21 September 2001

EUto enforce bio-fuel mixing on oil firms

By Philip Clarke

OIL companies are to be forced to mix in a certain percentage of bio-fuels with their petrol, under bold new proposals to be issued by Brussels.

Previewing the plans with farm ministers this week, EU agriculture commissioner Franz Fischler said fulfilling the Kyoto targets on greenhouse gasses was still a top priority.

"Through expanding the use of bio-fuels, agriculture can make an important contribution to reducing carbon dioxide emissions."

The actual proposals are being drawn up by transport commissioner Loyala de Palacio and will be published next month. Recent drafts suggest a target market share for bio-fuels of 2% in 2005, rising to 5.75% by 2010.

Oil companies would also have to blend in a certain percentage of bio-fuels with every gallon of petrol, starting at 1% in 2009 and then 1.75% in 2010.

To achieve these targets would require several million hectares of non-food oilseed crops, said Dr Fischler. But the extent to which subsidies can be paid to encourage this extra production are strictly limited by the World Trade Organisation. The use of set-aside for non-food crops is also bound by the 1992 Blair House agreement.

Another problem is that bio-fuels typically cost twice as much as conventional fuels. "Market prices do not reflect the external costs of using fossil energy, such as carbon dioxide emissions," said Dr Fischler. "Political measures are required to bring about a true price ratio."

The EU is also planning to introduce significant tax breaks for bio-fuels. While this will be left to member states discretion, concessions of up to 50% are foreseen.

The NFU has welcomed the plans, which it says could give oilseed producers "another string to their bow". "We need to see the full details, but it may provide an opportunity for oilseeds to regain the ground they lost under Agenda 2000," said alternative crops chairman Rad Thomas.

Financial help would be essential to make non-food crops competitive with food crops, which got full area aid. In this respect the 20% cut in bio-diesel duties in the last Budget did not go far enough. &#42