* Policy u-turn follows doubt over biofuels' climate impact
* Officials want to encourage use of non-food biofuels
* Rules could put EU 2020 green transport goal out of reach
* Draft law needs approval by EU governments and lawmakers (Adds detail, quotes, background)
By Charlie Dunmore
BRUSSELS, Sept 10 (Reuters) – The European Union will impose a limit on the use of crop-based biofuels over fears they are less climate-friendly than initially thought and compete with food production, draft EU legislation seen by Reuters showed.
The draft rules, which would need the approval of EU governments and lawmakers, represent a major shift in Europe's much-criticised biofuel policy and a tacit admission by policymakers that the EU's 2020 biofuel target was flawed from the outset.
The plans also include a promise to end all public subsidies for crop-based biofuels after the current legislation expires in 2020. The Commission is expected to formally publish the draft rules in the coming weeks.
"The (European) Commission is of the view that in the period after 2020, biofuels should only be subsidised if they lead to substantial greenhouse gas savings… and are not produced from crops used for food and feed," the draft said.
The policy u-turn comes after EU scientific studies cast doubt on the emissions savings from by crop-based fuels, and following a poor harvest in key grain growing regions that pushed up prices and revived fears of food shortages.
Under the proposals, the use of biofuels made from crops such as rapeseed and wheat would be limited to 5 percent of the total energy consumption in the transport sector in 2020.
Such a limit would throw into doubt the EU's binding target to source 10 percent of road transport fuel from renewable sources by the end of the decade, the vast majority of which was expected to come from crop-based biofuels.
In an attempt to make up the shortfall, the European Commission wants to increase the share of non-land using biofuels made from household waste and algae in the EU's 10 percent target.
The proposals are contained in long-awaited EU plans to address the indirect land use change (ILUC) impact of biofuels, a subject that has split officials, biofuel producers and scientists, delaying the plans for almost two years.
They include new ILUC emissions values for the three major crop types currently used to produce biofuels: cereals, sugars and oilseeds. These values will be included when calculating emissions savings from biofuels under an EU law designed to encourage fuel suppliers to increase biofuel use.
While low draft values for ethanol made from cereals and sugars will have little overall market impact, a much higher value for oilseeds is likely to exclude most biodiesel made from rapeseed, soybeans and palm oil from counting towards the fuel suppliers' targets, hurting demand.
"Three years after the EU made biofuels a central plank of its policy to promote renewable energies in transport, the Commission's current proposal threatens an industry that arose as a response to its policies, supports 50,000 jobs and would have provided the next generation of biofuel technologies," said Jean-Philippe Puig, CEO of France's Sofiproteol, which owns top EU biodiesel producer Diester Industrie.
