New report by Cerulogy and Rainforest Foundation Norway:
Nordic alternative fuel policies should do more to eliminate deforestation risks
Deforestation and peat loss linked to alternative fuel policies in Finland, Norway and Sweden could reach tens of thousands of hectares annually in 2030, according to a new report by Cerulogy and Rainforest Foundation Norway.
Photo: Shutterstock
By Rainforest Foundation Norway.
Biofuel production has been linked to environmental harms, including habitat destruction, pollution, and greenhouse gas emissions. The risks are especially high for biofuels made from virgin vegetable oils like palm and soybean oil, which are linked to deforestation in Southeast Asia and South America.
The Nordic countries in this study have made progress to address deforestation-risks from biofuels by reducing palm oil use in biofuels, and avoiding reliance on soybean oil. However, other feedstocks such as rapeseed oil, palm fatty acid distillate (PFAD), used cooking oil, and animal fats can still contribute to deforestation. Their use in biofuels creates demand for substitute oils, indirectly driving further land conversion.
PFAD use in biofuels will predictably lead to palm oil expansion, a recognized driver of tropical deforestation. Sweden and Norway have excluded PFAD from their biofuel mixes. In contrast, Finland has not restricted the use of PFAD, posing significant risks for deforestation and peatland loss. Meanwhile, animal fats and used cooking oil present challenges for Norway and Sweden due to substitution effects and fraud risks.
The report’s projections suggest that, without policy changes in the three countries, implied deforestation and peat loss could reach tens of thousands of hectares annually in 2030.
Urgent policy action needed
The report calls for stricter sustainability criteria and further action to phase out deforestation-linked biofuels in Nordic countries. As global demand for biofuels grows, the findings highlight the need for regulatory action to prevent further environmental damage and ensure climate policies do not inadvertently contribute to deforestation.
General policy recommendations:
- Maintain the exclusion of palm oil from biofuel incentives.
- Exclude soybean oil from the biofuel mix.
- Recognize the deforestation risk from using some residual oils (e.g. PFAD and category 3 animal fats).
- Restrict the total supply of biofuels from used cooking oil and category 1 & 2 animal fats.
- Exercise caution before increasing liquid biofuel demand. Ambitious decarbonization efforts may counterproductively increase the risk of deforestation from agricultural expansion.
- Identify domestic availability before setting targets, with special attention to the cascading principle and the waste hierarchy.
- Tackle fraud with the creation of a dedicated fraud investigation unit and by reviewing the certification system.
- Enact policies to encourage energy saving in the transport sector, through for example, local amenities and services, reducing demand, public mass transit, increasing transport system efficiency, and accelerated electrification. Raw materials for batteries used in electrification of transport should be responsibly sourced, transparent and traceable, extracted, produced and assembled with renewable energy without harm to people and environment.
Used Cooking Oil (UCO)
Used cooking oil (UCO) collected within the EU has the potential to serve as a sustainable feedstock for biofuel production, but the available volumes will remain limited. Given the significant concerns over fraudulent imports, such imports should not be incentivized. Instead, UCO collected in other producing countries should be utilized to decarbonize their own economies. Although UCO is currently primarily used for biofuels in the road transport sector, these biofuels should eventually be redirected to hard-to-decarbonize sectors, such as aviation, as road transport becomes increasingly electrified.
Animal fats
Biofuels produced from domestically collected animal fats categories 1 and 2, which have the fewest competing uses, can be considered a sustainable feedstock. However, the availability of these feedstocks is limited, and current consumption trends indicate that demand already exceeds sustainable levels, increasing the risk of fraudulent practices. Animal fats category 3 should not be used for biofuels due to their existing applications in animal feed and the oleochemical industry, as well as the high risk of indirect emissions.
Country-specific review and recommendations
Sweden:
In Sweden, the main deforestation risk is the consumption of Category 3 animal fats, which indirectly drives palm oil expansion.
The policy review estimates that implied deforestation varies significantly between scenarios, according to different biofuel targets. It ranges from 9.8 to 37.8 thousand hectares of cumulative deforestation. For comparison, the urban area of Stockholm is recorded as 38 kha, so the ‘high-ambition’ policy scenario would lead to the deforestation of an area nearly the size of Stockholm, and an area about half the size of Stockholm of peat loss.
To tackle the risk posed by unsustainable biofuels, Sweden is recommended to:
- Commit to an immediate phase-out of soy oil-based biofuels.
- Persevere with the recent policy shift to recognize and incentivize renewable electricity’s contributions to greenhouse gas reductions in transport.
- Remove or at least limit the contribution of problematic Annex IX feedstocks, such as intermediate crops and crops grown on severely degraded land, from counting towards the targets.
- Set sub-target for advanced biofuels at a maximum of 3.5%. Targets for inclusion of advanced biofuels and renewable fuels of non-biological origin (RFNBOs) should provide a strong investment signal and give them confidence in the costly development of next-generation technology.
- Recognize the indirect impacts of using animal fat as a biofuel feedstock.
Finland:
Home to a significant biofuel industry, Finland stands out due to its presumed continued reliance on PFAD as a biofuel feedstock and lack of restrictions on PFAD use in biofuels. A 2023 report for RFN indicates that the use of PFAD in biofuels is likely to increase the demand for palm oil, a recognized driver of deforestation.
Finland requires high ILUC-risk biofuels to be fully phased out by 2030. However, unlike some EU Member States, Finland has not restricted the use of PFAD in biofuel production. Finland also has a domestic biofuel industry, with the partly state-owned company Neste producing HVO with heavy reliance on lipid-based feedstocks, including PFAD.
The policy review estimates that by following the current policy track, in 2030, an area corresponding to 37% of Helsinki would be deforested, and we would see peat loss of an area of 19% of Helsinki.
To tackle the risk posed by unsustainable biofuels, Finland is recommended to:
- Commit to an immediate phase-out of palm- and soy oil-based biofuels. Accelerate the formal regulatory phase-out of biofuels made from palm oil, including PFAD.
- Maintain the sub-target for advanced biofuels at a maximum of 3.5%. Targets for the inclusion of advanced biofuels and RFNBOs should provide a strong investment signal and avoid backfilling of the renewable fuel mandate with less sustainable biofuels.
- Remove or at least limit the contribution of problematic Annex IX feedstocks, such as intermediate crops and crops grown on severely degraded land, from counting towards the targets.
- Sustainably increase the share of renewable energy in the transport sector while safeguarding nature and biodiversity.
Norway:
Norway is not an EU member state, but adopted the original Renewable Energy Directive of 2009 through the EEA. In the later versions of RED, stricter sustainability standards were introduced. Norway’s feedstock sourcing regulations do not include updates in the newer RED, such as monitoring impacts on soil quality and soil carbon, legal and sustainable harvesting of forest biomass, and the higher greenhouse gas thresholds on biofuels.
Norway is notable for its pursuit of vehicle electrification, and its transport sector currently uses very small amounts of food-based biofuel*. Residual and waste oils and advanced biofuels are given preferential treatment. Some of these biofuels, like used cooking oil, are associated with deforestation risk.
The impact on deforestation and peat loss is determined by whether the future increase in the blending quota is met with conventional or more advanced biofuels and whether they align with REDIII on Annex IX Part A biofuels. In the worst deforestation case, a third of an Oslo of forest loss (16 kha) and a sixth of an Oslo of peat loss will occur.
To tackle the risk posed by unsustainable biofuels, Norway is recommended to:
- Establish a sub-target to incentivise the development and supply of advanced biofuels from the RED III’s Annex IX Part A.
- Cap the contribution of residual oils in Annex IX Part B, as required by RED III.
- Create a sub-target for RFNBOs
residual and waste oil is now considered conventional.
For more information, contact:
Veera Mo
Senior Adviser, Research within Commodities and Supply Chains, Deforestation-free Markets
(+47) 920 92 438
veera@rainforest.no