Brussels, 30 October 2019 – Cefic and iEthanol welcome the future trade agreement between the EU and Mercosur and wish to present their joint position regarding the interpretation of the ethanol related provisions in the political agreement between the EU and Mercosur on a trade agreement. The ethanol quota that has been negotiated consists of “450 000 tonnes of ethanol for chemical uses, duty-free and 200 000 t 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”. The political agreement did not define “chemical use” nor the scope of “all uses”.
We understand that the Commission is currently finalizing the details on how the ethanol quota would be specifically defined in the legal text and we have the following concerns. We fear that if the definition of “chemical use” is not reserved for chemicals intermediates in chapter 29, the intended development of bio-based chemistry in Europe will not be fulfilled. There is a high risk that the 450 000 tonnes and the 200 000 tonnes of Brazilian ethanol end up in the industrial ethanol market, representing over 60% of the total European industrial ethanol market.
Therefore, we would hereby like to propose a solution which would be more equitable, and which addresses the concerns and aspirations of both Cefic and iEthanol:
- The ethanol quota of 450 000 tonnes destined for chemical uses to be split as follows: 350 000 tonnes of the quota shall be allocated to the production of chemical intermediates (i.e. not for blending purposes). This means that the imported ethanol would be used only for chemical intermediates included in chapter 29 of the EU harmonized nomenclature. 100 000 tonnes of the quota to be allocated to “all chemical uses”, meaning that this ethanol could go to any application included in the chapters 28-40 of the EU harmonized nomenclature.
- The 200 000 tonnes of ethanol destined for all uses (including fuel) to be allocated to fuel ethanol only. This amount, phased out in six equal annual stages, does not represent a big quantity in a growing fuel ethanol market in Europe.
- The specific implementation modalities of the ethanol quota would need to be defined. We recommend a system based on inward processing licenses in order to strictly control the end use of the ethanol. This system would also give companies the necessary flexibility and predictability in their supply of bio-ethanol to decide on investments in Europe. With 4.3 million tonnes in 2019, the fuel ethanol market represents over 70% of the European ethanol consumption, while the increase of blending mandates across Europe for 2020 onwards confirms that this market is growing. We therefore believe that this compromise solution would allow all the market segments to bear the weight of these quotas, while preserving the interest of the chemical intermediate industry.
In conclusion, this compromise proposal would allow the European chemical industry to develop further the bio-based chemistry segment. This would respond to a growing market demand for bio-based products (e.g. bioplastics) while being in line with the EU’s objectives on Circular Economy. At the same time, this solution would give some protection to the European industrial ethanol producers, many of which are family-owned businesses, small or medium cooperatives and all with a strong local and regional history of employment and long-term commitment. And finally, it would not seriously harm the interest of the European bioethanol producers, while meeting the concerns of Brazil that the quota of 450 000 would not be fully taken up.
Cefic, the European Chemical Industry Council, is a not-for-profit making organisation 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.
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 uses sector, being produced by fermentation and /by hydration of ethylene (i.e. synthetic).