Are biofuels good or bad? Or, rather, which ones are good and which ones are bad? At the moment, EU targets oblige member states to power 10% of their transport with biofuels by 2020. But contentious debate over the credentials of biofuels has long stalled investment and threatens the future of some producers.

After a two year debate on the issue, the European commission has admitted that the issue of land use change, or displaced deforestation, can lessen the carbon savings from some biofuels.

In July therefore, it has announced, it will introduce a new, tougher sustainability benchmark which aims to keep the least environmental producers out of the European market. Many in the biofuels industry have complained loudly about the new benchmarks. The commission says it will provide opportunities for producers of the greenest biofuels.

Indirect land use change (ILUC) has been the elephant in the room in the biofuels debate, strongly criticised by environmental NGOs, until now somewhat overlooked by the eurocrats.

ILUC means that if you take a field of grain and turn it to biofuel use, those missing tonnes of grain will have to be produced elsewhere or someone will go hungry.

The economics of the situation means the shortfall has tended to come from tropical areas, encouraging farmers there to carve out land from rain forests. Burning the forests to create agricultural land releases large amounts of CO2 into the atmosphere, negating the carbon-reducing effects biofuels were supposed to bring.

According to an EU analysis of 15 surveys it has carried out, the EU's biofuels policies over the next decade could lead to land clearance of tropical forest equivalent to the size of Denmark, or 45,000 square km.
Biodiesel, mainly palm oil produced in the once rain forest rich areas of Indonesia, is one of the worst offenders. But the commission is expected to endorse bioethanol derived from Brazilian sugar cane, which grows fast, needs little fertiliser and is cheap to transport.

(When growing extra food, Brazil has plenty of spare arable so-called cerrado land, "the world's last agricultural frontier", so the Amazon need not be deforested. That is the argument that Brazilian politicians use, and seems to have convinced the commission.)
But the main hope will be pinned on next generation biofuels.

A clear message in July, say local representatives for the biofuel industry, could speed up the adoption of this next generation source - made from agricultural residue, ie straw, after food crops have been harvested, so no longer creating a land displacement problem. Kaare Nielsen, a spokesperson for Novozymes, a large Danish producer, says these new generation biofuels (which require pretreatment) are not yet competitive but will be soon.

"The volatility of oil prices makes it a tough guess, but probably by 2020 it can compete with petrol."

She adds that the barrier is no longer so much technical, but political: that the best performing biofuels must be incentivised. That those who suffer the first mover disadvantage must given support.

Meanwhile, an NGO, Action Aid, said that monitoring of biofuel procedures were often evaded and that population displacements - on top of ILUC - were not considered when considering the costs of biofuels. The commission says that member states are responsible for verification checks, and that third party auditing covered certification systems rather than individual projects.

There's bound to be bumps ahead, but if the commission manages to steer the contentious and long bothersome issue of biofuels production in the right direction it will be quite an achievement.

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Pelle Neroth -- EU correspondent

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