Ec Fuels Mandate Could Quadruple Biodiesel: Report

Diesel Fuel News, Nov 26, 2001 by Jack Peckham

The European Commission's proposed alternate-fuels mandate (including a 5.75% "biofuels" minimum) could cause biodiesel sales to soar, according to a Frost & Sullivan (F&S) special report.

If the BC mandate eventually becomes law, then it would "increase the biodiesel market [in Europe] from today's $504 million [annual sales] to $2.4 billion by 2007, a compound annual growth rate of 25% over the forecast period," the F&S report found.

The BC proposal also could open the door to wider use of tax incentives for costly biodiesel among the Euro member states.

"Until now these exemptions have only been available in some countries, leading to huge geographical variations in the biodiesel market and uncertainty for producers," F&S analyst Gordon McManus said.

"In Germany and Austria, biodiesel essentially only attracts the tax exemption if it is sold as a pure fuel, whereas in France biodiesel must be blended with mineral diesel at 5% for the general market and up to 30% for captive fleets," the report points out.

By 2000, 848,000 tons of biodiesel were sold in Europe, almost entirely in France, Italy, Germany, Austria and Czech Republic. Sweden, Norway and Slovakia are "embryonic" biodiesel markets. Three producers dominate: Diester Industrie, Novaol and Oelmuhle Leer Connemann, all backed by "large agricultural concerns, which has given them the financial capability to invest in capacity expansion and a reliable source of large volumes of rapeseed oil," the F&S report finds.

On the down side, "limits on the production of non-food oilseeds and a decrease in support payments for oilseed producers means there is less incentive for farmers to grow rapeseed," the report notes.

"Whether the price of rapeseed rises high enough to significantly affect the biodiesel market, or whether demand for rapeseed from the biodiesel industry outstrips the possibly supply, restraints on the availability of raw materials is likely to be a major restraining force as the biodiesel market grows."