German Biodiesel Forced to Compete

Until a few months ago, the production of crop-based fuels was the best energy business imaginable in Germany, thanks to growing demand supported by the government. That’s no longer the case.

But the basis for the once-positive outlook is beginning to disappear. As of Jan. 1, 2008, the German government will receive nine cents on the dollar per litre of biodiesel. That tax will increase to more than 65 cents on the dollar in 2012.
The tax exemption and subsidies for biofuels represented nearly three billion dollars in 2006. Because the new taxes imply an increase in the price, biodiesel will lose its ability to compete with fossil fuels, prompting predictions of a decline in demand.

“Many companies are already seeing the negative consequences of the end of the exemptions. As a result, farmers and refineries have reduced production,” said Frank Bruehning, spokesman for the German association of agricultural fuel producers, in an interview for this report.

Furthermore, the greater demand for oleaginous crops to be used for fuels generated an inflationary spiral for those inputs. And the competition of imported rapeseed oil — much cheaper — helped undermine the future of the business.

Another government measure to promote the use and production of biofuel in Germany — a mixture of at least five percent of biodiesel with gasoline — turned into a stimulus for import, because of the increase in prices on the German market.

IPS News