EU Action to Alter New German Biofuel Law
01 February 2009
A recent action by the European Commission will likely result in Germany dropping its proposed exclusion of soybean oil-based biofuels from being eligible for German incentives and mandates, according to a report from the US Department of Agriculture Foreign Agricultural Service (USDA FAS). However, Germany will still exclude biofuels which have benefitted from foreign government support from receiving its benefits.
Germany is the largest producer of biodiesel in the EU: 2.890 million tonnes in 2007, compared to second-place France’s .872 million tonnes, according to the European Biodiesel Board.
German biodiesel consumption has fallen, however, from 3.8 million tonnes in 2007, to an estimated 3.1 million tonnes in 2008, and with an expected 2.7 million tonnes in 2009, according to German oilseeds association UFOP (Union zur Förderung von Oel- und Proteinpflanzen e. V.). The decrease is due to the higher taxes, UFOP says.
In October 2008, the German government proposed changes to its biofuels support program, including a reduction in both the increase of German biofuels mandates as well as in the increase in the energy tax for biodiesel. The draft act also proposed disqualifying biofuels from being counted against the biofuel mandates and denying receipt of any tax incentives if:
The biofuel was made with soybean oil and/or palm oil unless and until the German Government implements a sustainability criteria law for biofuels and it can be proven that the biofuel in question was produced in compliance with these criteria.
The biofuel had previously received state aid. This is likely to include the US blender’s credit applied to biodiesel.
Because the draft law contained changes to the existing tax incentives for biofuels, Germany had to refer the draft to the EU for evaluation of compliance with EU state aid regulations.
In January, the European Commission (COM) extended a “stand still” period for the draft German law on several grounds:
Some of the sustainability criteria in the German draft are not in alignment with the EU directives on the use of energy from renewable sources.
Questions on the WTO/GATT compatibility of singling gout soybean and palm oil.
The draft lacked clarity especially regarding the entry into force of sustainability criteria which would have negative effects for planning purposes of the industry.
In response, German officials have indicated that they will proceed with the parts of the law that the COM did not criticize, including:
The exclusion of previously supported biofuels (such as B99) from the benefits;
The reduction in the biofuel quota/mandate increase; and
The reduction in the tax increase.
An amended draft law will be up for vote in the Bundestag in February or early March, according to the USDA FAS report. Procedurally, the law could be formally implemented at the earliest in April.
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