Net Zero Transition: Biomass Markets – EU’s Renewable Energy Directive for the biomass market

Listen to Argus expert John Cooper and Bioenergy Europe's Irene di Padua as they discuss the opportunities and challenges of the EU's Renewable Energy Directive for the biomass market.

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Transcript: 

John Cooper: Hello everyone and welcome to another episode of our biomass series of podcasts. Today, we're going to be discussing the EU’s Renewable Energy Directive and how it has, and will continue to impact regulation, supply and demand in the biomass sector. Joining me today is Irene di Padua, policy director at Bioenergy Europe. Hi Irene, thanks for joining me

Irene Di Padua: Hi John, really glad to be here with you today.

John Cooper: So, lets jump right into it then. The European Council has recently approved the final text for REDIII, which strengthens the sustainability criteria for biomass in energy and ensures that a cascading principle for feedstocks is applied by member states. What are the wins and losses for the biomass industry as a whole from REDIII?

Irene Di Padua: Well, first of all, thank you for the question. I think the biggest win is for sure the higher renewable energy target. We now have a 45% renewable target by 2030, but also sub sectoral target. In particular, a new mandatory target for renewables in the heating sector and also indicative target for the decarbonisation of districts, but also industry. If we speak about the cascading principle. Well this is something that is already happening in the market in a way because high quality biomass usually goes directly to sawmills and industries because foresters are paid much more than for low quality residues that are instead used for bioenergy. However, what we do have now in the legislation is that member states will need to explicitly consider this principle when developing their schemes for supporting bioenergy. Of course, there will be some derogations based on the feasibility at local level, so the capacity of the industry in terms of economic or technical perspective to use this wood and this feedstock for high quality material, and though what we do see here is that this will for sure increase the administrative burden. So, especially for smaller players this will be an additional effort that will need to put into place. So this is a bit the losses that we see in the revision.

John Cooper: Looking back to REDII as well, how is the roll out of REDII progressing now? And has the gap in implementation among some Member States narrowed since earlier in the year whenthere was some discrepancies between the progress made by particular countries?

Irene Di Padua: So unfortunately there is not much to say on that yet, because indeed the member states are moving at a very different pace. Some of them already implemented REDII, some are still missing. We do have some secondary legislation that is still needed to some member states, or in certain countries what we notice is that there is a lack of auditors which are available and so cannot certify compliance with the new renewable directive criteria. So indeed there is not a uniform trend right now in Europe. We are still lagging behind and we do hope that the system will be up and running soon, but as it is today, this is not yet the case.

John Cooper: And so REDIII then in terms of implementation for REDIII as well, are the deadlines or start dates when that is likely to start taking place at the moment or is that still unclear?

Irene Di Padua: So for this one I can give you a better answer, John, because indeed as you mentioned, both the colleges later approved the final deal on REDIII, it was published in the official journal on 31st of October and will now enter into force on 20th of November after that member states will have up to 18 months to transpose this in national legislation. So the end date for that is the 21st of May 2025. And of course as Bioenergy Europe, we've been discussing with our members and we've been active to ensure that there is a consistent implementation. So that we have a uniform approach of what is transposed as in the different national legislation.

John Cooper: And just looking a bit more in the details of the RED directives. There's been a lot of focus on energy production, but do they address biomass use for more hard to abate sectors such as sustainable aviation fuel, steel, cement and if not, what challenges does this pose to these sectors going forward as they want to look towards net zero

Irene Di Padua: Well, first of all, sustainability criteria do apply to all bioenergy used in Europe, so this also includes hard-to-abate sectors and SAF. And I think like for every new regulatory changes in the beginning, there is always a little bit of confusion, some questions that are still unanswered and this is the case as well for in this situation. But we do not expect this will have a bad impact on the development of SAF. It's actually quite the opposite. We do see bright future ahead in particular, we also see a clear commitment from the European Union to decarbonise the transport sector. And as an example, we do have a new target that combines advanced biofuels and RFNBOs, which are renewable fuels of non-biological origin and that I think clearly shows that indeed there is a willingness from the European Union to have a clear strategy for SAF and for a decarbonising solution in the transport sector.

John Cooper: Just moving on, the decentralised nature of the EU’s financial support for projects in renewable energy and carbon removals has sometimes made it difficult for companies to fully benefit from the funds. While other more centralised systems, such as in the US with the Inflation Reduction Act (IRA), offer a faster track for investments in fields such as BECCS. Are there any plans in place to speed up procedures in the EU? And following on from that is the EU leader or a follower in the global arena in this sense?

Irene Di Padua: Well, first of all, I would like to say that the EU is indeed a leader in the energy transition, whether if we look at the European Union and the USA, there are quite two different worlds, and especially if we talk about decision making, the procedure are quite different indeed. So that's why also the IRA will have a very different impact in the US market than what the Net Zero Industry Act will have in Europe. One example again is that the IRA gives support in the form of tax credits and this is simply not possible in the European system. So Europe will need to find ways to attract new investments and, as Bioenergy Europe, we've also been quite active in including carbon removal solutions in the Net Zero Industry Act to make sure that Europe is also a competitive and strategic advantage there to promote carbon removals and to fight against climate change. However, indeed, if the EU fails in finding this new investment, it risks falling behind in the net zero technology ecosystem. And in this context, I think it's important also to mention another initiative that's ongoing right now in Europe, which is the carbon removal certification framework, the CRCF. So this is an initiative to create a new European carbon market and indeed we do see that by certifying carbon removals, this will also boost investment in European technologies.

John Cooper: And just finally, just more specifically on woody biomass, the EU approved a regulation on deforestation earlier this year, which requires mandatory due diligence for operators and traders selling imported cattle, cacao, coffee, etc from December next year and what do you expect the EUDRs impact to be on biomass and especially woody biomass?

Irene Di Padua: Yeah. So well, of course the EUDR will have an impact on the biomass market because it does change the requirements and the data collection that will be needed to commercialise products in Europe. In the short term, there might be some issues let's say in the sense that some material might be diverted from the European market because of this new provision and the adaptation period that is needed. And especially what I think is important here is that the traceability approach and the risk management which is included in the EUDR’s provisions is quite different from the Renewable Energy Directive one, so we will also need to understand how these two will work together. And again here there are quite some unanswered questions which are still being taken care of at European level. However, I also would like to stress that the biggest obligations which are currently in the EUDR will apply to actors that put products into the market. So whether we speak about internal market or import is still who's putting the goods into the market. So this will most likely apply mostly to other actors in the value chain, higher up compared to the bioenergy actors. So it will be less impacting on our sector, let's say compared to other sectors

John Cooper: Thanks Irene, it's been really interesting to hear about these developments. I'm sure everyone's going to be keeping an eye on how REDII and REDIII implementation progresses and what it will mean in the end for the biomass market as a whole. So thank you very much for joining me today, Irene, who I imagine will be quite busy ahead of the European Bioenergy Future Conference for Bioenergy Europe that will take place in Brussels on the 29th and 30th of November.

Irene Di Padua: Thank you so much for having me, John. We are almost getting there for the conference and we expect quite a good audience. We'll be talking about market and policy, so ongoing trends but also with legislation. In fact, the energy sector will have industry, market players, politicians, you name it, research and academia, a bit of everything. So really looking forward to seeing you and some colleagues from Argus as well in Brussels.

John Cooper: And for our listeners, if you enjoyed this episode, please be sure to look out for future episodes in our biomass series of podcasts. And For more
information on August's coverage of the biomass market, please visit augsmedia.com/biomass. Thank you.