Biofuels to benefit from preferential tax regimes

The promotion of renewable energies in Europe received significant support this month as the Commission took two decisions to allow reduced excise duties to be applied to German and British biofuels used for road transport.

The first decision concerned a British request for reduced excise duties on bioethanol in the UK. The reduction will be granted automatically to any producer or importer of bioethanol in the UK for five years starting from January 2005. The second concerned a German request for total exemption of excise duties on mineral oils used in the production of pure and blended biofuels. It is valid from 1 January 2004 to 31 December 2009.

The Commission assessed the German and British demands against a set of EU guidelines relating to state aid for environmental protection. When it is granted, the aid can cover the difference between the costs of production and the market price of renewables. Under the guidelines, companies who want to invest in renewable energy projects would be permitted to receive up to 50 per cent state aid.

Last year, Parliament and Council agreed on a directive to promote the use of biofuels for transport across the EU. The directive set 'reference figures' for the total amount of biofuels to be placed on the market at 2 per cent for 2005 and 5.75 per cent for 2010. But at the time, those measures were met with deep scepticism by environmentalists who said biofuels were not as green as they first appeared (see

EurActiv, 13 March 2003).