Report analyzes diminishing biofuel targets

August 28, 2014, London, UK  – The U.S. is considering reducing its
biofuels target for 2014 from 18.2 billion to 15.2 billion gallons, while the
EU has lowered its ceiling on food-based biofuels used in the transportation
fuel mix from 10% to 7%, in moves that slow the urgency around the industry’s
growth and biofuels’ role in wider renewable targets, according to GlobalData.

The company’s report states that the U.S. Environmental
Protection Agency (EPA) is considering shaving 3 billion gallons from this
year’s biofuels goal, which would mark the first reduction to annual targets
since they were set in 2007, with future reductions and regulatory
modifications likely.

Carmine Rositano, GlobalData’s Managing Analyst covering
Downstream Oil & Gas, says: “While gasoline demand has declined over the
past seven years, the approved annual use of ethanol in gasoline has not been
adjusted to reflect this change, as increasing amounts of biofuels have been
mandated to be blended into petroleum products each year through to 2020.

“The refining industry has warned that increasing ethanol
use in gasoline would exceed the 10% mix that dominates car engine designs and
the gasoline fuelling infrastructure, so revising the mandated amounts for
biofuels in the energy mix would make economic sense.”

While U.S. biofuels targets are expected to be cut to mirror
the decrease in gasoline demand, the EU has a different reason for its own
target adjustments.

Rositano explains: “The EU’s new 7% biofuels ceiling comes
in response to claims that using biofuels made from food crops increases
inflation on food costs.

“As the EU is still aiming to achieve 10% of transportation
fuels made from renewable energy sources by 2020, the gap between this target
and the 7% ceiling of food-based biofuels indicates a reliance on next
generation biofuels made from algae, waste and other materials.”

Matthew Jurecky, GlobalData’s Head of Oil & Gas
Research, concludes: “It’s normal for agencies to review challenged policy.
Ongoing analysis on the actual reduction of greenhouse gases, inclusive of the
entire value chain, the impact they’ve had on food crops and prices, and the
simple economics associated with producing them, underlies the regulatory
shift. Biofuels will, however, remain a part of meeting mandated renewable
energy and emissions targets, but other industries and policies, such as more
stringent efficiency standards, will also form a part.”