Positive Environment News

More German Biodiesel Plants Face Closure In 2009

Date: 20-Jan-09
Country: GERMANY
Author: Michael Hogan

BERLIN - More German biodiesel plants face closure in 2009 following government's decision to raise taxes on green fuels and to scale back an increase in biofuel blending in fossil fuels, a biofuels industry leader said on Monday.

Germany's biodiesel industry, Europe's largest, was working at considerably under 60 percent of its five million-ton annual capacity, Johannes Lackmann, chief executive of German biofuels industry association VDB, said.

"Many medium and small size plants will have little chance of survival this year," he told Reuters at the Green Week food trade fair in Berlin. "I think more will close."

Germany increased taxes on biodiesel on Jan 1 this year which hit demand in the country's domestic market. A series of biodiesel plants closed last year, largely because taxes on green fuels had cut sales.

"Some larger biodiesel plants will seek to export more to the European Union and east Europe," Lackmann said. "But a large number of smaller plants do not have the ability to do this."

Germany's biodiesel industry is also suffering from great uncertainty and reduced demand because a series of key measures announced by the government for implementation on Jan 1, 2009, have either not yet passed through parliament or not yet taken force by publication in the country's official gazette.

A tax rise of six euro cents a liter had been in the statute books for Jan 1, 2009, but the government agreed in late 2008 to cut this to a three cent rise after biofuel industry protests that the rise was making biofuels too expensive compared to fossil fuels.

But the tax change is yet to come into law and technically the six cent rise still applies. "As this change has not come into force we do not know what tax level we have," Lackmann said.

UNCERTAINTY

The government said in October 2008 oil refineries will have to mix 5.25 percent biofuels in fossil fuels from January 2009 instead of 6.25 percent previously planned.

The VDB estimates the change will reduce 2009 biodiesel demand by about 600,000 tons, reflecting output cuts from six biodiesel plants and more refinery closures were on the cards.

But this change has also not been implemented yet, so January's blending levels are also unclear.

The rise in biofuels blending had been planned as part of Germany's program to reduce pollution and combat global warming. Several European countries have scaled back plans to blend biofuels in fossil fuels in 2008 because of fears the policy was contributing to rising food prices.

A further major change for Jan 1, 2009, which had also not passed fully into law was a ban on using soyoil and palm oil for biofuels production unless they were certified as coming from sustainable agriculture.

The regulation was announced but not yet put into force. Technically non-certified soy and palm oil could still be used for biofuel production in Germany but producers are avoiding it.

The industry expects the tax, blending and sustainable agriculture measures to be approved by parliament and backdated to Jan 1 as the ruling conservative-social democratic grand coalition has a huge parliamentary majority.

But the legislative vacuum had created "huge uncertainty" among both biodiesel producers and their customers which was contributing to the decline of the German green fuel industry, Lackmann said.

"Germany currently has a biofuels policy which is based on retroactive measures," he said. "We cannot work like this and urgently need a policy based on a long-term strategy."

(Editing by James Jukwey)

Reuters
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