* EU biofuel probe confirms some negative impact - officials
* EU's Oettinger: indirect effects are a "concrete danger"
* Oettinger: science unclear, more studies due by July 2011
BRUSSELS, Dec 15 (Reuters) - A year-long European Union investigation into biofuels has concluded that their green credentials might be partly compromised by indirect side-effects, which should be tackled, EU officials said.
The multi-billion-dollar industry fears barriers will be further raised against unsustainable biofuels from food, but the long-awaited European Commission report, due next week, will stop short of proposing any new actions.
Instead, it will recommend six months more of studies.
The report follows a one-year internal battle among experts within the Commission, which has thrown into doubt EU plans to create a $17-billion-a-year market for biofuels from producers such as France, Germany, Brazil, Malaysia and Indonesia.
Investment in European biofuels has slowed to a halt due to doubts over the sector's green credentials and the challenging investment climate. [ID:nLDE6B719K]
"Now we should realise security on sustainability and security for investors in the EU fuel and transport sectors and for countries of production," EU Energy Commissioner Guenther Oettinger said when asked by Reuters about the report.
Recent uncertainty over investments has largely been caused by a new concept known as "indirect land-use change" (ILUC).
In essence, that means that if you take a field of grain and switch the crop to biofuel, somebody, somewhere, will go hungry unless those missing tonnes of grain are grown elsewhere.
The crops to make up the shortfall could come from anywhere, and economics often dictate that will be in tropical zones, encouraging farmers to hack out new land from fertile forests.
Burning forests to clear that land can pump vast quantities of climate-warming emissions into the atmosphere, enough, in theory, to cancel out any of the climate benefits the biofuels were meant to bring.
"Indirect land use (change) is a concrete danger," Oettinger said. "It's a normal economic process that acres with agriculture will be used as acres for production of biofuels."
"There's a danger that deforestation follows," he added. "It's in our interest to have an instrument to avoid this process."
The Commission has run 15 studies on different biofuel crops, which on average conclude that over the next decade Europe's biofuels policies might have an indirect impact equal to 4.5 million hectares of land -- an area the size of Denmark. [ID:nLDE65N1K2]
If that was gained by clearing wild land, as economics often dictate, it could result in a one-off release of at least 200 million tonnes of carbon -- about the same as the annual fossil-fuel emissions of Germany, according to Reuters calculations.
Environment campaigners and many politicians want some kind of disincentive applied to biofuels from food crops to reflect that impact.
Industry argues the science is flawed and that the issue could be tackled by a major overhaul of agricultural strategy to improve productivity. But mostly it is eager for some sort of clarity by which to plan its investments.
Oettinger said the science was still very uncertain.
"It's very difficult to have a detailed balance of this process acre-by-acre," he said. "We need more time to come up with the best proposal."
He did not reveal his options for tackling ILUC.
One EU source said the Commission would look at various options, including raising the greenhouse gas savings threshold for biofuels that can be counted towards the EU's goal of getting 10 percent of road fuels from renewable sources by 2020.
Other options include a penalty factor for biofuels with a high ILUC impact, or additional "sustainability criteria" to reduce that impact.
"The last step will be a proposal from (climate commissioner) Connie Hedegaard and myself, in July next year, before the summer break," said Oettinger. (Editing by James Jukwey)