Tax Hike Would Force German Biodiesel Closures
Date: 31-Jul-08
Country: GERMANY
Author: Michael Hogan
Germany's government plans to increase taxes on biodiesel in January 2009 to 21 euro cents a litre, from 15 cents, in the next stage of its programme to raise taxes on green fuels to the same level as fossil fuels.
"Some biodiesel producers will not survive the impact of even higher taxes and it must be expected that there will be more plant closures," Johannes Lackmann, chief executive of the German biofuels industry association VDB told Reuters.
"The German biodiesel industry is in a crisis."
Lackmann said the industry is already working substantially under capacity mainly because tax increases on green fuels in January this year largely removed the price advantage of biodiesel over fossil diesel at petrol pumps.
Germany's five million tonnes annual capacity biodiesel industry, Europe's largest, has seen a series of plant shutdowns this year.
Among the most prominent was in May, when leading producer Campa AG, operator of a 150,000-tonnes-per-year capacity plant, declared insolvency.
"Many producers are currently working at capacities well below commercial break-even levels," he said. "This cannot continue indefinitely. A further tax rise could be the end for some in the industry."
The industry will intensively lobby the country's government to drop the coming tax rise.
"Germany faces the loss of its competitive edge in biofuel production technology," he said. "If the biodiesel industry cannot survive further tax rises, Germany could become dependent on imported biofuels to meet its blending targets."
Germany has introduced compulsory blending of biodiesel with fossil diesel at oil refineries to help meet its European Union targets to cut greenhouse gas emissions and slow global warming.
But Lackmann said Germany's blending requirements were mainly being met by cheap imports, especially from the US
US producers can gain US subsidies for the B99 blend which contains 99 percent biodiesel and one percent fossil diesel and may also export the cheaper product.
The European Union has started an investigation into whether the practice involves unfair trade.
Lackmann said the general rise in fossil oil prices this year had not significantly improved biodiesel demand.
Green producers argue that they need a tax advantage over fossil fuels as biodiesel has a lower energy content and vehicles consume more.
The industry is also seeking to convince the public that biofuel production is not responsible for the sharp rise in food prices seen this year.
"World wheat prices have fallen around 40 percent since February while biofuel production has remained unchanged," he said. "This must show that other factors and not biofuel output were responsible for rising grain and oilseed prices."
The VDB is also considering moves against multinational oil companies which refuse to sell bioethanol at their German petrol stations.
(Reporting by Michael Hogan; editing by Peter Blackburn)