I will quickly address some of the later comments and then answer the questions. What Mr. Brady said about biofuels being key in European programmes until 2020 is absolutely true. It is also true up to 2030 and 2050.
That is unfortunate for the climate in so far as the provision is that even under the best scenarios, electric vehicles will not have taken over the fleet to the extent that one would like by 2030 or 2050. As a consequence we will still have hydrocarbon fuels sloshing around in petrol and diesel tanks, which we need to decarbonise and lower. The vision, which we share, is that they would be advanced biofuels. In the meantime, whether the solution is advanced biofuels and-or electro-mobility, we should not throw out what we have.
Regarding the value or otherwise of producing ethanol from grains and other crops, as a company, we are very active in producing ethanol from crops but also in producing feeds. We produce ever more valuable formulae of those feeds. We also break the inputs into other things that we can use in a higher value way. One should look at it as an integrated refinery process where we are not simply building factories based on selling commodity ethanol, but rather building factories based on the notion that we will be selling commodity ethanol plus another five, six or ten things that are highly valuable. That is our vision and mission as a business and what we want to do in Ireland.
I will return to the questions from the Deputies on indirect land use change, ILUC, how it stacks up, the ILUC food and fuel question and the rationale for the drastic change in direction on the renewable energy directive, RED II. RED II effectively empties out the ambition of transport decarbonisation entirely because it takes away the overall target and proposes a new target which goes up gradually, from 1.5% in 2021 to approximately 7% in 2030. Within that target are advanced biofuels and electricity. There is double the number, up to five times, of forms of energy within those targets. If one looks at the real climate impacts with regard to the actual amount of carbon emissions reductions, they are minuscule by 2030. The Commission has effectively taken transport out of the deal for climate change mitigation by 2030, which seems unconscionable in so far as transport accounts for over 25% of carbon emissions now and is the only sector that is actually growing because the fleet of vehicles on the road is growing.
Why is there a negative approach to biofuels if we need them so much? There are two or three things at play. One, palm oil diesel, which Deputy Corcoran Kennedy referred to, is very simple. I deliberately did not mention it in my statement. The street name for ILUC is palm oil diesel. It has flooded into Europe since the biofuel friendly legislation came into place in the 2000s. It is cheap, can be bought in huge quantities and the fossil oil companies can process it rather than having to buy from new companies such as us. It is very cheap and popular but its indirect and direct impact on the climate is very damaging, since the forests and peatlands that are destroyed to produce it release much more carbon into the atmosphere than ever gets saved by displacement of fossil fuel. It is a horrible commodity, an elephant in the room and is a huge part of the rationale for emptying out the RED II policy. That calls for a policy that, instead of throwing all the babies out with the bathwater, has a standard in place that allows us to distinguish between something like palm oil diesel and fuels that do not have any adverse side effects.
European ethanol and biodiesel made from European oil do not have any of the negatives that palm oil diesel would have because, if one looks at from a common sense point of view but also using the scientific models that have been developed for this specifically, there is simply no pressure to create new farming land to supply European biofuel demand. There is no pressure because even in the most optimistic scenarios, supposing Mr. Brady's Department decided to put 20% biofuels into the mix, and then we had to buy those crops from farmers to turn into fuels, we would still not be buying a significant enough amount of crop produce to impact the dynamics of agriculture and land. European crop output increases by 1% or 2% a year. It is a normal thing that happens despite the fact that demand is very depressed and prices are very low. People get better at their jobs even if they are not trying to, due to technology, education and so on. That tiny increase in European crop output each year would cover a very ambitious biofuels policy several times over by 2030. Europe is a starch and sugar superpower and there is no way we could ever take away sufficient volumes from that to have an adverse impact.
We have a positive impact since if we were to increase demand and double or treble crop-based biofuels, Europe's farmers would love the extra €10 billion or €20 billion of demand. They would not have any difficulty supplying it and would not need any more land. Yield increase and use of marginal land or land going out of economic use at the moment would cover it many times over. If one runs that through the scientific models developed by the European Commission to do that with real world data, one gets real world answers that confirm it. The directive impact assessment, which is the technical side of the directive, cites an initiative to use the modelling systems based on a spike in demand that is way beyond any real world scenario. Many people became concerned about biofuels because of the notion that if we replaced all our fossil fuel with biofuel, we would not have enough space on the planet to produce them. That is true but nobody is suggesting that. It is not a feasible scenario that exists in the real world. The real scenario is one where the transport sector is decarbonised by 10%, 20% or 30%, using biofuels in ten to 20 years. That is the optimum amount by which to do it and that can be covered multiple times over by Europe's farm sector.
There are no subsidies in Europe for biofuels. There were in the past but there are none now. There is a mandate. Member states take the directive and transform it into a local national mandate, putting an obligation on fuel suppliers to blend. In the case of our ethanol, which costs 45 cents per litre if bought in bulk, it is not a mad figure compared to the low price of fossil petrol. It is also a highly efficient fuel blend additive. It is marginally more expensive than the base petrol that we use, but blenders are only putting in somewhere between 5% and 20%, so it is not increasing the weighted average cost of the litre by a huge amount and it allows for other additives to be avoided that would typically be added to, for example, increase oxygen levels in the petrol or to make it cleaner or leaner burning. Ethanol does that naturally. Economically, it is not subsidised and it does not need a huge push. We are overcoming the reluctance of the fossil oil industry to take into its business something that it does not actually make.
Why was there such an impetus to drop the target? There have been big discussions in figuring out how to deal with palm oil and a couple of other shady elements in the biofuel sector. It appears to me that the European Commission, out of a sense of fatigue, said that it would just get rid of the lot rather than implementing a slightly more sophisticated process that could actually distinguish between the good and the bad. It is a big problem. The European Parliament groups working on it actively now and the European Council, unlike the Commission, have decided that this will be key and that whatever comes out will have standards on it.
It appears that if a person does not have a biorefinery in sight of his or her farm he or she might wonder why they should care.
That is a legitimate thought. If one has a biorefinery inside one's farm, it is terrific because one gets around 10% more per tonne than if one was selling to a trader. One has more control over how one sells and gets a better price. However, because a large amount of farm crop produce in Europe goes to markets anyway, the fact that the market is there but not visible still buoys it up generally. Most Irish rapeseed goes to the UK where it is used for making biodiesel. The effect is not something that one can see but it is there.
Regarding some of the others, in the case of the high-protein by-product, if the cap was halved, there is another element to the rationale for having a bluntly non-negative policy towards biofuels. Five or ten years ago, the by-product of ethanol and biodiesel made from European oil seeds was good for animal feed but was not massively attractive as the quality was variable. Some producers burned it or threw it away if they were unable to sell it quickly or easily. That has changed but perceptions take a while to follow. Now, no company in Europe treats their protein feed as something to be given or thrown away. The emphasis has shifted from getting the highest yield out of the fuel part to getting the most consistent high quality from the feed part. We could not exist without our feed. It has to be the same colour every month, have the same smell, texture, and taste for the animals and have the same nutritional and handling qualities for the feed companies to which we sell it or we would be unable to sell it and we would have to give it away or burn it. We have had to invest significantly in this, as have others. I can see why that was not that important to architects of the policy but it is now. The volume we produce is effectively the same volume of GMO soy meal imports from the Americas, and is very significant in the feed system in Europe and our ability to have a GMO-free feed system.
