DG Environment, Room 0C, Avenue De Beaulieu 5, Brussels

DRAFT NOTE OF MEETING

Stakeholder meeting to discuss technical aspects of the proposed Article 7a in the Commission proposal to modify Directive 98/70 (Com 2007(18)).

18th July 2007

DG Environment, Room 0C, Avenue de Beaulieu 5, Brussels

Participants:

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Greg ArcherLowCVP

Colbert Dane UEPA

John NeeftSenterNovem

Elke van ThuijlSenterNovem

Horst FehrenbachIFEU

Robert VierhouteBIO

Christophe Bourrillon eBIO

Alain HeilbrunnCONCAWE

Harald Schneider Europia

Jean-Michel AsparCOCERAL

Florence LimetCOCERAL

Hugo Lucas IDAE

Peter A. KostadinovABV

Walter Mirabella EFOA

Wojciech GurgaczPKN ORLEN SA

Susana FernandezMin of Ind, ES

Gonzalo del CastilloES, AOP

Ingo KlenkCropEnergies AG

Ostheim Kai-kweFedoil

Coen BlomsmaFedoil

Amandine LacourtEBB

Christian SchableEBB

Mahieu Vincent JeanJRC

Christophe BourillonIOGEN

Olivier PairaltMin of Ecology, FR

Dejonckheere DominiqueCOPA

Aramnd DuvielquerbiqAEGPL

M. Fernandez San MiguelMin of Ambient, ES

European Commission

Michele LemassonDG AGRI

Mark MajorDG ENV

Ian HodgsonDG ENV

Lotten KronuddDG ENV

Paul HodsonDG TREN

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Proceedings

Introduction: DG ENV

Ian Hodgson, chairing, opened the meeting with a shortintroduction covering the purpose and background of the meeting.

Presentation on the JRC-EUCAR-CONCAWE Well-to-Wheel Study:

Vincent Mahieu from JRC, the Joint Research Centre, presented the joint study that they have made with EUCAR and CONCAWE covering the key issues that need to be addressed in carrying out a Well to Wheel study. The purpose of the study was to establish a consensual well-to-wheels energy use and GHG emissions assessment of a wide range of automotive fuels and powertrains relevant to Europe in 2010 and beyond, in a transparent and objective manner as well as to consider the viability of each fuel pathway and estimate the associated macro-economic costs. The study covers the GHG balance and energy related and economical issues. There is also an inclusion of vehicles in this study.

The conclusions of the study is that not only the type of fuel is important for its CO2 budget, as well as its economical budget, but also in what way the fuel is produced is of importance. A particular pathway may offer reduction potential while another may not. There is however no single pathway that offers a low CO2 economy solution. This problem will have to be solved through a number of technological solutions and a wide variety of fuels. Further conclusions relate to the bigger scope of the study, suggesting that transport applications may not maximize the GHG reduction potential of renewable energies but that the optimum use of renewable energy sources requires consideration of the overall energy demand including stationary applications and that more efficient use of renewables may be achieved through direct use as electricity rather than road fuels.

The presentation covered the second version of this study. JEC is now working on a third version that will include new pathways. The next version will cover some engine and technology additions, but mainly new fuels. It is planned to be done before the summer of 2008. A bigger update is also to be finished by 2010, covering a complete revision of pathways, new time scales, more cars, heavy duty long-haul trucks and specific city applications, more specifically:

●Fuel from conventional oil.

●Revisits of biofuel pathways, after talking to producers.

●Palm oil.

●Hydrogenated vegetable oil.

●Wet pyrolysis route. This has been tried before, without any good result and will be tested again.

●BGL and cellulose

●Carbon capture and sequestration. This has been tried before, without any good result and will be tested again.

●Biogas from crops. The second version only covers biogas from waste.

●Possibly other options if any good suggestions are put forward.

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Following the presentation was adiscussion on the effect octane, which is expensive economically, environmentally and energy wise, will have on the outcome of the study. Mahieusaid that according to the study presented, a difference in octane between 93 and 95 does not have a big influence on the price, but that the footprint of diesel and knowing how the gasoline market will look in ten years is a more important problems for the refineries. Economical issues regarding calculations based on marginal production or average were further discussed as well as the future of fossil fuels. Some claimed that the demand for oil will increase over the years while others referred to OPEC saying that increasing the production and need for biofuels will have the effect that no one wants to invest in conventional refineries.

After this, Paul Hodson from DG TREN explained what was discussed at the expert meeting the day before and the agenda ahead for the planned renewables Directive. Hodson said that JRC's third version can not be waited for as the preparation of this directive is moving faster than that. Some of the issues that were brought up at the expert meeting were land use change (LUC), co-product allocation and whether to limit the scope to the transport sector for simplicity.

Presentation on biofuel greenhouse gas reporting tool in Germany:

Horst Fehrenback from IFEU started the German presentation with background information on the legislative framework, sustainability issues in Germany and the biofuel quota act. He then described the outcome of a research project to support this legislative framework. The approach has many similarities with the Dutch and the British approach. They, too, want actual GHG savings, a sustainable production and offer realistically conservative default values for users that do not know the LCA data of their product. An addition in the German tool is the goal to include indirect land use change through the use of the "risk adder", which at the moment needs further improvements. Another difference is the probable preferred use of allocation based on lower heat value on the grounds that the purpose of the recently introduced Biofuel Quota Law is the substitution of fossil energy. No final decision has however been made. There may be some flexibility in the German scheme just like in the British case, without giving the producer the right to use the allocation method that gives him/her the best result in either of the two countries. Following this was a discussion about the different views on land use change. The German tool includes smaller land use changes than the British approach. This affect on the output is not yet known.

A short discussion explaining what is and is not included in the German approach followed.

Presentation comparing the GHG methodologies used in studies:

Greg Archer,director ofLow Carbon Vehicle Partnership,presented a comparison between the GHG calculation tools developed in United Kingdom, the Netherlands, Germany and the study made by JEC. This comparison included the energy carriers analyzed, the system boundaries, inclusion of indirect and direct LUC, assumed reference residue and co-product allocation methodology.

The German scheme is still in a draft phase, but plans are to also include land use change as to crops. The reference residue scenario is assumed to be zero and does not allow for a demonstration of actual savings. The British and Dutch methodologies both differ from the German approach in these two aspects. One of the key differences between the four studies is the co-product allocation methodology. Other differences are available in the PowerPoint presentation.

In the discussion that followed this last presentation, the reason for the use of IPCC data from 1995 was explain by the fact that the Kyoto Protocol is based on this. Another reason for this is that the updated values do not differ much from the data presented in IPCC 1995.

Discussions on key issues:

The afternoon was set aside for discussions. The first regarded legislation and the effect the outcome will have on the national schemes. Hodgson explained what the next steps in Parliament and Council are and tried to foresee what will happen. As the approaches presented by United Kingdom, the Netherlands and Germany are so alike despite being developed independently, there is a chance of the EU version being similar. If the common European methodology covers all the fields the United Kingdom needs for its legislation, Archer sees no reason why not to adopt it as a replacement to their national scheme.

The following question was whether default values should be used and in that case if national or EU values are desirable. Most seemed to agree that the use of conservative default values encouraging the user to make own calculations was good. Archer further brought up detailed information about the British scheme that was well received. They have tried to develop a flexible system to get a combination of default and real values. If the user is able to provide a small amount of data such as fertilizer, heating energy and yield, the default values are not at all as conservative. The British scheme further has a pyramid of default steps, different values depending on the knowledge of the fuel. Archer suggests that EU values simply should be inserted in this pyramid of values. The next best default step is national values. EU and national values do not cancel out each other but both are needed. These defaults should not be set based on the worst values in EU, but have to be reasonable and yet conservative. Neeft pointed out that the reason for the conservative values is not necessarily to get a good reflection of the situation but to encourage own calculations. The British scheme does not allow users using average default values if the known facts give a worse result. The bottom step of the pyramid, going down to a search for information on farm level is a possibility but the UK targets are set at the level above. The issues relating to countries outside the EU were also discussed. The British approach includes a set of rules based on scientific studies to be made before setting default values on imports from outside the EU. Archer also pointed out that high identity preservation is not in conflict with a good information flow. A seller may use average values for his batches, but need a document proving traceability. Examples from markets of electricity, wood and sugarcane were brought up to show that certification is possible even when dealing with non-EU sellers. If it for some reason is not possible for the information to follow the product until the end, the default values may be used.

On the issue of how to address indirect and direct land use change. Only the German scheme attempts to address indirect land use change, but so far this substitution methodology is fairly uncertain, but has a strong influence on the final result. Many agree that the issue is very critical and that sustainable behaviour such as using waste streams or set aside land should be encouraged, but think that ILUC should be addressed through another method. WWF have released a report on how to address ILUC through an approach called "idle land", showing that it in fact is possible to include ILUC into the developing national schemes. Fehrenbach explains that the German "risk adder", that still is under development, has included idle land. The British scheme has excluded these parts on the grounds that it is too difficult to proportion the effect the biofuel has on ILUC as e.g. food habits may change and affect the land use. They further find it important that the result of these developments is workable, stating that there is no need for perfection. The UK approach includes an evaluation of ILUC but how this will be done is still not decided. Another key target in the British scheme is the effects of corporate responsibility on the market. For this reason companies will be encouraged to present all data no matter if it is good or bad, in order to not produce a perverse system of incentives. The discussions on direct LUC mainly concerned if any good inventory of land use in 2005, which is the set baseline for United Kingdom and the Netherland, exists. Many suggestions on sources of this type of data, such as FAO, GIS, FSC and an un-accessible US data base, were brought up. Finally a Shell report on sustainability criteria of sourcing biofuel was put to everyone's attention.

The next topic that was brought up was GHG calculations on other fuels than biofuels. Harald Schnieder from EUROPEIA presented their views of unfairness as refineries already are part of ETS and therefore should not have to obey the second piece of legislation (Article 7a). Schnieder also said that producing gasoline or diesel is a too complex process for LCA methodology. The NGOs T&E and WWF replied to this by pointing out that a small biofuel market should not have to be faced by this regulation if the bigger fossil fuel market is left out, that a system allowing comparisons of fuels is needed to not only give alternatives to oil based fuels but also to even more carbon intensive tar sands and "coal to liquid" and that ETS is something completely different as it does not promise any improvements and covers companies based in Europe and that Article 7a regulates products sold in Europe and does promise improvements. Again, economic issues and the risk of this EU approach only causing a rearrangement of "cleaner" fuels was brought up. The question of where LPG fits in this scheme was raised but not answered to. No one raised any opinions or reasons for a different approach in the evaluation of fossil fuels than biofuels.

Addressing the boundary between Article 7a and ETS

Hodgson made a short presentation on the issues and options regarding the interaction between Article 7a and ETS, following discussions in a workshop in the Parliament, stating that Article 7a need not affect the ETS operation.

The presentation was followed by questions and answers further clarifying the possibility of running both ETS and Article 7a.

Summing up and close of meeting

As the topics had be summed up following the discussions, no final summing up took place. Hodgson thanked everyone for coming and ended the meeting.

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