February 2010 Management Briefing: Biofuels in Europe (Part 1)
Saab has been at the forefront of introducing cars that can run on E85 in Europe, but the biofuel charge appears to have petered out
In the first part of this month’s management briefing, we look at how confused and erratic Government policy has played havoc with Europe’s demand for biofuels and sales of flex-fuel cars.
Rewind to the middle of the last decade and biofuels were the buzzword of the European automotive industry. In some respects, Europe was behind other parts of the world. Bioethanol has been a dominant fuel in Brazil on and off since the 1970s, its popularity fluctuating in line with oil prices. In the US, General Motors had already sold several million flex-fuel vehicles (FFVs) capable of running on E85, albeit mostly in the mid-west corn growing states where the ethanol industry supports local farmers.
In Europe, Ford kicked off the trend in 2003 with the launch of the Focus Flexi-fuel car in Sweden. As with all flex-fuel vehicles (FFVs), the Focus can run on bioethanol E85 (a mixture of 85% ethanol and 15% petrol), normal unleaded petrol, or any mixture of the two. Swedish carmaker Saab followed in 2005 with the launch of its ‘BioPower’ range of cars. Before too long, Swedish demand for FFVs and bioethanol E85 was red hot as the Swedish Government laid on a tempting smorgasbord of incentives to buy biofuel . In 2008, for example, 57,886 FFV s were sold in Sweden, equivalent to 22.8% of the whole new passenger car market. Around that time, Saab was reporting that of those models with a flex-fuel option, 90% of its Swedish sales were of the BioPower variant.
By 2007 the rest of Europe had begun to take notice. Bioethanol E85 pumps were slowly but surely springing up, as were national Government incentives to support consumer take-up of E85. But amid a huge amount of anti-biofuels lobbying and acres of negative media headlines, their enthusiasm was short-lived and just as quickly as many national Governments had got behind biofuels, they started to retract their support.
U-turns and backtracking
The most striking case of a rapid Government U-turn was in France. At the end of 2006, French Prime Minister Dominique de Villepin launched a high-profile campaign in favour of biofuels, and together with Formula One supremo Alain Prost persuaded high-level representatives from the auto and oil sectors to sign a charter for the development of bioethanol E85. Grand pledges were made, such as the Government promising to install 500 E85 pumps in France within a year and Renault aiming for 50% of the gasoline-powered cars it sold by 2009 to be flex-fuel.
By early 2008 though, and much to the frustration of the French manufacturers who had been instructed by the Government to back its campaign, the French Government had quietly decided that it no longer liked high-blend biofuels. To this day, E85 is barely available to buy in the country and sales of flex-fuel cars remain miniscule.
In the UK, biofuels had been privy to a 20 pence per litre fuel duty rebate since early last decade. That rebate was removed in 2010, making bioethanol E85 more expensive to buy at the pump then petrol and diesel. As a result, Morrisons supermarket, which used to sell E85 on some of its petrol forecourts stopped selling the fuel towards the end of last year and Saab has taken all BioPower cars off its UK pricelist, making them available only on special order. The UK’s favourite car brand, Ford, stopped selling its flexi-fuel range of cars in the UK in 2009, due to a lack of consumer interest in them and the absence of any strong government support of them.
Swedish support wavers
Now, it looks as if even Sweden’s commitment to high-blend biofuels is waning, after successive Governments have shown unwavering support to them for the best part of a decade. The result of this has been instantaneous, with FFVs losing a full 20% of share of Sweden’s ‘environmentally-friendly vehicle’ (EFV) market in 2010 compared to 2009. According to Sweden’s automotive trade association BilSweden, 35,292 FFVs were registered in 2010, equivalent to 30.4% of all EFVs sold. This compares with 2009’s FFV sales of 39,851 units, equal to 49.1% of the EFV market. BilSweden statistics show that FFVs are directly losing out to low-emission (<120g/km) diesels, with their share of the EFV market rising from 24.7% in 2009 (20,068 units) to 46.7% in 2010 (54,200 units).
In terms of total market share, FFVs accounted for 18.7% of all new car sales in Sweden in 2009, dropping to 12.2% of the market in 2010. Low-emission diesels’ share increased in that time from 9.5% to 18.7%.
Anna Petre, Saab Automobile’s Manager of Government Relations explains. ”The current Government is being very unclear about their intentions for biofuels, which is making customers very uncertain about what sort of fuel to choose. E85 is currently cheaper to buy at the pump than petrol, so the Government thinks that is enough of an incentive for people to buy it. The Government has been talking about taking away the other incentives that currently exist to buy a flex-fuel car, such as the 20% tax discount for company cars. At the same time, the Government has increased incentives on low-emission diesel cars, such as removing all annual car tax on them, because they are very focused on diesel’s energy-efficiency which is much better than E85’s. So at the moment, Swedish customers think that diesels are the only safe purchase to make.”
A lack of European leadership
It’s not just Europe’s national Governments who seem confused by biofuels, however. The European Union’s whole approach to the contribution that biofuels can make to reducing road transport emissions is mixed up. Last year, for example, the EU published its latest set of green vehicle initiatives, which all but snubbed biofuels with a clear focus on hybrids and electric cars instead. Yet, official EU targets, as agreed in 2008 as part of its Renewable Energy Directive (RED), still stand. These oblige Member States to source 10% of their fuels from renewable sources by 2020. The RED has already created a substantial increase in demand for biofuels, and will continue to do so. These generally appear in member states as low-blend biofuels, so either 5 – 10% bioethanol or biodiesel mixed with fossil fuels.
A spokesperson for Renault, which now sells more FFVs in Europe than any other carmaker, told just-auto that “what is clearly lacking is a stable EU policy environment that delivers a clear and consistent signal to industry.” Meanwhile, Jonathan Nash, Managing Director of Saab Great Britain is clear about what he thinks are some of the reasons behind such inconsistencies: “There has always been a high level of government policy sensitivity around biofuels. This scepticism has been caused in part by the powerful anti-biofuels lobby, while the lack of credible well-to-wheel certification for biofuels’ emissions also makes policy makers ambivalent towards them.”
Whatever the reasons, it is clear that biofuels continue to divide opinion on a major scale in Europe. The fact though, that Europe’s policy makers are as confused as the general public about them is helping no one.