Brussels, 27/07/2001 (Agence Europe) - European Commissioner for Transport and Energy Loyola de Palacio is expected to propose, in September, an action plan intended to take the share of "alternative" fuels in European fuel consumption to over 20% in 2020. A communication and two draft directives, currently examined by the Commission services, provide for tax relief on biofuels, and the setting of targets by 2009 for each Member State.
The future proposal aims to reduce the European Union's dependency on oil imports, but also to contribute to reducing CO2 emissions from road transport. The draft communication recognises, however, that, although vehicles using biofuels do pollute less, the production of such fuels requires far more energy.
In the most optimistic scenarios, the draft communication provides for the share of biodiesel (from soya oil, sugar beet, colza or mustard, and from ethylic alcohol and denaturated eaux de vie) will rise to 8% in 2020, natural gas to 10% and hydrogen to 5%, of fuel consumption. To achieve this target, a directive on the promotion and use of biodiesels would make it compulsory for Member States to ensure that the share of biofuels in sales of petrol and diesel fuel increase from 2% in 2005 to 5.75% in 2010.
In parallel, the services under Ms de Palacio propose to grant tax incentives on biofuels to make them competitive with petrol. With a barrel of oil at $25 or $30, as is currently the case, and a cost of production of 500 euros for 1000 litres of biofuels, the surcharge of pure biodiesel production (not mixed with fossil fuels) is around 0.25-0.30 euros per litre compared to fossil diesel fuel. Replacing 2% of current diesel consumption by biofuels would cost around EUR 1.2 billion annually, but would make it possible to save around 4 billion barrels of oil, which would justify the cost, states the draft text.
To achieve this, Directive 92/81 on harmonisation of excise duties, would be amended to allow Member States to apply a reduced rate of excise duty between 1 January 2002 and 31 December 2010 for biofuels. An additional reduction would be authorised for local public passenger transport, including taxis, and vehicles under the responsibility of the public authority. The level of taxation on biofuels could not, however, be less than 50% of the normal rate.
The European Commission had already tried on two occasions in the past to propose tax incentives on biofuels: in 1992 within the framework of the so-called "Scrivener" proposal on excise rates applicable to fuels for engines of origin, which was refused by the Council; and in 1997 in the context of the proposal for restructuring of the taxation of energy products, also blocked in Council. France, Italy and the United Kingdom nonetheless called on the Commission for exemptions for reducing excise on biofuels, since the Court of First Instance cancelled, in September 2000, a Commission decision authorising France to reduce excise on ethyl-tertio-butyl-ether. (We recall that, after this ruling, the Commission reopened the investigation on French aid - see EUROPE of 1 December 2000).
The main biofuel producers are currently France (344kT in 1999), Austria (298 kT), Germany (130 kT), Italy (96 kT), Spain (50 kT in 2000) and Sweden (50 kT in 2000). Stressing that the production of biofuels calls for considerable labour, the draft text considers that, if biofuels represented 1% of fuel consumption, between 45,000 and 75,000 jobs could be created, "mainly in farming regions".
The draft communication nonetheless remarks that the margin of manoeuvre for supporting agricultural reconversion towards plants used for biofuels is reduced: - on one side, the promotion of such crops would contribute to the multi-functionality of agriculture; and, on the other, the Blair House agreement with the United States does not allow further support to colza, soya or sunflower, states the draft text. It also states that "public opinion will not be supportive of a biofuel campaign that would be seen as additional agricultural subsidies".