Spinning ILUC Policy the European Way

By Robert Vierhout | January 14, 2011

It took the European Commission several stakeholder meetings, two public consultations and many more economic modelling studies to conclude that the indirect land use change (ILUC) effects of biofuel demand are not that obvious. At least the opinions and results from over 100 documents on the topic are so diverse that a straightforward conclusion is impossible, except perhaps that there is no overall agreement on the effects. More study is needed was the recent conclusion.

Obviously, those people who are convinced that ILUC exists do not need more proof. They believe the effect is self-evident. Their reasoning is that more demand for land use can only result in the use of land (in countries far, far away) that is not intended and should not be used for agricultural purposes. If (further) proof is required it is not difficult to find a study describing a model that will deliver the proof. After all, models are static and you can prove pretty much anything depending on what assumptions have been included in the model. The predictable consequence of this static analysis is that there will be long discussions on the output because of difference of view on the input. The researchers’ defense of their models reminds me of a statement ascribed to Winston Churchill who supposedly once said he trusted only those statistics that were made by himself. In the past 12 months, I thought of Churchill’s self-fulfilling prophecy often as I attended meetings on ILUC.

The main flaw of the use of economic equilibrium models for trying to establish the land use effect of future biofuel demand is the inability to include in the equation the impact of politics and any given policy on supply and demand. In a market such as biofuels, that is so much determined and set by political decisions, the use of economic models precisely to determine the politics on ILUC is questionable and strange. So, we are trying to understand the effects of a highly politically defined market by analytical instruments that are unable to take account of changes in political realities. Most ILUC researchers will argue that this is irrelevant. The objective is to assess the effects of biofuel policy measures and to determine the extent to which the policy needs change.

Relevant or irrelevant as it may be, what certainly is not irrelevant is to include in the models the effects of animal feed production, yield increase and the use of idle or abandoned agricultural land—to name just a few highly important variables. For example, in the EU year-on-year, we see a growing area of agricultural land being abandoned. All of the models that were presented to the European Commission ignored the combined effect of these realities, and none looked at historical data. To put it differently: we have had biofuels in the EU since 2003. Did anyone study the ILUC effect that has occurred because of seven years biofuel policy?

The ILUC debate has been politicized from its inception. It doesn’t matter how many scientists will get involved in this discussion. In the end every scientific “truth” will be used to prove one or the other. Therefore, the debate on biofuels and ILUC needs to be resolved by politics and this is how it will happen in the EU as it has happened in the U.S.A., though not in precisely the same way.

In the EU by mid 2011, we will eventually conclude that the ILUC effects differ by feedstock to such an extent that certain biofuels cannot penetrate the EU market any longer after a certain date. However, to apply an ILUC factor or raise the greenhouse gas emission threshold to such a level that most of the biofuels would be out of the game is politically not possible. All EU governments know, and have indicated, that they need biofuels to achieve the 2020 emission reduction targets. Taking biofuels out of the equation is simply not an option.

By mid-2011, the European Commission will spin the ILUC policy in a way that there will be clear winners and clear losers. Most likely it will make both those fighting and favoring an ILUC factor unhappy, but this is probably the best way to spin a controversial policy.

Author: Robert Vierhout
Secretary-general, ePURE