Imports and legal delays may hamper EU biofuel output

Output of biofuel in the European Union may be hit over the next few years as some countries delay implementing EU targets and import green fuels, sector experts said.

Aiming to reduce its reliance on fossil fuels, the EU wants biofuels to make up 5.75 per cent transport fuels by 2010.

While some like Germany and France have risen to the challenge, others have shown little interest in developing local biofuel production.

"Ireland and Finland are probably the countries that are dragging their feet the most," said Raffaello Garofallo, general secretary of the European Biodiesel Board.

And with the 2010 goal looking increasingly unlikely, the EU has said it plans to encourage "green" fuel imports and is considering whether its goals should be mandatory.

Biofuels made in Europe comprise biodiesel (80 per cent), largely made from rapeseed and then blended with diesel and ethanol (20 per cent), made from sugar beet or cereals, and blended with conventional fuel.

The EU is the world's largest producer of biodiesel while Brazil leads in ethanol. Within Europe, 2004 data shows Germany produced the most biodiesel and Spain leads in ethanol.

The EU produced 1.93 million tonnes of biodiesel and 491,000 tonnes of ethanol in 2004.

One biofuel industry expert forecasts EU biodiesel production will reach between 2.6 and three million tonnes in 2005.

Germany and France are set to go beyond EU incorporation goals with German oil refineries compelled to blend 5.75 per cent biofuel content in conventional diesel by 2007 and France aiming for the same ratio by 2008.

But Germany, with an estimated output of 1.8 to two million tonnes in 2005, will now impose extra taxes on biodiesel.

A ten euro cent tax per litre will be imposed on biodiesel sold at petrol stations and a 15 cent tax per litre on biodiesel used for blending at refineries.

The German biodiesel producers group VDB said the tax rise was "inappropriately high" but hoped the industry would survive.

"The tax increase in Germany could push other European countries to sell their production domestically instead of exporting to Germany," Mr Garofallo said, citing Poland, which exports most of its 70,000-tonne biodiesel output to Germany.

Poland now aims for a 1.5 per cent biofuel share this year, up from 0.5 per cent in 2005 and believes the EU's 5.75 per cent goal will be comfortably met by 2010.

Its biodiesel production could surge to 500,000 tonnes by 2010 if the government introduces planned legislation in June.

France, the EU's second largest producer with output of 348,000 tonnes of biodiesel and 102,000 tonnes of ethanol in 2004, is well on target after a slow start with a forecast production of 4.3 million tonnes by end-2010.

But some French industry players say imports from outside the EU are the biggest threat to the development of the sector.

"We have to convince northern European countries, which are not very particular regarding third country imports, to satisfy their incorporation needs," Xavier Beulin, head of the French oilseeds growers' union FOP said.

Countries such as the UK and the Netherlands, which have fledgling biofuel sectors, are not expected to meet EU goals.

The UK aims to include 2.5 per cent of biofuels in transport fuels by 2008-2009, a tenfold rise from the current 0.25 per cent level. The target will be raised to 3.75 per cent for 2009/10.

The Netherlands was also slow to get started.

Junior Environment Minister Pieter van Geel has said the country faced problems controlling road transport CO2 emissions.

"We see problems in the transport sector because it is growing very fast with bigger cars and rising CO2 emissions. That's why we are taking measures to increase the use of biofuels," Mr van Geel said, adding the country would introduce a two per cent compulsory blending of biofuels by January 2007.

Spain has set a target of six per cent of "green" fuels in fuels by 2010 as part of its renewable energy plan. However, the country only had a 0.4 per cent biofuel content in fuels in 2005.

But Garofallo said a high number of projects were being submitted in Spain and the sector there was very promising.

After pressure from the EU, Finland has proposed setting a one percent biofuel target by 2008 and three percent by 2010.