

The results of the study were presented at a meeting in the European Parliament on 22 March 2012.