Other G7 countries block German and UK proposals for biofuels waivers

Spike in fossil fuel prices should stop countries from introducing relaxations of biofuels mandates

A proposal from Germany to temporarily reduce the volume of biofuels consumption in G7 countries has failed to gain traction at a summit of the grouping being held in Bavaria, according to media reports on Sunday, with the US and Canada said to be leading the opposition to the move.

If a mooted waiver to biofuels use does indeed fail to get agreement at the G7 summit over the next couple of days, biofuels producers would breathe a sigh of relief following various stories in media late last week that Germany and the UK would push for a temporary relaxation of biofuels mandates.

A June 26 report from the Reuters news agency quoted an unnamed source as saying that officials from the US and Canada were citing the spike in fossil fuel prices in the past few months as an argument for why G7 countries should refrain from introducing a waiver from biofuels mandates.

The same news agency reported a US official as saying that the issue was being negotiated by the Sherpas (government representatives who discuss which subjects should be on the high-level agenda at summits) and hadn’t yet progressed to being an item for G7 leaders to chew over at the three-day meeting in the German Alps that ends on June 29.

But in a statement published late Sunday by the UK Prime Minister’s office, Boris Johnson had encouraged G7 leaders to look at their demands on the use of land and biofuel globally.

“The use of grain for biofuel is contributing to reduced availability and increased costs for human consumption. That is something the Prime Minister will be raising at the G7 today (Monday), the statement said.

Reuters reported on June 23 that Germany and the UK would ask other G7 countries to consider reducing biofuels blending requirements in order to free up grains and vegetable oils amid fears of a global food crisis.

Meanwhile, UK newspapers on June 24 reported comments from the country’s Prime Minister that biofuels use should be moderated by 10% to free up the availability of grain for the world’s poorest countries.

The reports were a major talking point for biofuels producers as well as traders on Friday, Fastmarkets Agriculture understands, although underlying prices for rapeseed-based biodiesel (RME), used cooking oil-based biodiesel (UCOME) and FAME biodiesel (a mixture of crop-based and waste-based feedstocks) all rose on the day but were down sharply compared with June 17.

Mercurial markets

Biofuels prices have been in sharp retreat in June amid a major correction from record highs in prices of vegetable oils based on rapeseed, soybean, and palm, although the knock-on effect on biofuels blending compliance credits (also known as renewable transport fuel certificates) hasn’t always been in tandem amid thin liquidity and a general reluctance to ‘lift’ trades amid uncertainty about mandates at national level in Europe and economic turmoil.

Meanwhile, prices late last week showed that waste-based feedstocks such as used cooking oil underwent a major correction compared with seven days beforehand (down around $90 per tonne week-on-week to $1,800 per tonne in Thursday afternoon’s trading window) amid expectations that demand for freight in Europe will be eroded by an increasingly likely economic downturn.

UK lobby responds

In response to reports on June 23 that the UK PM would urge a 10% reduction in the G7’s biofuels consumption, the country’s main biofuels lobby, the RTFA, said in a statement that the country’s Department for Transport has “no intention of curbing its ambition on renewable fuels, nor pulling back on E10 which was successfully and smoothly introduced in September 2021.”

The lobby also pointed out the UK cap on crop-based biofuels has been set at a level that recognizes the benefits of crop-based bioethanol and does not restrict UK production.

The UK’s crop cap was set at 3.83% for 2021 and decreases year-on-year from 2021 to reach 3% by 2026 and 2% by 2032.

The lobby also pointed out that the country’s bioethanol industry is also the single largest producer of food-grade carbon dioxide and which is essential for food preservation and distribution.

“Lack of food-grade CO2 would trigger a food crisis in its own right,” the RTFA statement added.

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