EU RENEWABLE ENERGY DIRECTIVE

ASA Position

ASA supports negotiation of a bilateral agreement between the EU and U.S. that would establish an aggregate approach for certifying U.S. compliance with the sustainable land use requirements of the Renewable Energy Directive (RED). Until an agreement is reached, ASA is pursuing continued acceptance of U.S. soybean exports by EU Member States.

Background

The EU imported $2.0 billion in U.S. soybeans in 2011. Since the EU requires food products to be labeled if they contain biotech ingredients and 93 percent of U.S. soybeans are biotech, food companies have reformulated their products to avoid using U.S. soybean oil. As a result, most of the oil from processing U.S. soybeans in the EU is used in biodiesel production. As implementation of the RED disqualifies U.S. soy biodiesel from EU tax credits and use mandates, suppliers will source biodiesel and feedstocks from other countries and U.S. soybean producers will lose an important export market.

The RED was adopted by the EU in April 2009, and its sustainable land use requirements entered into force on January 1, 2011. It is required to be transposed into national law by the EU’s 27 Member States, but only Germany, Denmark, Austria, and the Netherlands have done so to date. The EU is taking action against Member States who are not in compliance, and U.S. soybean exports to the EU are expected to further decline as more countries begin to enforce RED requirements.

Partially as a result of RED implementation to date, U.S. soybean exports to the EU fell 41 percent in 2011 from 2010 levels, and 37 percent compared to the previous five-year average. A recent study carried out for USB by LMC International projects that the RED will divert the remaining $2.0 billion in U.S. soybean exports to other countries, costing U.S. soybean farmers an estimated $270 million, or $0.08 per bushel, per year. If soybean imports from all origins are diverted, the loss to U.S. producers would be $1.17 billion, or $0.35 per bushel.

The RED has two requirements that are negatively affecting imports of U.S. soybeans. To be eligible for EU tax credits and use mandates, biofuels must reduce emissions of greenhouse gases by a minimum of 35 percent, compared to petroleum diesel, by 2013. This threshold will increase to 50 percent in 2017 and to 60 percent in 2018. The RED establishes default values for emission savings for each biofuel based on the feedstock used. The default value set for soy- based biodiesel is 31 percent – less than the initial 35 percent requirement. This value was determined by the EU’s Joint Research Center using production, processing, and transportation data from Brazil, the largest soybean exporter to the EU. Analysis substituting U.S. data but using the same methodology, conducted for USB by Omni Tech International, documented that the actual emissions savings for U.S. soy biodiesel, depending on various assumptions, are in a range of from 41 to 57 percent. Addressing U.S. compliance with the GHG reduction requirement is further complicated by the EU’s intention to recalculate emissions savings taking indirect land use change into account.

The second RED requirement is that feedstocks used to produce biodiesel must be certified as having been produced sustainably on land that has not been converted from rain forest or other high carbon density conditions. Certification is to be carried out by companies in compliance with one of several EU-approved schemes under which the production, shipment, and processing of the feedstock can be traced in order to verify compliance with sustainability requirements.
U.S. government officials have submitted data to DG-Energy documenting that U.S. farm law requires conservation compliance, including Sodbuster and Swampbuster, and other stewardship practices which meet RED standards. They have requested the EU to enter into bilateral negotiations to establish an aggregate approach for determining U.S. eligibility under the RED requirements based on 99 percent compliance of U.S. producers with U.S. conservation laws and annual audits by USDA.

ASA and other U.S. organizations, including USB, USSEC, NOPA, NAEGA, and NGFA, have been working closely with USDA and USTR to address these issues in order to keep the EU market open for U.S. soybean exports. Private sector delegations have met with EU Member State government officials and industry to obtain commitments that they will continue to accept shipments of U.S. soybeans until bilateral negotiations are completed. ASA also sent comments to USTR in February 2012 asking that concerns with the RED as well as EU biotech regulations be addressed in the U.S.-EU High Level Working Group on Jobs and Growth. In addition, ASA and other organizations have asked the USG to include agreement in the bilateral agreement that GHG emissions of U.S. biodiesel should not be subject to RED restrictions, which would result in a disruption of trade.