German govt working on crop-biofuel cut due to Russia war supply issues
Quantum Commodity Intelligence - The German government is working to restrict the use of crop-based biofuels due to supply issues and soaring prices caused by Russia's invasion of Ukraine, according to local media reports Friday.
The Greens party Minister for the Environment, Steffi Lemke, said she is working with the Ministry of Agriculture to reduce the use of biofuels from food- and animal feed-based feedstocks in Europe's largest fuels and biofuels market and free up supply for food.
Germany has a target to reduce emissions by 7% this year in transport by using renewable fuels, but with a cap on the usage of crop-based fuels at 4.4% of emissions and "high-ILUC risk" fuels, such as from palm oil, at 0.9%.
Restrictions could lead to a massive hit to demand for biofuels and free up crops for food supply but would also pile pressure on a beleaguered supply situation for fossil fuels, which has led to record refining margins and flat-out refinery run rates across Europe.
In the last reported year, 2020, 72% of biofuels used in Germany were from biomass, mainly palm oil, rapeseed and corn, according to official data.
"Agricultural areas are limited around the world, we urgently need them for food, as the war in Ukraine has shown us dramatically," said Environment Minister Steffi Lemke Friday.
Germany is already set to ban palm oil-based biofuels from next year due to concerns over the effects of added demand for the vegetable oil on deforestation and the removal of carbon sink rainforests in the world's largest producers, Indonesia and Malaysia.
"I now want to take the next step and also further reduce the use of agrofuels from food and feed crops," Lemke said.
The Agriculture minister Cem Özdemir is also from the Greens party, which has advocated strongly for electro-mobility instead of biofuels over the last several years, and said at the end of March, "it is not sustainable to pour wheat and corn into the tank."
Germany is also currently weighing up an embargo or other restrictions on Russian oil imports, a move which could be considered at odds with cutting the availability for domestic use of biofuels which are largely produced within Germany and the EU.
Industry body Association of the German Biofuel Industry (VDB) pushed back against the announcement by Lemke, saying the move was "met with incomprehension" by the industry and that production was already restricted due to high crop feedstock prices.
In March, the VDB said that biodiesel producers were already cutting run rates due to record high vegetable oil prices, which have only grown stronger since amid ongoing supply issues from the Black Sea and Indonesia's decision to halt palm oil exports.
"The minister, therefore, wants to legislate on something to which the market has already reacted," said Elmar Baumann, Managing Director of the VDB.
"The measures to be taken are unsuitable because they would mean that more food would not be available...and the plans are expensive because pollution rights from other EU member states and scarce fossil diesel fuel would have to be bought," added Baumann.
Grains used in ethanol production were typically not high enough quality to meet food standards, while refining capacity to bring vegetable oils up to human consumption standards was also already creaking, said the VDB.