Indirect land use changes of biofuel production – a review of modelling efforts and policy developments in the European Union

The use of bioenergy involves use of land for production of, for example, harvest residues, crops or forestry, so increased demand for bioenergy can cause land use changes (LUC), which can have many implications on the economic, social and environmental sustainability of bioenergy. The LUC directly associated with a bioenergy project are referred to as DLUC, for example, when converting one type of land use to a bioenergy plantation. Indirect LUC (ILUC) are the changes in land use that take place as a consequence of a bioenergy project, but are geographically disconnected to it. For example, displaced food or feed producers may re-establish their operations elsewhere by converting natural ecosystems to agricultural land or, due to macro-economic factors, the losses in food/feed/fibre production caused by the bioenergy project may cause an expansion of the total agricultural area, or an intensification of its use.

Although LUC due to increased demand for bioenergy were first discussed in the 1990s (see for example, [1, 2]), the debate on indirect LUC caused by bioenergy production intensified with the publication of two studies in 2008 [3, 4]. Both studies demonstrated that ILUC could increase carbon emissions following biofuel expansion to such a level that the life-cycle greenhouse gas (GHG) emissions were higher than with fossil fuels. These studies also had impact on policymaking. Within the EU, in 2009 the Renewable Energy Directive (RED) and Fuel Quality Directive (FQD) were introduced with a set of sustainability criteria for biofuels and bioliquids used to achieve the Directive targets^a. One of these criteria is that the use of biofuels must ensure at least 35% reduction in GHG emissions compared with fossil fuels^b. The threshold will increase to 50% after 2017 (60% for installations that enter operation after 2017). However, the methodology for calculating GHG emissions contained in the Directives does not account for emissions due to ILUC. Only in October 2012 did the EC put forward a proposal to amend the Directives and address GHG emissions generated through ILUC.

One of the major problems with including ILUC in policy is the uncertainty related to the quantification of the GHG emissions [5]. Quantification of GHG emissions due to ILUC is very different from quantification of direct changes, as the theory in ILUC modelling is based on economic market reactions to increasing demand for biofuels, whereas quantifying direct changes relies more on natural science. ILUC are not observable. A wheat-growing farmer in Europe will not see any indirect effects of his or her actions, and it can never be proven that a certain land use in Brazil, for example, is the effect of the European farmer’s change from producing wheat for food to wheat for ethanol. The links are complex and impossible to attribute to a certain field.

It is common to use economic equilibrium models to estimate ILUC. These tools are complex optimisation models studying the entire global economy or a specific sector, for example, agriculture. Economic models assume that perfect markets exist and that equilibrium is reached when demand equals supply in the economy [6]. There are several different economic models available, which have been developed and used by researchers for many years. Among the most commonly used are, for example, the Global Trade Analysis Project (GTAP) model developed by Purdue University, the Food Agricultural Policy Research Institute and Center for Agricultural and Rural Development (FAPRI-CARD) model developed by FAPRI together with Iowa State University, and the Modeling International Relationships in Applied General Equilibrium (MIRAGE) model developed by the European Commission French National Institute for Agricultural Research (INRA), the UN and the World Trade Organization. Economic models typically assess changes associated with the implementation of a policy, such as promotion of biofuel. The LUC are often calculated as the difference between scenarios with and without implementation of such a policy. Most economic models are complex and require in-depth understanding of the way they are organised [7, 8].

Several alternatives to the economic models have been developed using different approaches. The feature these other methods have in common is that they try to use descriptive methods rather than complex optimisation models. For example, one such model allows reference expert groups to describe likely scenarios of market reaction to increased demand for biofuel [9]. Others use statistics on past LUC to predict future LUC (for example, [10, 11]).

The uncertainty in ILUC estimation has been discussed in several papers (for example, [12–14]). There are many explanations for the large variation in modelling results, for example, differences in input data and assumptions. Decisive for the results is the type of land assumed to be affected and the GHG emissions attributed to the LUC, as well as how the emissions are treated over time. LUC, for example, a shift from forest or permanent pasture to annual crops, can lead to large initial carbon losses. However, since the land will continue to produce crops for several years, the carbon losses must be allocated over time, or treated as emission impulses to the atmosphere [8, 15, 16]. The uncertainty in model results is a problem for policymakers, since it affects the validity of arguments for and against policy support for biofuels. Although the aim of this paper is not to go into details of uncertainty due to underlying assumptions in the models, we return to this in the discussion.

The aim of this paper was to review the recent literature (2009 onwards) reporting efforts to model biofuel ILUC. In our analysis, we evaluated whether results from different types of modelling exercises are comparable and whether there is evidence of result convergence over time. In addition, we reviewed the development of ILUC policies in the EU and compared modelling results with the ILUC values proposed by EU policymakers. We then assessed the possibility of different types of biofuels to comply with the GHG-saving requirements established in the RED and FQD. The paper is intended to give a comprehensive state-of-the-art update of modelling results and policy efforts in the EU, which can be useful to inform future research as well as policy discussions on the topic.

Our review of recent ILUC modelling exercises revealed that most studies employ economic equilibrium modelling and focus on ethanol fuels, especially with maize as feedstock, while only a small number of studies to date have modelled advanced biofuels. It also revealed that in spite of some convergence of results over time, particularly for ethanol from maize, wheat and sugar cane, there is still a major variation in the results from the models, especially for biodiesel fuels.

There are many reasons for the variation in the results found in the review. They can be grouped into three major issues: (i) structural components of the models (ii) input data and assumptions and (iii) treatment of carbon stock changes, both concerning the amount of released or sequestered carbon, and how carbon emissions are treated over time.

i) Structural components of the models: economic models (the most commonly used type of ILUC models) were originally developed for quantitative analysis of global economic and political issues rather than assessing ILUC. They adopt different world views and, therefore, have different assumptions about the development of oil prices, and food prices, et cetera [28]. Economic models such as GTAP and MIRAGE (general equilibrium models) study entire economies, whereas others, such as AGLINK (partial equilibrium models), study only specific sectors. Models differ also in their geographical resolution as some study the system at country level, while others aggregate larger, regional areas. Further, the commodity-level resolution varies among models. Whereas some models, for example, IMPACT, study cereals, others, such as CAPRI, can differentiate between different types of cereals. Finally, other issues such as the possibility to model trade of biofuels or the expansion of agricultural land into different types of land uses (only pasture land, only forest, or both) explains some of the variation in model results. For a more in-depth comparison of these issues among models see previous work as examples [12, 28–30].

ii) Input data and assumptions: the studies analyse different policies and use different start and end points in time. They assume policy target will be achieved by different ratios of biodiesel and ethanol and only in a few cases include second generation biofuels. An important set of differences concerns assumptions about harvest levels and raw material use per MJ of biofuel and assumptions about the amount and value of by-products, with some studies (for example, IMPACT and LEITAP models reported in [28]) not accounting for by-products at all. In addition, assumptions about how demand for different commodities depends on commodity price (the so-called elasticity factors) are of great importance and vary significantly among the models. Finally, land prices and costs of land conversion are major assumptions influencing the results of ILUC models [8, 12, 15, 16, 30–33].

iii) Treatment of carbon stocks changes (including above and below ground biomass): assumptions regarding the type of land that will be converted and the related emissions are important for the variation in results of ILUC models [12]. As these assumptions are usually not included in economic models, additional models need to be added. For example, very high ILUC factors of biodiesel can in some instances be explained by assumptions about ILUC on peat soils in South East Asia [12], see for example, previously reported studies [34].

Our review of the development of EU policies to address the GHG emissions associated with ILUC for production of biofuels showed that EU policymaking suffers from a number of inconsistencies and weaknesses. The approaches officially suggested by policymakers in recent years recognise, to different degrees, the necessity of accounting for ILUC in biofuel support policies. The ILUC factors selected by policymakers for this purpose are very specific in terms of g CO₂-eq per MJ of biofuel, which is clearly at odds with the uncertainty in results emerging from modelling exercises to date. Thus, there is a conflict between the demand from EU policymakers for exact, highly specific values and the capacity of the current models to supply results with that level of precision.

The uncertainty of ILUC estimates may be reduced in the future as better models and better data reduce the epistemological uncertainty associated with lack of knowledge of system behaviour [35]. We observed in our review some convergence of results over time, particularly regarding ethanol from maize (which has undergone much modelling effort), sugar cane and wheat. However, uncertainty will not be eliminated. The modelling results produced to date indicate that due to the complexity of the global economy, no significant reduction in model uncertainty should be expected in the near future [36]. Furthermore, predictions of future changes in complex natural and socio-technical systems are intrinsically uncertain. Future ILUC will be dependent not only on economic reactions, but also on other (unforeseen) factors such as agricultural and trade policies in different parts of the world. This so-called variability uncertainty [35] is not reducible and results in a variety of valid scientific standpoints.

The gap between demand by policymakers for indisputable evidence and final answers and the lack of conclusiveness and definitiveness in the knowledge generated by scientific models is visually displayed in Figures 3 and 4. This gap fuels the abundant criticisms linked to the introduction of ILUC factors in EU policies. Considering that the effectiveness of the introduction of (controversial) ILUC factors on the LUC of biofuel policies has not been modelled, and is probably outside the reach of current models, we must conclude that alternative policy approaches should be further explored. One such alternative approach would be to place a cap on food-crop-based biofuels, as proposed by the EC in 2012 [24]. However, the cap suggested by the EC is a very general measure, which does not reflect the real risk of ILUC of different types of biofuels. It aims at regulating the indirect effects of biofuel promotion without being able to measure them. Hence, it is not an effective measure to reduce the risk of negative LUC. We believe that an overall strategy for land use is more urgently needed than ILUC factors or a cap on food crop-based biofuels.

^aThe RED sets a binding target of 10% renewable fuels, including biofuels, in transportation by 2020 for each Member State, while the FQD mandates fuel suppliers to lower the GHG emissions by 6% for each unit of energy from fuel sold by 2020.

^bThe fossil fuel comparator for calculation of GHG reductions is at present 83.8 g CO₂-eq/MJ, but is under revision.

^cThe report identified four options: (i) take no action for the time being, while continuing to monitor; (ii) increase minimum GHG saving thresholds; (iii) introduce additional sustainability requirements on certain categories of biofuels; and (iv) attribute a quantity of GHG emissions to biofuels reflecting the estimated ILUC impact. These options have been evaluated in [25] and [5].

^dThese are available on the EC website (http://ec.europa.eu/energy/renewables/studies/land_use_change_en.htm).

^eIn a leaked draft version of the EC proposal, ILUC factors were included in the methodology to calculate the GHG balance of biofuels for compliance with the minimum GHG saving requirements.

^fNote that the EC proposal assigns an ILUC factor of zero to all advanced biofuels.

Serina Ahlgren holds a PhD in agronomy and is currently working as a researcher at the Swedish University of Agricultural Sciences, mainly with life cycle assessment studies of bioenergy systems. Lorenzo Di Lucia is a post-doctoral fellow at Lund University, where he is working on the governance of biofuel systems in the EU and developing countries.