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European Union FlagIndirect Land Use Change (ILUC) Being Misinterpreted by Fuel Companies

Changes to bio-fuel policy in the European Union have been in the works since November 2014. Now six months in, the European Parliament, the European Commission and European Union states have a comprehensive piece of legislation regarding bio-fuel policy. Known as the Indirect Land-Use Change Directive, the new legislation is already facing intense scrutiny. Several fuel companies have interpreted the legislation contrary to the original proposals by the European Commission. Lawmakers intended the bio-fuels policy to guarantee renewable energy and sustainable drilling practices in Europe.

Crude Tall Oil (CTO): Residue or Product?

At the heart of the misinformation is the classification of Crude Tall Oil (CTO) as a residue. EU lawmakers now believe that CTO must be granted special status. Multiple fuel companies are now requesting European Union decision makers to adopt the Indirect Land-Use Change Directive to classify CTO as a residue. However, these very same companies have also classified CTO as a product. In Finland and Sweden, CTO has wrongly been deemed a residue, instead of a product. The reason why chemical companies appear to be doing this is to receive state subsidies, by creating confusion and obscurity around the legislation that applies to renewables.

The result is that fuel companies in Finland and Sweden are able to circumvent the criteria for sustainability in respect of the European Union’s renewable energy laws. The scarcity of CTO requires that limitations are set in place for the chemical industries that use it. This requires resource efficiency. Additionally, the contribution of exclusive use of CTO within the EU would not be met within the bio-fuel sector. Estimates suggest that exclusive use of CTO within the EU would only contribute approximately 0.4% of the 2020 EU target of 10% set out for renewable energy within the transport sector.

Many believe that the Indirect Land-Use Change Directive places a tremendous burden on European taxpayers. Without state subsidies, many petrochemical companies would be forced to curtail operations. Biochemical industries are lobbying for a leveling of the playing fields for all industries utilizing CTO as one of their raw materials.

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