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VW Chairman Calls for Preferential Policy Treatment for Second-Generation Biofuels

VW’s Powertrain and Fuel Roadmap. Click to enlarge.

A key element in Volkswagen’s roadmap for future fuels and powertrains is the use of second-generation biofuels.

Second-generation biofuels can be produced from various kinds of agricultural residue such as corn stover as well as from the whole grains or seeds that serve as the feedstock for first-generation fuels. Examples of second-generation biofuels are Biomass-to-Liquid (BTL) synthetics or cellulosic ethanol.

The company’s Chairman is now calling on politicians to develop a tax model that gives second-generation biofuels preference, and provides a secure framework for investing in the development and market launch of these new fuels.

The present assessment regarding the sustainability of first and second-generation biofuels is entirely unsatisfactory, both in economic and environmental terms. One biofuel is not the same as another: some first-generation biofuels can best be described as a “wolf in sheep’s clothing”. Some of them have a worse CO2 balance than conventional gasoline fuels, but nevertheless still bear the name of “biofuel”.

First-generation biofuels receive tax incentives from scarce budget resources and consequently constitute a bad investment. That cannot be considered sustainable in either the ecological or the economic sense of the word.

—Dr. Bernd Pischetsrieder, Chairman of the Board of Management of Volkswagen

Characterizing second-generation biofuels as being to a large extent CO2-neutral and non-competitive with food production, Pischetsrieder noted that the fuels are easy to blend with other fuels and thus can reduce CO2 levels in the short term.

The relatively high cost of production means that second-generation biofuels cannot yet be produced economically on a large scale. Production costs alone for the cellulose ethanol process are currently higher than the costs for both petroleum-based gasoline and conventional bioethanol, VW notes.

Pischetsrieder also called for further sustainability criteria, oriented, for example, to factors such as the use of fertilizers and pesticides, the protection of rainforests, social standards, employment potential and security of supply, to be included in fuel taxation.

Excessive subsidization and the misallocation of politico-economic resources must be avoided.

—Bernd Pischetsrieder

Volkswagen has developed a tax model catering for CO2 efficiency as the primary criterion as well as the other sustainability criteria. Volkswagen believes that such a system could encourage tax harmonization in Europe.

The German government is planning a lower tax rate on BTL and cellulosic ethanol until 2015, a move welcomed by Volkswagen.

However, we doubt this is sufficient for the long-term planning security needed for major investment.

—Dr. Jürgen Leohold, Head of Group Research at Volkswagen
The CHOREN process. Click to enlarge.

Volkswagen works closely with other automakers, bio-tech companies and petroleum corporations in developing fuels. Volkswagen has developed the fully synthetic SunFuel diesel fuel together with CHOREN Industries GmbH and other partners. (Earlier post.)

By using biomass, the CO2 cycle can be almost completely closed and greenhouse gases cut by approximately. 90 percent. With regard to gasoline fuels, Volkswagen is cooperating with partners such as the Canadian Iogen Corporation, whose process for producing cellulosic ethanol offers a similarly high CO2 reduction potential.

VW also notes that the development of new synthetic fuels supports the development of new combustion systems that provide outstanding emissions reductions combined with higher efficiency.

Emissions results with different fuels used in the CCS research engine. Click to enlarge.

In its work with the next-generation Combined Combustion System (CCS)—a partial homogeneous compression combustion process—Volkswagen highlights the need for high- and constant-quality fuels such as BtL or GtL derivatives with a kerosene-like boiling range for more precise ignition control to optimize emissions reduction and engine efficiency.




He seems to be saying that by implication grain ethanol and oilseed diesel look attractive only because of subsidies/taxbreaks. But cellulosic ethanol and BTL diesel need even bigger subsidies. Unless I missed something.

Rafael Seidl

First-gen biofuels are expensive and always will be because they only use a fraction of the vegetable matter available. Secend-gen processes are still expensive today but there is the promise at least of substantial cost reductions once some of the technical hurdles (e.g. co-fermentation of glucose and xylose) can be cleared. Moreover, biobutenol would be easier to transport, blend and sell than bioethanol, because it's properties approximate those of mineral gasoline more closely.

Jonathan Smith

Ah, I was mistaken. I thought that cellulosic vaporware was simply a strategy to create an impetus to remove ethanol tariffs. After reading this post, I remembered that another hidden agenda is the BTL push.


Makes me wonder if the numbers with Iogen don't look good enough to build a plant in Germany or if they're just trying to sweeten the numbers before they make an anouncement.

Lee Dekker

The little picture shows everything ending up as diesel. VW makes diesel cars. Kind of fits.

Ron Fischer

This is about sluicing general tax fund subsidies toward a class of liquid fuels which support 'business as usual' for automakers. Under the guise of GHG reductions, subsidies would make very expensive BTL processes result in price-competitive fuels. If liquid fuel prices were allowed to rise on their own, direct use of electricity in transportation via PiHEVs, electrified rail, etc. would phase in on its own. Instead, we see the beginning of what is likely to be a broad and sustained push for large market distortions to maintain the status quo for liquid fuels.


It is in the best interest of every automaker to become less dependant on the oil industry. Perhaps their future as well as ours depends on it.


Conventional petro-liquid fuels *are* subsidized. The US 5th Fleet patrolling the Persian Gulf is one huge such subsidy.

I'd much rather have as many of my tax dollars as feasible subsidizing BTL from US/Brazilian/any-non-monopoly sources than helping Abdul Aziz bin Saud's spawn get richer.

Is that such a hard concept for those pooh-poohing BTL here (and other fora - hi TODers)?


Liquid fuels have some compelling advantages: energy density, storage and portability, fueling speed, established infrastructure. Battery technology is getting better, but it's still a long way from matching up as far as I can see.


Implementation of new automotive technologies is a very long process. Look, for example, how perfectly viable hybrid vehicles are doing: very fast percentage grow in sales, still minuscule per cent of new vehicles sold. There is a lot of time to trim infrastructure (electricity grid for PHEV, refueling grid for biofuels) to catch up with appearance of new vehicles. Both approaches could perfectly co-exist for decades to come.

There is big difference between subsidizing first and second generation biofuels. First generation subsidies help to grow feedstock, and are not going anywhere. Subsidizing of second generation biofuels, like cellulosic ethanol, subsidizes conversion technology of practically free feedstock to liquid fuels. It could be easily fazed out as technology matures.


The other issue to remember that, in Europe, road fuels are very heavily taxed.

All the proponents of BTL are asking, is for BTL fuels to be taxed at a lesser rate.

So you're not directly giving the producers of BTL fuels large wads of taxpayers money, rather, you're letting the market pay an honest price for the fuel.

In the US, the govenment favours the "give the producers large wads of taxpayers cash" routine.

It needn't be that way in Europe.

Thomas Pedersen


I agree 100%, on both topics. We are talking decades (sadly), not months, even with people ripping every Prius, wind turbine and solar cell of the shelves.

In my heart I agree, but once the fuel tax is firmly implemented in the state budget, it feels just like giving out cash.



To be fair, some European States could do with less govenment largess.

After all, if we see a hugh swing to PHEvehicles, then most govenments are going to be heavily out of pocket due to reduced fuel tax recipts anyway.

On top of that fuel usage will be reduced over the next decade due to Peak Oil anyway so the govenments might as well get used to reduced taxation on transport anyway.

With the above in mind, is it any wonder that many EU states are trialling GPS based pay as you drive tracking systems.

Once you have your electric vehicles, care to wager a bet that the governments of the day will want their cut of the cash based on milage, not energy consumption.



Hi All,

Looks like he sees the future not using traditional , or resent Diesel technology. He sees bio-Naptha burning Homogeneous Compression Combustion Ignition (HCCI in US parlance, other countries have other names/abbreviations for this) engines as the future. These engines typically use like 50:1 to 100:1 compression ratios, and burn the fuel almost instantly, using high pressure injection. The piston expansion cycle is a pure expansion, with no burn. The burn is also so fast, there is little contact with the engine metal during the burn. Thus the low emissions. The efficiencies claimed for these engines are 40 to 50 %.

I wonder about the durability , as those large compression ratios would be tough on the bearings.

Cheryl Ho

DME developments in China!
DME is an LPG-like synthetic fuel can be produced through gasification of Biomass. The synthetic gas is then catalyzed to produce DME. A gas under normal pressure and temperature, DME can be compressed into a liquid and used as an alternative to diesel. Its low emissions make it relatively environmentally friendly. In fact, Shandong University completed Pilot plant in Jinan and will be sharing their experience at upcoming North Asia DME / Methanol conference in Beijing, 27-28 June 2007, St Regis Hotel. The conference covers key areas which include:

DME productivity can be much higher especially if
country energy policies makes an effort comparable to
that invested in increasing supply.
National Development Reform Commission NDRC
Ministry of Energy for Mongolia

Production of DME/ Methanol through biomass
gasification could potentially be commercialized
Shandong University completed Pilot plant in Jinan and
will be sharing their experience.

Advances in conversion technologies are readily
available and offer exciting potential of DME as a
chemical feedstock
By: Kogas, Lurgi and Haldor Topsoe

Available project finance supports the investments
that DME/ Methanol can play a large energy supply role
By: International Finance Corporation

For more information: www.iceorganiser.com

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