Powering tomorrow Navigating the energy transition landscape 2024 - Flipbook - Page 13
The EU has approached biofuel as a mediumterm stopgap in the energy transition. While RED
III will raise the EU’s binding renewable target
for 2030 to a minimum of 42.5 percent, it will
also cap the usage of advanced biofuels in the
transport sector to 5.5 percent, and limit them
to non-food-based feedstocks—taking corn,
soybean, and rapeseed producers out
of the equation.
Like the U.S., the EU has also recognized the
importance of biofuel in reducing the aviation
industry’s carbon emissions. The European
Commission recently proposed a new law
requiring that SAF make up at least two percent
of the fuel that suppliers provide to EU airports
by 2025.
Major headwinds for business and private
equity leaders
As outlined above, the hydrogen and biofuel
sectors are fast approaching an in昀氀ection point,
presenting industry stakeholders with lucrative
opportunities.
But these endeavors don’t come without
challenges. Here are two major issues business
leaders should consider in the coming months:
• M&A players in these markets need to
di昀昀erentiate themselves: When it comes
to the M&A landscape, the perception is
that hydrogen and biofuels aren’t bankable.
But there are lucrative deals to be made,
particularly through o昀昀take agreements. For
example, oil and chemical giants like BASF
recently bought into a hydrogen project to
get access to the company’s algorithm. If
dealmakers can highlight their strong suits in
this competitive landscape, they can attract
investment from these global energy titans.
The future of biofuels and hydrogen is closely
intertwined with that of renewables. While the
bevy of incentives, subsidies, and regulations
will only grow larger or more complex, these
nascent industries stand to evolve swiftly in the
U.S., Europe, and around the world. With enough
foresight, stakeholders can capitalize on soaring
demand, lofty decarbonization targets, and
signi昀椀cant tax credits.
‘‘
The team understood our business
and weren’t afraid to get their hands
dirty and get on with the matter at
hand. Their track record has been
consistently excellent.
Projects & Energy, Europe-wide,
Chambers Global, 2023
• EU sustainability goals will vary between
member states: RED III gives member
states two choices: either pursue a 14.5 percent
reduction of greenhouse gas intensity in
transport using renewables, or achieve a 29
percent share of renewables in the transport
sector by 2030. This compromise will make
it more di昀케cult for hydrogen and biofuel
investors and executives to scale business
models across the entirety of the EU. To
be successful, business leaders will have to
monitor regulatory developments on a stateby-state basis.
Hogan Lovells | Powering tomorrow: Navigating the energy transition landscape
‘‘
What remains to be seen is whether pending U.S.
Treasury Department guidance will enable corn
and soybean producers to take advantage of the
growing demand for low-carbon aviation fuel
by contributing to SAF feedstock. The guidance
that takes conservation practices like cover crops
into account could be a boon for the ethanol
industry, allowing them to contribute to the
decarbonization e昀昀orts of major U.S. airlines.
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