Europe’s transport emissions continue to grow, having increased steadily by 36% since 1990, and accounted for 26% of total EU GHGs in 2013. Transport is the only sector whose GHG emissions continue to rise in Europe and solutions are urgently needed to address this, with biofuels proving to be one of the most commercially viable carbon abatement options in the short-medium term.
Ethanol, a renewable fuel that is mixed with petrol and sold as a fuel, is a cost-effective and readily available means to decarbonize transport fuels. In 2013 European ethanol achieved 60% average GHG savings compared to petrol, and still has substantial net GHG savings after taking potential Indirect Land Use Change (ILUC) emissions into account. Furthermore, ethanol is more efficient than petrol in combustion engines and improves fuel efficiency. But the structure of the European fuels market is complex and limits the amount of GHG emission savings that can be achieved in transport. With the right regulations in place, Europe can achieve substantial cuts in GHG emissions and reduce oil dependence at the same time.
Europe’s fuel markets are dominated by diesel and biodiesel
As of 2014, the European transport fuel market is dominated by diesel (70%), and as a consequence, the Renewable Energy Directive’s (RED) target for 10% renewable energy in transport is being mostly fulfilled with biodiesel, which is blended with diesel. In 2014 biodiesel was 80% of the EU market share of biofuels. At the same time, petrol fuel made up 30% of the European transport fuel market, while ethanol was 20% of the biofuels market.
In EU countries diesel contains a higher volume of biodiesel (up to 7%), while petrol typically contains a lower volume of ethanol (up to 5%), but ethanol can also be used in higher levels. A blend of 90% petrol and 10% ethanol (called E10) is sold widely in France, Finland and Germany, while other EU countries are considering its introduction. E10 could be introduced immediately in every EU country, as more than 90% of petrol cars are already compatible with it.
Europe has a diesel deficit and petrol surplus
Europe currently consumes more diesel than it produces, with more than 10% of diesel demand met by imports. The opposite is the case with petrol, where the equivalent of about 40% of EU petrol demand is exported. Oil suppliers view biodiesel as a solution to Europe’s diesel deficit and blend in biodiesel to fill the gap. This has distorted the European biofuels market creating a market dominated by biodiesel at the expense of ethanol. The growing demand for diesel has been caused by a EU energy taxation regime that taxes diesel fuel less than petrol and biodiesel less than ethanol. This has encouraged consumer demand for diesel vehicles, which now make up about 70% of the vehicle fleet.
Spurred on by the favourable tax regime for diesel, the shift from gasoline to diesel began 20 years ago, when the gasoline to diesel ratio was 2:1. It is now inversed to 1:3 and could potentially reach 1:4 by 2020. This growth of the diesel market can be seen in France, for example, where over the past 10 years diesel demand increased by 10% while petrol demand decreased by 40%. In the UK, the number of diesel cars increased from 14% of the vehicle fleet in 2000 to over 50% in 2013.
Growing dieselization of Europe’s vehicle fleet is problematic
Diesel engines have higher negative air quality impacts than traditional petrol engines, with diesel engine emissions significantly more damaging to human health than those of petrol engines due to higher NOx and particulate emissions of diesel. This has led to significant debate about the increased use of diesel vehicles, with some cities planning a total ban on diesel vehicles to reduce urban air pollution: the Mayor of Paris has pledged to progressively ban diesel vehicles in Paris from 2015. The recent classification of diesel particulates as carcinogenic, causing adverse respiratory and cardiovascular heath impacts, means it is time to reconsider this diesel boom.
In addition to the negative air quality consequences, dieselization increases Europe’s dependence on diesel fuel imports. Dieselization also restricts the market development of petrol and could eventually squeeze petrol out of the market, meaning Europe will lose out on the opportunity to achieve the high GHG savings offered by petrol’s biofuel substitute ethanol.
National and European policies are exacerbating dieselization
11 Member States have introduced a general minimum target for blending biofuels in fuels in order to help achieve the RED’s 10% target for renewable energy use in transport. The general nature of these targets allows fuel suppliers in these countries the flexibility to choose to blend biofuels into either petrol or diesel as they see fit. However, another 13 Member States have set specific differentiated minimum targets for blending biofuels into both petrol and diesel. However in these 13 Member States, on average, the targets for biofuel use in petrol are lower than the targets for biofuels use in diesel.
Experience shows that in Member States where there is no minimum national biofuel blending target for petrol, oil refiners prefer, for the reasons outlined above, to use only biodiesel to blend into their fuels. In these Member States ethanol is put at a clear disadvantage and can be virtually eliminated from the fuel market: in Italy, biodiesel accounts for 95% of biofuel consumed. Double counting of biodiesel made from used cooking oil or animal fats only exacerbates the situation.
With an imbalanced energy taxation regime distorting the European fuels market, and with Member States national biofuels policies exacerbating the problem, the dominant position of both diesel and biodiesel is being strengthened. Policy makers need to intervene to secure the benefits that petrol brings to the market and to promote petrol’s renewable substitute ethanol.
Promoting renewable energy use in petrol is a solution to dieselization
A fairer energy tax regime for fuels, i.e. if petrol was taxed lower and the same as diesel, would create more equilibrium in the market and redress the slide towards dieselization. A rebalancing of energy taxation would also open the EU market to more efficient petrol engines and higher petrol-ethanol blends such as the roll out of E10 and the introduction of E20. But in view of the ongoing failure to reach agreement on Europe’s Energy Taxation Directive, other options should be examined. In 2012 the European Parliament, as part of its ILUC review, called for a nationally binding target of 7.5% renewable energy (ethanol) use in petrol to promote ethanol against this backdrop of increased dieselization, this target is the equivalent of the EU-wide introduction of E10.
The roll out of E10 would help support the completion of the EU fuels market by bringing other Member States into line with France and Germany, the biggest fuel markets, which already use E10 fuel. It would reduce Europe’s GHG emissions by 14.6 million tonnes of CO2, equivalent to taking about 9 million cars off Europe’s roads for 1 year. This would replace at least 50 million barrels of imported crude oil, providing an annual saving of €4 billion.
Indeed, Europe would achieve higher net GHG savings from a biofuels policy scenario that includes the widespread use of E10.
 DG CLIMA, European Commission
 Eurostat, FuelsEurope, EurObserv’ER Biofuels Barometer (2014)
 UN World Health Organization (2012)