January saw the debate over biofuel policies in the European Union intensify, including over how (and if) biofuels should be supported by governments. At the centre of the discussion was whether to continue mandating biofuels as a fuel blend and whether to establish sustainability requirements on biofuels.

Mandating minimum shares of "energy from renewable sources" (which, effectively, means mainly biofuels) in the final consumption of energy in transport has been the primary instrument by which the EU has encouraged ethanol and biodiesel as a means to reduce greenhouse gas emissions and lessen dependency of foreign energy sources. In 2003, The European Commission introduced a target of 5.75% for renewable fuels in the transportation fuel market by 2010, and a 10% binding minimum target by 2020 was endorsed last year.

But there has been a push from a variety of corners to abandon the mandates. Among the criticisms is that they could cause more environmental harm than good, depending on how the biofuels are produced.

A draft report by the Joint Research Centre (JRC), the European Commissions in-house scientific unit, leaked to the Financial Times newspaper in January, said that the costs of mandating biofuel blends would outweigh the benefits. "The uncertainty is too great to say whether the EU 10% biofuel target will save greenhouse gas or not," said the JRC report.

Despite the criticisms, the draft directive from the European Commission on renewable energies, released on 23 January, endorsed the mandates. The Commission has also recommended that the EU adopt sustainability standards to ensure that biofuels deliver a reduction in greenhouse gas emissions, before they can be counted against fuel-blending mandates.

Yet even the sustainability requirements have divided policy makers and advocates of sustainable development. While some environmentalists are calling for stronger criteria than what has been proposed by the Commission, others maintain that no standards can effectively address the indirect effects on changing land use caused by the displacement of existing production of food, feed and fibre as a result of the increased production of biofuel feedstock. And already, some exporters are alleging that the regulations are a guise for protecting EU producers from competitors in other countries.

Indeed, the prospect of sustainability requirements has raised alarms in regions like Southeast Asia, where newly-felled forests are being used to grow palm oil, which can be turned into biodiesel. Biofuels produced from crops grown on such land may not pass the standards being contemplated in the EU.

The Commission has floated the idea that biofuels should cut carbon emissions by at least 35% more than fossil fuels in order to be counted toward blending mandates. Biofuels produced from rapeseed oil, the most common fuel crop in the EU, would likely pass that threshold. Biofuels produced in many developed countries, as well as ethanol made from wheat, may not. And biodiesel from soybean oil is not even mentioned in Annex VII of the directive, which sets out typical and default values for different kinds of biofuels if produced with no net carbon emissions from land-use change.

The proposed regulations have drawn criticism from sceptics who believe the EU is aiming to insulate itself from competitors in countries that can produce biofuels more cheaply.

"If the EU were to impose discriminatory sustainability criteria, it should at least contain a historic reference to its own agricultural sector, which is using land that used to be forest before the onslaught of the Industrial Revolution," writes Jonas Van Den Berg, in the blog Biopact. "Developing countries should be allowed to produce biofuels the way they want. Countries that want to import biofuels only when they are produced in a manner they define as ‘socially' and ‘environmentally' ‘sustainable', should pay for this extra service."

Looming over this debate is whether such sustainability requirements would be in breach of WTO law. This is not just a consideration for the European Commission; certain governments in Europe, as well as Brazil, Canada and United States, are also developing sustainability requirements for biofuels. Switzerland, for example, has amended its Mineral Fuel Tax to allow exemptions from its mineral oil (fuel) tax only for biofuels that meet minimum environmental and social criteria.

However, there exists a grey area within WTO jurisprudence for what is termed non-product-related processes and production methods (npr PPMs): that is, discriminating between products based on the way they are produced, when there is no difference in the characteristics of the end product.

"The main concern about those measures is that, by establishing requirements on the way products should be manufactured, they limit the freedom of foreign producers to produce according to the technologies they have available and following the priorities and strategies set up by their governments," explains a forthcoming study on the issue from the United Nations Conference on Trade and Sustainable Development (UNCTAD).

The certification schemes for biofuels go beyond those so far analyzed by WTO panels. While WTO jurisprudence has accepted product differentiation based on environmental and health impacts, it is less clear whether panels will accept product differentiation based on labour and social criteria" says the UNCTAD report.