Brussels 20 February 2020 – Cefic, ePURE and iEthanol wish to present their joint proposal regarding the management of import quotas granted to Mercosur by the EU in the future Free Trade Agreement (FTA). The ethanol quota that has been negotiated consists of “450,000 tonnes of ethanol for chemical uses, duty-free and 200,000 tonnes of ethanol for all uses (including fuel), with an in-quota rate 1/3 of MFN duty. The volume will be phased in in six equal annual stages”[1].

Although the political agreement did not define precisely “chemical use”, it has been the background of the EU position that the processing of ethanol into specialty chemical intermediates and bio-based chemicals, including new developments in Europe, would be the destination of these 450,000 tonnes. This in order to foster competitiveness and growth of EU chemical value chains where ethanol is the main raw material and therefore a key component of the production cost.

We fear that if the definition of “chemical use” is not primarily reserved for the processing of ethanol into chemicals intermediates under chapter 29[2], the intended competitiveness and development of specialty chemical intermediates and bio-based chemicals in Europe will not materialise. Indeed, there is a high risk that both the 450,000 tonnes and the 200,000 tonnes of Brazilian ethanol end up in the general industrial ethanol market, thereby representing over 60% of the total European industrial ethanol market.

Regarding the management of the 450,000 tonnes quota, an allocation on a “first come, first serve basis” would seriously disrupt the European industrial ethanol market while doing nothing to support the development of the above-mentioned value chains. We therefore recommend that the Commission put in place a quota management system that prioritizes those activities that require long-term access to renewable feedstock at competitive prices. We would welcome your consideration of an end-use declaration akin to the Inward Processing Relief (IPR) mechanism for ethanol entering under the Mercosur FTA.

An IPR-like quota management system would allow the European chemical industry to consolidate the European footprint and the further development of the specialty chemical intermediates and bio-based chemicals segments. This would respond to a growing market demand for bio-based raw materials, in line with the EU’s objectives on Circular Economy, in the perspective of the carbon neutrality in 2050. At the same time, it would preserve the interests of companies operating in the industrial ethanol market, without causing harm to the European ethanol market for fuel use.

 

 

Cefic, the European Chemical Industry Council, is a not-for-profit making organization, which represents large, medium and small chemical companies across Europe, directly providing 1.2 million jobs and accounting for 14.7% of world chemical production.

ePURE represents the interests of European renewable ethanol producers. Based in Brussels, ePURE speaks for 35 member companies and associations (including 19 producers), with around 50 plants in 16 EU Member States, accounting for about 73% of the EU’s installed production capacity.

iEthanol, the European Industrial Ethanol Association (EIEA) is a Brussels-based trade association representing producers of ethanol for industrial use in Europe. The Association, dedicated to non-fuel use of ethanol, acts as a focused voice for the European ethanol used in industrial and food sectors, being produced by fermentation and /by hydration of ethylene.

 

[1] Source: New EU-Mercosur agreement, The agreement in principle, 1 July 2019

[2] Excluding CN Code 2909 19 10: Ethyl tert-butyl ether, known as ETBE, which is commonly used as an oxygenate additive in petrol and is an important market for EU fuel ethanol producers