Boost for biofuels

The European Commission is to propose offering big tax incentives and impose mandatory minimum take-up for biofuels.

The underused renewable energy source, biofuels, (see related feature) are set to receive a significant boost according to draft documents from the European Commission’s Transport and Energy Directorate, which could be proposed as soon as September.

Although viewed as expensive, at €300 (£190) or more in additional cost per 1000 litre conventional fuel replaced, the Commission views the increased use of biofuels as beneficial. Several crops, such as wheat and colza, have a higher energy content than is used to produce the biofuel and deliver plant protein as a useful by-product. The use of one biofuel, biodiesel, would prevent up to 2.5 of the 3.2 tonnes of carbon dioxide released for every 1,000 litres of conventional diesel road fuel, the Directorate says.

Creating an EU market for biofuels will also offer an opportunity for accession countries, which generally have more agricultural land and less diesel and gasoline consumption per capita than present member states. The fuels also deserve to be exploited in the short term because they can be used in the existing vehicles and distribution system and so do not require expensive infrastructure investment, the Commission says. However, with present EU consumption languishing below 0.5% of overall diesel and petrol consumption, EU level action will be required to lift the market to a desired level of use of above 5% and a value of €5 billion (£3.1 billion).

Tax incentives could provide an effective way of promoting the development of biofuels by helping to reduce the differences in production costs with fossil fuels. Under the Directorate’s proposals, EU members would be able to introduce tax breaks of up to 50% on biofuels, as well as additives such as biodiesel and ethanol. Currently the cheapest biofuel, biodiesel, costs more than twice as much as standard diesel.

The Directorate also says that a requirement for a certain minimum percentage biofuel of all fuel sold throughout the EU can be implemented without technical complications with the modest costs of such a measure shared by all users. As a first step it suggests a minimum biofuel share up of 2% by 2005, would “not have unforeseen implications for vehicle technology” and would “create a stable market”, expanding the existing biofuel production capacity by a factor of five in the EU. In a second phase, as dedicated uses of biofuels will only be able to absorb a limited quantity, further substitution above 5% will necessarily take the form of a required blended amount of biofuels in each type of fuel marketed. Blending would also require no modification of existing vehicles and take advantage of the existing distribution system with practically no additional cost. The Directorate proposes that by 2010, 5.75% of all fuels sold should be biofuels.

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