Florence, 07/11/2001 (Agence Europe) - In Florence on Wednesday, the European Commission finally adopted an action plan and two draft directives in view of encouraging the use of alternative fuels in the transport sector, beginning with regulatory and fiscal measures intended to promote biofuels. It considers that fuels derived from agricultural sources is the technology with the greatest potential in the short to medium term. The aim of the mechanism proposed is clear: contribute to the respect of the environmental commitments made by the Union in Kyoto and contribute in reducing the EU's energy dependence on third parties.
The action plan defines a strategy that should allow the Union to replace, by 2020, 20% of diesel fuels and petrol by alternative fuels in road transport. For the Commission, only three options would have the potential to achieve individually more than 5% of total transport fuel consumption over the next 20 years: biofuels which are already available, natural gas in the medium term and hydrogen and fuel cells in the long term. As it concerns the medium and long terms, the Commission urges industrial organisations and NGOs concerned to clarify the questions in suspense.
The draft directive on the use of biofuels in road transport aims for a growing share of all diesel and petrol sold in the Member States being replaced by biofuels at an initial alternative rate of 2% in 2005 (against the current 0.3%) and a gradual increase to a minimum of 5.75% in 2010 (passing by 2.75% in 2006, 3.5% in 2007, 4.25% in 2008 and 5% in 2009). The Vice-President of the Commission, Loyola de Palacio, therefore managed to convince the minority of her colleagues who were opposing the idea of forcing Member States to ensure that minimum levels of biofuel use. However, she had to drop her plans to signal in the proposal the Commission will be publishing before 2007 a proposed date by which a requirement will be introduced for a minimum percentage mix (mixture of biofuel and mineral oil derivatives).
The second proposal concerns tax and would allow Member State, but not oblige them, to reduce excise duties on pure biofuels or biofuels blended into other fuels, when they are used for heating and transport. The Commission believes that "appropriate differentiation" of excise rates would contribute to the development of the biofuel industry by offsetting the high cost of manufacturing biofuels compared with fossil fuels. The proposal would allow Member States to reduce excise duties in proportion to the percentage of biofuel incorporated in the fuel or end product, without the need for a specific authorisation from the EU Council of Ministers. However, in order to limit distortions of competition and to ensure the smooth functioning of the internal market, the proposal calls on Member States to set up excise reduction mechanisms that take account of changes in raw material prices so that the lower tax rates do not overcompensate for the extra cost of manufacturing biofuels. Furthermore, to minimise the tax revenue loss for Member States, the actual amount of tax on the end product, when intended for sale as motor fuel, may not be less than 50% of the normal excise duty for the corresponding product.
This limit to tax exoneration could be a stumbling block for the issue - which requires Council unanimity - at a later stage, in so far as it can be interpreted as discrimination between pure biofuel and blended biofuel channels. This was stressed several weeks ago by circles close to Agriculture Commissioner Franz Fischler (several of his colleagues sharing this reservation). Furthermore, in the case of pure biofuels used for local public passenger transport (buses, taxis, etc.), and public service fleets, the proposal provides for allowing Member States to apply an excise duty reduced to less than 50% of the normal rate and even to fully exonerate these fuels. Furthermore, in the countries where biofuels were totally exempted on 1 January 2001, a transition period is foreseen until 31 December 2003, in order to give operators the time to adjust or to introduce a demand for keeping their total exoneration, according to a procedure under Directive 92/81/EEC on mineral oils. This clause for protection of rights acquired, authorised for taking specific national circumstances into account, would thus allow the Member States that so wish to call on the Council to approve long term exemption. Finally, the Commission provided for revision of the directive proposed before 1 January 2008.