Sunday, November 25, 2012

EU biodiesel market not having its best days

The EU is currently experiencing decline in biodiesel production, and some energy experts claim that this trend will continue in years to come, even despite the EU's Renewable Energy Directive (RED), which set a target for the EU to reach a 10% share for biofuels in its energy transport use.

The year 2008 was the last really good year for biodiesel production in European Union (EU) with the production growth rate increasing by more than 35 percent compared to 2007 levels. In 2009 EU’s biodiesel production grew by 17 percent compared to previous year, and in 2010 by 5.5 %. The decreasing trend also continued in 2011, and the 2012 will likely follow the similar pattern.

Why is biodiesel production experiencing such a slowdown in EU? The food vs. fuel debate is certainly one of the reasons for decrease in production but the main reasons for the decline include: increased biodiesel imports, particularly from Argentina and Indonesia, a decline in European diesel demand, and the uncertainty over the regulatory outlook for biodiesel. European Union’s imports of biodiesel are constantly rising.

In 2010 EU imported more than 1.9 million tons of biodiesel, of which more than 60 percent came from Argentina and 26 percent from Indonesia. In fact, one of the largest biodiesel markets in EU, the Spanish biodiesel market, has dwindled in the past three years because exporters from Argentina and Indonesia have priced them out of the market.

The European Union had 254 biodiesel facilities in 2011. According to analysts this will be only enough to fulfill 66 percent of the EU’s 2020 biofuel mandates. The large EU countries such as UK, Germany, France and Italy have all reported slight decreases in their biodiesel production. The largest biodiesel producers in EU are Germany and France, followed by Spain and Italy. Out of the four largest biodiesel producing nations in EU only Spain experienced slight increase in production in 2010.

Biodiesel plays major role in EU plans to reduce the level of carbon emissions emitted by transport but there are many scientists who are worried that the bigger biodiesel production would cause massive deforestation and higher food prices.

To conclude, concerns over biodiesel supply, demand and legislation are creating significant dose of uncertainty in EU biodiesel market, with investors accepting the more cautious approach and choosing to wait before making their moves.