Phase-out of biofuel tax relief disappoints German biofuel industry - fears competition from the South

According to Germany's VERBIO (Vereinigte BioEnergie AG), one of the largest biofuel producers in Europe, the German government's recent decision to phase out tax relief on biodiesel and bioethanol will damage the industry. It fears German producers will not be able to withstand competition from biofuels made in the South, notably Brazil.

Earlier, the German Social Democratic Party proposed a total biodiesel quotum of 7 % and a general exemption of public transportation and agriculture from the petroleum tax. To VERBIO, this would have been a sustainable concept for a continuance of the German biodiesel industry which the entire sector could have accepted.

The general conditions put forth in the proposal could have strengthened the demand for biofuel through the increased and more heavily increasing mixing quotas and as a result ensured the investments made by the industry through higher utilization of the available plants. Even a further tax increase for pure biodiesel (B100) could have been compensated for with a stronger establishment of the market. - Claus Sauter, Chief Executive Officer of VERBIO

But the government did not take up the proposal, and pursues its course, which means a further reduction of the tax relief for biofuel and leaving the regulations on admixing, introduced at the end of 2006, unchanged. VERBIO thinks the German government thus blocks the chance for the new biofuel industry in Germany to establish its market. It is to be expected that at the beginning of 2008 more than 50 % of the biodiesel plants will have to be shut down for good since no market will exist. Added to this is pressure from biodiesel 'dumping' from the US, via an export subsidy, which has hit German biodiesel producers badly (more here).

The bioethanol market in Germany will continue to suffer due to insufficient demand and cheap imports from Brazil, VERBIO says.

However, in November, the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) and the Federal Ministry of Food, Agriculture and Consumer Protection adopted a new 'Biofuel Roadmap' which calls for ambitious targets for next generations of biofuels, such as biomass-to-liquids and cellulosic ethanol. The plan aims for a 10% share of biofuels in the fuel mix by 2010 and a 20% share in 2020 (previous post):
energy :: sustainability :: biomass :: bioenergy :: biofuels :: ethanol :: biodiesel :: tax :: trade :: Brazil :: Germany ::

VERBIO is not certain whether this plan will have positive effects on domestic biofuel production and its suppliers.

VERBIO calls on the government instead to focus more on measures to halt to the undesirable developments arising from the use of biofuels, for instance, the deforestation of the rain forests in South America and the tropical forests in Asia.

Despite what it calls an 'unsatisfactory decision' of the German government, the management board for VERBIO continues to assume that the long-term growth trend in the biofuel market will remain intact in Europe. The management board says it will continue to implement measures to strengthen competitiveness in order to profit from an improvement of the biofuel industry's economic situation in 2008.

References:
DJ DGAP: VERBIO: Biofuels contribute to climate protection and provide new jobs - Outlook for 2008 confirmed - December 18, 2007.

Biopact: Germany massively increases biofuels targets to kickstart next generation fuels: 10% in 2010, 20% in 2020 - November 22, 2007

Biopact: German biodiesel industry faces collapse over taxes, US subsidies, competition from the South - June 03, 2007