EU sees solid biofuels growth, challenges ahead

Reuters, 28 October 2009 - The European Union has seen solid growth in the use of biofuels, but the bloc faces tough challenges in meeting its 2020 renewables target in transport, experts said on Wednesday.

Paul Hodson, Deputy Head of Unit at the European Commission's Transport and Energy Directorate General told a conference the EU had increased the proportion of biofuels in its consumption mix to 3.3 percent last year from 2.6 in 2007.

Hodson said it was a "fairly solid step forward," adding that overall use may even exceed 4 percent next year.

"We've said that we'd probably not get much past 4 (percent) by 2010, but that might prove to be an over-pessimistic estimate," he told a conference in Budapest.

"There is still a big variation between Denmark and Latvia, whose consumption is almost zero. But nonetheless nearly all of the countries are moving forward in their share of biofuels," he added.

The two major biofuels are petroleum substitute ethanol, which is mainly produced from grains and sugar crops, and biodiesel for which the major feedstocks are vegetable oils.

TAX EXEMPTIONS

Hodson said biofuels were still not competitive with petrol and diesel and relied on government intervention -- either in the form of tax exemptions or imposing obligations on fuel suppliers -- to be marketable.

"It will be interesting to see whether the German coalition agreement means some shift back towards tax exemptions in Germany," Hodson said.

Germany's crisis-hit biofuels industry on Monday welcomed the incoming coalition's policy deal which promises aid to the biodiesel and bioethanol sector.

Under the European Union's binding targets, each member state must raise the ratio of renewable energy sources in transport to 10 percent by 2020, but some observers said that target may be difficult to reach.

"It's a tough target to meet but no one said it would be easy," said Gordon McManus, biofuels analyst at Wood Mackenzie.

He said food crops were expected to remain a major source of biofuels in the next decade and while an overcapacity persisted in biodiesel, further investment was needed in global ethanol production.

"Most biofuels will remain expensive compared with conventional fuels they are seeking to replace, with the exception perhaps of Brazilian sugar cane ethanol."

(Reporting by Gergely Szakacs, Editing by Nigel Hunt)

Author Reuters Publication Date 28 Oct 2009 Document Type News articles Issue/Topic Ecosystems Energy & Climate Mobility Source Reuters Include In RSS Business & Sustainable Development News Energy & Climate News Sustainable Mobility News