This publication does not necessarily reflect the views or position of the European Commission

DG Enterprise and Industry Short-term Industrial Outlook July 2014

Highlights: Positive trend developments continue in 2014

+ The EU motor vehicles sector continues to expand. + Sector experts are optimistic about the near future, especially regarding new orders. + Growth in the euro area is expected to be stronger in the third than the second quarter. World prices for metals and minerals are lower than at any point since 2009; a possible warning

signal for the world economy but some EU manufacturers may be able to source cheaper inputs.

The first quarter of the year saw a continuation of the positive trend observed in 2013 in EU manufacturing as well as the individual sectors monitored in Figure 1.

Figure 1. Positive trends continue from 2013 into 2014

Note: Percentage change of industrial production indices in different manu-facturing industries relative to the level in the first quarter of 2008 Source: Own calculations based on seasonally adjusted Eurostat data

The production of pharmaceutical products and preparations continues to expand and was 16% higher in the first quarter than six years ago. The output of food products and beverages remains very close to pre-recession levels. The motor vehicles sector continued the strong recovery of 2013: output in the first quarter was merely 4% below output in early 2008, which is remarkable considering the very sharp fall in output experienced in 2008 and early 2009. The consecutive output growth in the sector the last five quarters was initially driven mainly by production of coaches, buses,

trucks and components. Car production has remained subdued, but in the first half of 2014 all EU carmakers reported higher numbers of new registrations than the same period last year.1

Fabricated metal products also increased in 2013 and into the first quarter this year, but output remained 17% below pre-recession levels. Of the manufacturing sectors monitored in Figure 1, only machinery and equipment saw a drop in seasonally adjusted output from the fourth quarter to the first quarter. It remains close to 15% below pre-recession levels.

Figure 2. Short-term growth in most manufacturing sectors

Source: Own calculations based on seasonally adjusted Eurostat data

1 European Automobile Manufacturers Association, press release 17 July 2014

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With some exceptions (clothing, tobacco products, che-micals, coke and refined petroleum products, electrical equipment, machinery and transport equipment other than motor vehicles), most manufacturing sectors are above their output levels of May 2013 some even above their 2008 levels. Beverages and motor vehicles are approaching their pre-recession levels of output.

Turning to the matrix of aggregated manufacturing sectors across Member States, the share of national sectors with higher output than in early 2008 was 4 percentage points higher in the first quarter than the preceding two quarters. In the second half of 2013, slightly more than a quarter of national manufacturing sectors were producing more than at the start of 2008; at the start of this year the share had risen to almost one in three. The forecast for the end of 2014 (based on a switching-regime model) remains unchanged from the April edition: 37 %. If confirmed by data, it means that nearly two-thirds of all manufacturing sectors in Member States would still not reach the production volumes they achieved in early 2008.

Table 1. Growing share of recovering manufacturing sectors in Member States

2013q3 2013q4 2014q1Share of Member State manufacturing sectors with higher output than in the first quarter 2008

28 % 28 % 32 %

Source: Own calculations based on seasonally adjusted Eurostat data

Pharmaceutical products and preparations remains the only manufacturing sector with higher production than before the recession in virtually all Member States. Notable exceptions include France, where the produc-tion of basic pharmaceutical products is higher and the production of pharmaceutical preparations considerably lower than before the recession, and the UK.

The worst manufacturing sector in terms of number of Member States with higher production than before the crisis is other non-metallic mineral products, where out-put is lower than before the recession in all Member States except Poland. The fragile state of the construc-tion sector in several Member States is a likely cause, as well as the availability of cheap imports from third countries. Other manufacturing sectors where output falls short of pre-recession levels in almost all Member States include basic metals, coke and refined petroleum products, textiles and clothing.

The short-term expectations of DG Enterprise and Industrys sector experts are more upbeat than in the recent past, especially regarding new orders. For copper and the engineering sector the outlook is neutral. More detailed assessments of the short-term prospects in the sectors in Figure 3 can be found on page 5.

Figure 3. Short-term outlook in key manufacturing sectors

Source: Questionnaire replies from DG ENTR units. Expected increases are shown as positive except for increased inventories (shown as negative)

Purchasing managers expectations

The most recent information from purchasing managers in the euro area and other economies reflects more up-beat expectations, especially in Japan, China and the US. For most economies shown in Figure 4, manufacturing PMI was higher in June than in April and May. In the euro area, along with Brazil and South Korea, manu-facturing PMI dropped from April to May, and again from May to June.

On the other hand, in the euro area, USA, Indonesia, India, Japan and China, the index numbers remain well above 50, a sign that purchasing managers expect rising activity on those markets. Russian, Brazilian and Korean purchasing managers in manufacturing appear to expect decreasing economic activity on their markets.

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Figure 4. Falling optimism among euro area purchasing managers in manufacturing

Note: Manufacturing PMI covers surveys of purchasing managers in manufacturing companies. Values above 50 are indications of expectations of increasing economic activity. Source: Markit Economics

The US economy disappointed in the first quarter of year as it shrank by 0.7 % (seasonally adjusted) from the previous quarter its largest drop since exiting recession in 2009 and the second largest drop in the first quarter 2014 of all OECD countries. One explanation for the sur-prisingly low first-quarter US GDP figure could be the un-usually harsh winter conditions in parts of North America earlier in the year. Meanwhile, US manufactu-ring output is expanding: it was 3.4 % higher in June than in June 2013, while capacity utilisation in manufacturing rose by 1.3 % over the same twelve months. 2

After growth of 1.4 % in the first quarter the lowest quarterly growth rate since 2012 China's GDP grew by 2 % in the second quarter and appears to be on track to reach the official target of 7.5 % growth in 2014. The Japanese economy surprised forecasters by growing by 1.6 % in the first quarter, the highest quarterly growth rate since 2011 and second only to Ireland (+2.7 %) and Turkey (+1.7 %) among OECD countries. Meanwhile, South Korean GDP grew by 0.9 % in the first quarter; the same seasonally-adjusted growth rate as in the previous quarter.

Metal prices

From a global perspective, because metals and minerals are important inputs in manufacturing and construction, their world market prices can be used as indicators of global industrial activity. Price changes for these inputs

2 Federal Reserve statistical releases (2014), G.17 Industrial Production and Capacity Utilization. Press release 16 July 2014.

reflect changes in demand and supply and can give an indication of future industrial activity.

Figure 5. Low world prices for metals and minerals

Source: World Bank Global Economic Monitor (2010=100)

As Figure 5 shows, the world market price index is falling since late 2013 and now stands at a lower level than at any time since 2009 a possible indication of a future slowdown in the world economy. World market prices are however influenced by many factors not related to future economic activity: speculative buying and selling, the supply situation, geopolitical developments, etc.

Turning specifically to 3-month future contracts in copper and aluminium, Figure 6 shows that the fall in the world market price index illustrated above coincides with falling prices for 3-month future contracts in copper, while 3-month contracts in aluminium are now priced higher than at any time since early 2013. The de-coupling first discussed in the April edition continues.

As in the previous figure, the price developments in Figure 6 reflect more than just expectations of future economic activity. In particular, the speculative element in the pricing of futures should not be neglected.

Figure 6. Rising prices of 3-month aluminium futures

Note: Prices are in USD/tonne. Copper prices are on the left axis and aluminium prices on the right axis. Future settlement dates on horizontal axis. Source: London Metal Exchange

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Exports

Until early last year, international demand for EU exports compensated for the weak domestic demand in the EU, thereby keeping up the momentum of the recovery. However, the strong growth in EU export volumes seems now to have come to an end: after more than twelve months of stagnating exports, volumes are now more than 5 % lower than the peak in March 2013. Until November last year, US exports and exports by Asian economies other than Japan continued growing along the same trajectories as before, but have since fallen back slightly.

Figure 7. Stagnating EU exports

Note: Asia (except Japan) includes China, Bangladesh, Burma/Myanmar, Cambodia, India, Indonesia, Laos, Macau, Malaysia, Mongolia, Nepal, Pakistan, Papua New Guinea, Philippines, Sri Lanka, Thailand, Vietnam, Hong Kong, South Korea, Singapore and Taiwan Source: Own calculations based on CPB and Eurostat data (2010=100)

Euro area indicators

The Eurogrowth indicator, a leading indicator for the euro area, suggests that growth in the current quarter will be stronger than in the second quarter: from +0.9 % (year on year) in the second quarter to +1.3 % in the third.

Figure 8. Promising outlook for the euro area in Q3

Note: The bars represent changes from the same quarter the previous year Source: Euroframe

Manufacturing output forecast for coming months

Figure 9. Higher EU manufacturing forecast

Note: The forecast (green) is made for the period May to December 2014 using a bivariate VAR model including industrial production and producer prices Source: Own calculations based on seasonally adjusted Eurostat data (2010=100) The forecast for EU28 manufacturing has been revised up from the previous edition and now predicts a con-tinued expansion in the second half of 2014, followed by a modest drop in manufacturing output in the final quarter of the year.

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Sectoral Overview

Chemicals

EU chemicals production contracted 0.2 per cent during 2013 compared with 2012. However, production rose for the eighth consecutive month since September 2013. Output surged 2.8 per cent year-on-year in the first four months 2014. Capacity utilisation in the first quarter 2014 was the highest level in three years. Expectations of managers are slightly more positive for the third quarter 2014 than for the second. On the whole, the level of stocks of finished products is seen as adequate and similar to the last quarter. Managers continue to see the level of orders as normal but their expectations are higher than for the last quarter, in other words confi-dence is increasing. Employment in 2013 went down by 1 % to 1.15 million and is forecast to remain stagnant at the European level, even if it is increasing in some Mem-ber States. There is a broadly shared perception that the main concerns of the European chemical industry will continue to be: first, its high reliance on naphta as a feedstock and the high costs of energy; second, though the European recession is gradually receding (consumer confidence is increasing, sales and consumption of chemicals start to increase in sectors such as auto-motives, whose demand is of critical importance to the chemicals sector) it is still uneven across Member States.

Aluminium

The energy cost differential with other continents (Middle East, North America, etc.) continues to increase the import dependency of the EU for aluminium (e.g. primary production in the EU decreased again by 1% during the first 5 months of this year). Regarding aluminium scrap, the EU is still a net exporter of scrap (+133.5 kt in Q1 2014) but the net exports decreased by 7% year-on-year. All in all, the scrap shortage in EU remains a significant challenge. In total, the EU trade balance for aluminium products (HS code 76) is in deficit by 2.1 bn in Q1 2014, representing an increase of 4% year-on-year. A strong euro compared to the dollar is hampering exports of semi-fabricated aluminium products (mainly rolled products). From the end-use markets perspective, the transport and packaging market are/remain good drivers for an increasing aluminium demand. The recovery in the building and construction market remains nonetheless quite vulnerable. New constructions in the private sector help to slightly improve the demand for extruded products.

However, the shipments to the civil engineering segments are on a fairly low level due to weak governments expenditures.

Steel

A moderate recovery in the steel sector is underway. Preliminary data signal that all EU steel-using sectors except for the construction industry and the mechanical engineering sector registered a first positive growth in activity since 2011. The outlook for 2014 and 2015 shows a gradual and rather cautious recovery of real steel consumption in the EU, in line with activity in the key steel-using sectors gaining traction again following their disappointing performance in the past two years. Prospects for 2014 are moderately positive with real steel consumption expected to grow by less than 2 %. A higher growth of 2.5 % is expected in 2015. Further expected improvement in the financial and economic framework should boost confidence and investment in the EU's steel sector.

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Policy Analysis Biofuels: a turning point?

Launching the next wave of investment

After a rapid expansion in the second half of the last decade, investment in biofuel production capacity has stagnated in recent years. Recession, overcapacity, un-certainty surrounding future EU policies, long lead times and the risk of negative returns have resulted in investors withdrawing from the sector for the time being.

This analysis looks at the importance of policy and the potential impact of the 2030 Climate and Energy Framework on the EU biofuels sector.

Climate Change Policy is a priority for the European Union. Among the different strategies to tackle the greenhouse gas (GHG) reduction goal, the transport sector plays a crucial role. It is, in fact, the second biggest source of greenhouse gas (GHG) emissions in the EU after the energy industries.3

The 2008 Climate and Energy package recognized this and set a specific target of renewable energy in transport for 2020 (10%). Among others, biofuels were targeted as an important technology to achieve the EU emission reduction goals in the transport sectors. Investment in biofuel capacity was promoted mainly by two Directives. In 2003, the Biofuel Directive4 required voluntary targets for Member States, with a suggested target of 5.75% of total energy use in transport coming from biofuels to be achieved by 2010. The Renewable Energy Directive5 of 2009 (RED) set mandatory targets for all Member States to achieve a minimum 10% share of renewable energy in transport fuel by 2020. At the same time, an amendment to the Fuel Quality Directive6 introduced a mandatory target to reduce the GHG intensity of fuels in road transport and non-road mobile machinery by 6% by 2020. The Commission expects a significant contribution of biofuels towards achieving these targets.

The two Directives addressed biofuels at large, without distinguishing between first generation and advanced

3 Source: DG Climate Action (ec.europa.eu/clima/policies/transport/) 4 Directive 2003/30/EC 5 Directive 2009/28/EC 6 Directive 98/70/EC

biofuels.7 Subsequently, there were discussions about the allegedly higher environmental impact of first generation biofuels (when evaluated under a life-cycle analysis), about the changes in land carbon stock8 associated with biofuel production, and the possible negative effects on food security caused by competition for food crops. This led the Commission to take action.

In 2012, it issued a Proposal to modify the Fuel Quality Directive and the Renewable Energy Directive to steer investments towards advanced biofuels.9 The aim of the proposal was to start a transition to biofuels that delivers substantial GHG savings, including the CO2 accounting emissions derived from indirect land-use change (ILUC).10 In addition, the Proposal pointed the way to disincentivize the production of first generation (food-based) biofuels.

The 2030 Climate and Energy Framework, issued at the beginning of 2014, sets the ambitious goal for renewable energy to contribute 27% of EUs energy consumption by 2030.11 It no longer includes a specific target for renewables in transport. Instead it places the role of advanced biofuels in a broader policy framework that promotes their integrated development with energy efficiency measures, deployment of electric vehicles and other sustainable fuels. Such a holistic approach is also in line with the Alternative Fuels Strategy.12 In addition, the 2030 Framework highlights the importance of a cost-efficient development of renewable sources, flexibility for Member States in their contribution to the EU GHG reduction target, and a more important role given to market competition among alternative technologies.

7 First generation biofuels are obtained from food crops and animal fats, whereas advanced biofuels is a category grouping all fuels obtained from ligno-cellulosic feedstock and other non-food crops, as well as from industrial co-products. First generation biofuels risk creating direct competition with food production, therefore putting pressure on food prices and creating issues of food security. On the other hand, advanced biofuels are supposed to compete only indirectly with food production, mainly through land use. 8 'Land carbon stock' refers to carbon dioxide from the atmosphere and the oceans trapped in organic and inorganic compounds on land. The natural exchange of carbon between terrestrial ecosystems and the atmosphere and the oceans is modified by human activity, especially through deforestation and land-use change. This alters the balance of carbon dioxide in the atmosphere and leads to stronger GHG effects trapping solar energy. 9 COM(2012) 595 10 ILUC refers to the increase of carbon emissions related to the land-use change induced by the expansion of croplands for biofuels. If more profitable, energy crops displace food crops. As a consequence, additional land is brought into production. 11 COM(2014) 15 12 COM(2013) 17

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Declining investment

A topic that has received little discussion is the dynamics of biofuel investments, how they have responded to policy, and where they stand now with respect to their capacity to contribute to the increasingly more ambitious targets set by the EU.

Figure 1: EU biofuels capacity development (million litres), 2003-2014

Source: Agra CEAS calculations based on F.O. Licht data

As shown in Figure 1, biofuel capacity investments in the EU seem to have responded well to the policy incentives, with a large (more than 5 times) increase in biofuel capacity. This growth refers mainly to first generation technologies: investment in advanced generation biofuels began in 2008, but its size never grew to the point of being comparable to its first generation counterpart. After 2009, though, the trend slowed down considerably. While part of the reasons behind the decrease in investment might be due to the general difficult economic conditions faced by the world economy in 2009-2013, it is clear that policy discussions have also limited certainty in this sector, thus making investment more risky.

Analysis

Data show that there was an overall increase in the production of biofuels between 2003 and 2012. This increase is related to the increasing quota obligations set by Member States to comply with the targets set in the 2009 Directive.13 None the less, the growth rate of biofuel production is slowing down.

13 In order to achieve the targets of the 2009 Directive, Members States employed two instruments: quota obligations and tax exemptions, most of

Figure 2 depicts the evolution of growth rates in primary production for selected renewable technologies. The thin lines are the actual growth rate values, while the thicker lines plot the general linear trends suggested by the data points.

Figure 2: Growth rate of production in selected energy sectors in the EU (2003- 2012)

Source: Own elaboration based on EUROSTAT data

All renewable technologies considered show an overall decreasing trend in their growth rates. The graph also shows that the rate at which biofuel production declined was much faster than for other renewable technologies, like Solar Photovoltaic and Wind Power.

During the pre-recession period, the high fuel prices and high demand made it attractive to look at alternative investments in green technologies. The high fuel prices contributed to the profitability of the projects, and, in the EU, the way policy was being implemented (tax exemption, subsidies) ensured good profitability prospects for the sector. In 2009, oil prices dropped dramatically. At the same time, demand for fuel started to consistently decrease (see Figure 3). The two factors together affected the opportunity cost of investing in biofuels: the fuel price drop eroded profitability of investments, and the drop in demand contributed to shrinking the growth prospects of the market.

the time in combination (see ECOFYS 2011). The 2009 Directive set mandatory national binding targets for Member States regarding the share of renewable sources to have in their gross final consumption of energy in 2020, together with an indicative trajectory (see Annex I of the Directive 2009/28/EC). As of today, these targets are still valid, and the growth in production of biofuels that we see in the data is mainly due to them.

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Figure 3: Oil data in the EU

Source: Own elaboration based on OECD and EUROSTAT data

Note: The relatively short time series for oil demand is due to lack of data.

Another factor that should be taken into account in order to explain the decline of biofuel investments and production growth rates was the so-called 'shale gas revolution'. Starting from 2006, natural gas prices dropped dramatically where shale gas reserves were exploited, which led to a widening spread between gas prices in the US and the EU (the latter prices moving closely to oil prices). In 2005, gas prices were around 0.022 EUR/kWh in both regions. By 2011, though, in the EU they reached 0.035 EUR/kWh, while in the US they dropped to 0.010 EUR/kWh.14 Biofuels and shale gas can both be considered lower-carbon alternatives to petroleum, and treated as competing products. Insofar as energy companies make investment choices on a global market15 and are resource-constrained, the shale gas revolution can be seen as creating an attractive investment alternative, with a growing market and little regulation. This is an additional factor to the increasing opportunity cost of investing in biofuels and contributes to explaining the drop in the growth rate of production and of investments.

Beyond the unfavourable economic conditions, the slowdown of investments from 2011-2012 can also be related more specifically to uncertainties in policy developments.

14 European Commission (2014) 15 To support this assumption, consider, for example, Abengoa Bioenergy, the leading European biofuel producer that operates production plants in Spain, France, the Netherlands, but also in the USA and in Brazil.

Policy directly affects the biofuel market through two channels:

1. By setting specific supply obligations or target quotas, it greatly contributes to the creation of the demand;

2. Policy can also allocate direct grant schemes and decide on tax or excise duty exemptions. Through this channel, it acts on the supply side by reducing costs for producers, or by compensating for the difference between production costs and the market price. It can also be an instrument to ensure industry the recoupment of investment costs.

When considered in parallel with the economic aspects specific to biofuels, it becomes evident that policy uncertainty can negatively affect investment dynamics:

For most biofuel technologies, production is not cost-competitive without government support. ECOFYS (2011) found that the long-run marginal generation costs for biofuels were well above the market price still in 2009 (see Figure 4).16 For this reason, demand for biofuels is mainly policy-driven;

Investments in biofuel capacity are highly capital-intensive and require a long time to break even.17 In addition, the lengthy lead times from investment project to operative plant (between 2.5 and 3.5 years)18, further stretches the recoupment period.

The above-mentioned 2012 Proposal for an amendment of the Fuel Quality and the Renewable Energy Directives represented a change of direction with respect to previous policy. While the ultimate objective remains carbon emission reduction, the Proposal dictates new ways in which such objectives will have to be achieved, with profound consequences on the biofuel market and investment dynamics.

16 The study considers long-run generation costs because they are relevant for the economic decision whether to invest in a new plant or not. They comprise operating costs and a capital recovery factor based on a 15-year timespan. 17 'Financing Renewable Energy in the European Energy Market' (ECOFYS 2011) provides some estimates of the costs. 18 F.O. Licht data

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Figure 4: Long-run marginal generation costs (for the year 2009) for various biofuel technologies in the EU

Source: Financing Renewable Energy in the European Energy Market, ECOFYS (2011)

Note: The figure shows the bandwidth of marginal costs estimated by ECOFYS (2011) in relation to different scenarios (demand conditions, technological options such as plant size and conversion technologies). The vertical grey bar indicates the estimated bandwidth for fuel market price, whereas the red bars show the estimated range of marginal cost for the four alternative fuels considered.

The Proposal limited the contribution of first generation biofuels towards the achievement of the 10% transport target in the RED while increasing the premium for advanced biofuels when accounting for the achievement of the target. In so doing, it introduced a 'technology' incentive, in parallel with the official emission target. In fact, it modified incentives for investments into different biofuel technologies, which in the past were considered equivalent.

This choice should open the market to investments, therefore incentivizing growth of the sector, spurring innovation, and promoting a leadership role for Europe in advanced biofuel technologies. But the shift towards innovative technologies may also increase uncertainty in the market and delay investment decisions of risk-averse agents.

The limitation of the contribution of first generation biofuels to only 5% of the overall 10% target acted in parallel with the decreasing fuel demand shown in Figure 3 to reduce the growth prospects of the sector. As shown in Figure 1, investments during the period 2003-2011 were heavy, leading to a share of 4.7% of biofuels in road transport.19 The European Biodiesel Board estimates that EU biodiesel production capacity in 2012 amounted to 23.5 million tonnes, while output was 8.6 million tonnes in 2011. This means that the heavy investments in first generation production capacity are

19 Estimation by EUROBSERVER (2013)

not yet fully exploited, but also that exploitation of this idle additional capacity will not be supported by policy.

In addition to this, new considerable capacity investments in advanced technologies will be required to meet the policy-driven demand. At the same time, the insufficient growth prospects in the market for first generation biofuels imply that the industry will be unable to recoup much of its investments,20 possibly rendering further investments cumbersome.

On the supply side, changing sustainability criteria will lead to changes in the allocation of subsidies, which will affect production costs, as well as create uncertainty on whether the current plants will continue to receive supports for their full lifetime. In addition, the absence of a credible long term commitment of policy makers contributes to increasing investors reluctance to start projects with big fixed costs and long development periods.

The way forward

This section has summarized the developments in biofuel policy and shows how investments and growth in production responded to them. The analysis suggests that, beyond the negative economic conditions related to the financial crisis and the possible impacts of the shale gas revolution, the decline of investments in the sector can be explained also using arguments related to mutable policy choices.

Investments were hampered by uncertain policy signals caused mainly by lack of scientific knowledge on the contribution of different types of biofuels towards GHG reductions and their impacts on food security.

The dynamics analysed seem to suggest that, when there is a clear policy goal this can make a sector flourish very rapidly. However, the experience with first generation biofuels shows that picking a winner too early might be risky. Additional policies should be technology neutral and based on better scientific knowledge.

The Commission recognizes the increasingly important role that bio-based products are taking in the economy. The 'Industrial Renaissance' Communication21 of January 2014 identified bio- based products as a fast-growing, strategic area where to stimulate investment and innovation. The Commission is also working on a

20 Biofuel Barometer EUROBSERVER (2013) 21 COM(2014)14

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'Bioeconomy Strategy', within which biofuels are part of a chain of high value-added bio-based products22. In this context, advanced biofuels could become an important driver of growth, contributing to the revival of the European manufacturing sector and enhancing the technological leadership of Europe in advanced technologies

Better scientific knowledge, together with the more important role of market competition for new energy technologies identified by the 2030 Climate and Energy Framework, should ensure the emergence of a cost-effective solution for the emission reduction targets and avoid the risk of technological lock-in for the future.

Whether biofuels are the solution to the emission reduction targets in the transport sector will become clear in future years with the development of technology and the evolution of alternative energy products. But in order to give advanced biofuels a chance to prove their worth in this competition, it is important to ensure a stable legal framework for the industry to invest in the sector.

Policy should hence proceed following the ambitious emission reduction lines drawn by the 2030 Climate and Energy Framework, by setting technologically neutral objectives which are coherent across sectors, and ensuring a credible long term commitment from the Institutions.

22 The Communication 'Innovating for Sustainable Growth: A Bioeconomy for Europe' (COMM(2012)60) considers biomass in a comprehensive framework, where it is used for the production of a wide range of products according to a cascading principle. In such context, biofuels would be only one of a chain of products obtained from biorefineries. Production in the biorefineries would favour the highest value added and resource efficient products, while contributing to the principle of a zero-waste society by fully utilizing biomass along its industrial lifecycle.

References

Agra CEAS Consulting. EU Biofuels Investment Development: Impact of an Uncertain Policy Environment. Special Study. 2013

ECOFYS, Fraunhofer, TU Vienna, and Ernst&Young. Financing Renewable Energy in the European Energy Market. 2011

EUROBSERVER. Biofuels Barometer. Systmes Solaires, July 2013

European Commission. European Commission Communication - Innovating for Sustainable Growth: A Bioeconomy for Europe. 2012. COM(2012)60

European Commission. European Commission Communication - Clean Power for Transport: A European alternative fuels strategy. 2013. COM(2013)17

Europan Commission. Energy Economic Developments in Europe. DG Economic and Financial Affairs, 2014

European Commission. European Commission Communication - For a European Industrial Renaissance. 2014. COM(2014)14

Fuss S., Szolgayova J., Obersteiner M., Gusti M. Investment under market and climate policy uncertainty. Applied Energy. 2008, Vol. 85

IRENA and IEA-ETSAP. Production of Liquid Biofuels, Technology Brief. 2013

Kampman B., Verbeek R., van Grinsven A., van Mensch P., Croezen H., Patuleia A. Bringing Biofuels on the Market - Options to Increase EU Biofuels Volumes Beyond the Current Blending Limits. TNO and CE Delft, 2013

Laborde, D. Assessing the Land Use Change Consequences of European Biofuel Policies. IFPRI, 2011

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The Short-term Industrial Outlook is prepared by a team from the unit Economic Analysis and Impact Assessment in DG Enterprise and Industry. This edition was written by Tomas Brnnstrm (monitoring section) and Irene Pappone (policy analysis).

This publication does not necessarily reflect the views or opinion of the European Commission.

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23

23 This table of industrial indicators, attached to STIO, is intended for monitoring purposes. It will be updated in April and October each year.

July 2014