By Barbara Lewis
BRUSSELS (Reuters) - EU lawmakers deferred on Wednesday plans to curb the use of fuels made from food crops, providing a reprieve for some in the bio-energy industry, but raising the risk of higher grain prices in the future.
The decision brakes for now a policy U-turn from the European Commission, the EU executive, which had said certain kinds of biofuels had to be limited after earlier encouraging them.
But on Wednesday, the European Parliament's environment committee failed to give the go-ahead for EU negotiators to begin work on a legal text to implement the cap, making it unlikely anything can be agreed before 2015.
The proposal has divided EU member states and industry.
Those involved in turning food crops into fuel, known as first-generation biofuels, argued more time and more hard evidence was needed before a policy shift.
"Any change to the current legislative framework requires solid and verifiable scientific evidence," agricultural and biofuel organizations, including the European Biodiesel Board and bioethanol lobby ePURE, said in a letter to lawmakers.
Environmentalists and those working on an advanced generation of biodiesel and bioethanol made from algae or waste had urged a quick decision.
Delay is now likely to be long because the European Parliament has elections next year and a new set of Commissioners will be appointed creating a legislative hiatus.
"This is bad news for industry and investors who need clarity," Kare Riis Nielsen, director of European affairs at Danish firm Novozymes, said in a statement.
"Ongoing regulatory uncertainty is jeopardizing all the parallel EU efforts to attract much needed investments in innovative renewable energy technologies, including in advanced biofuels."
Novozymes makes enzymes used in creating advanced biofuels, which do not pose the problems of the first generation, but have so far failed to attract enough investment.
In 2009, the European Union set a target for a 10 percent share of renewable energy in transport, with almost all of it to come from first generation crop-based fuels.
Use of first generation biofuel is already roughly 5 percent and almost enough production capacity has been installed to meet the 10 percent target, so the proposed cap could have forced plant closures.
Biofuels, such as ethanol made from sugar or biodiesel from rapeseed, are blended with conventional transport fuels and added to vehicle fuel tanks. They were meant to reduce transport carbon emissions and cut Europe's dependence on imported oil.
But evidence began to emerge that Europe's thirst for biofuels was inflating global food prices and that some biofuels were even more harmful to the climate than fossil fuels.
The problem is that crops such as rapeseed oil, palm oil from Malaysia or soyoil from the Americas, can displace food production into new areas, forcing forest clearance and the draining of peat land, as well as adding to food prices.
(Reporting by Barbara Lewis)