The EU regime on biofuels in transport: Still in search of sustainability. Egmont Paper No. 68, July 2014

Like other regions of the world, the EU is developing biofuels in the transport sector to reduce oil consumption and mitigate climate change. To promote them, it has adopted favourable legislation since the 2000s. In 2009 it even decided to oblige each Member State to ensure that by 2020 the share of energy coming from renewable sources reached at least 10% of their final consumption of energy in the transport sector. Biofuels are considered the main instrument to reach that percentage since the development of other alternatives (such as hydrogen and electricity) will take much longer than expected. Meanwhile, these various legislative initiatives have driven the production and consumption of biofuels in the EU. Biofuels accounted for 4.7% of EU transport fuel consumption in 2011. They have also led to trade and investment in biofuels on a global scale. This large-scale expansion of biofuels has, however, revealed numerous negative impacts. These stem from the fact that first-generation biofuels (i.e., those produced from food crops), of which the most important types are biodiesel and bioethanol, are used almost exclusively to meet the EU’s renewable 10% target in transport. Their negative impacts are: socioeconomic (food price rises), legal (land-grabbing), environmental (for instance, water stress and water pollution; soil erosion; reduction of biodiversity), climatic (direct and indirect land-use effects resulting in more greenhouse gas emissions) and public finance issues (subsidies and tax relief). The extent of such negative impacts depends on how biofuel feedstocks are produced and processed, the scale of production, and in particular, how they influence direct land use change (DLUC) and indirect land use change (ILUC) and the international trade. These negative impacts have thus provoked mounting debates in recent years, with a particular focus on ILUC. They have forced the EU to re-examine how it deals with biofuels and submit amendments to update its legislation. So far, the EU legislation foresees that only sustainable biofuels (produced in the EU or imported) can be used to meet the 10% target and receive public support; and to that end, mandatory sustainability criteria have been defined. Yet they have a huge flaw. Their measurement of greenhouse gas savings from biofuels does not take into account greenhouse gas emissions resulting from ILUC, which represent a major problem. The Energy Council of June 2014 agreed to set a limit on the extent to which firstgeneration biofuels can count towards the 10% target. But this limit appears to be less stringent than the ones made previously by the European Commission and the European Parliament. It also agreed to introduce incentives for the use of advanced (second- and third-generation) biofuels which would be allowed to count double towards the 10% target. But this again appears extremely modest by comparison with what was previously proposed. Finally, the approach chosen to take into account the greenhouse gas emissions due to ILUC appears more than cautious. The Energy Council agreed that the European Commission will carry out a reporting of ILUC emissions by using provisional estimated factors. A review clause will permit the later adjustment of these ILUC factors. With such legislative orientations made by the Energy Council, one cannot consider yet that there is a major shift in the EU biofuels policy. Bolder changes would have probably meant risking the collapse of the high-emission conventional biodiesel industry which currently makes up the majority of Europe’s biofuel production. The interests of EU farmers would have also been affected. There is nevertheless a tension between these legislative orientations and the new Commission’s proposals beyond 2020. In any case, many uncertainties remain on this issue. As long as solutions have not been found to minimize the important collateral damages provoked by the first generation biofuels, more scientific studies and caution are needed. Meanwhile, it would be wise to improve alternative paths towards a sustainable transport sector, i.e., stringent emission and energy standards for all vehicles, better public transport systems, automobiles that run on renewable energy other than biofuels, or other alternatives beyond the present imagination.

TTIP’s Hard Core: Technical barriers to trade and standards. Paper No. 13 in the CEPS-CTR project ‘TTIP in the Balance’ and CEPS Special Report No. 117/August 2015

Michelle Egan and Jacques Pelkmans provide an overview of the TBT chapter in TTIP and the various issues between the US and the EU in this area, which in turn requires extensive expositions of domestic regulation in the US and the EU. TBTs, outside heavily regulated sectors such as chemicals, automobiles or medicines (which have separate chapters in TTIP), can be caused by divergent (voluntary) standards, technical regulations and conformity assessment. Indeed, in all three the US and the EU have long experienced frictions with considerable trading costs. The 1998 Mutual Recognition Agreement about conformity assessment only succeeded in two out of six sectors. The US and European standardisation traditions differ and this paper explains why it is so hard, also economically, to realise convergence. However, the authors reject the unproductive ‘stand-off’ between US and EU negotiators on standardisation and suggest to clarify the enormous economic ‘installed base’ of prominent US standards in the world economy and build a solution from there. As to technical regulation, the prospect of converging regulation (via harmonisation) is often dim, but equivalence (given similar levels of regulatory protection) can be an option.

Quantifying Non-Tariff Measures for TTIP. Paper No. 12 in the CEPS-CTR project ‘TTIP in the Balance’ and CEPS Special Report No. 116/July 2015

This paper provides an overview of methods employed to quantify non-tariff measures (NTMs) and then analyses their differences and looks at what these mean for the Transatlantic Trade and Investment Partnership (TTIP) negotiations. The authors find several similarities in the approaches taken. Because all studies conclude that NTMs matter, they argue that policy-makers are right to focus on ‘regulatory cooperation’ in TTIP. Given the significant differences in NTMs across sectors, policy-makers are urged to dive deep into sector-specific elements of NTMs and focus on those sectors where the largest potential gains can be made (i.e. where NTMs are highest, such as in agriculture, automobiles, steel, textiles and insurance services). An area identified for further research is the fact that unlike trade taxes (i.e. tariffs), regulatory barriers to trade are not generally targeted as the primary policy objective, but rather stem from other strategic policy concerns such as consumer safety and/or social and environmental protection. This element should be further investigated.