f3 2013:15 41 In October 2011 the EU Customs Code Committee approved a proposal to end the loophole stating that all blends of ethanol and petrol with ethanol contents above 70% should be subject to the duty rate 102 Euro per cubic metre (Flach et al., 2012). This regulation became valid from 3 April, 2012.
In addition, and spurred by the European biofuels industry, the EU in February 2013 put in place a regulation including an anti-dumping duty on agricultural ethanol imported from the US. The duty is 62.3 Euro per tonne, which corresponds to 79 Euro per cubic metre (Council of the European Union, 2013).
The import of biodiesel has been small but increased from 60 to 2113 thousand tonnes between 2006 and 2010 (Flach et al., 2012). For 2009, 18% of the biodiesel consumed in the EU in 2009 was imported (ibid.) and biodiesel from Argentina represented almost half of the import to the EU during this year.
There are also other EU policies that have an indirect but substantial impact on biofuel markets, both the total volume and the composition. One such policy is the emission standards set for new passenger cars (European Parliament and the Council, 2009b). It states that average emissions of new passenger cars should not exceed 130 g CO2/km by 2015 and 95 g CO2/km by 2020. The tar-get for 2015 will be met relatively easily, but the 2020 tartar-get will be more challenging. In meeting these emissions standards diesel cars will have an advantage over petrol cars, due to the higher in-herent energy efficiency of diesel engines. Different kinds of electrification will also be increas-ingly important. The increasing general use of medium distillates such as diesel and aviation fuels will provide a further incentive to focus on substitutes for fossil diesel.
f3 2013:15 42
Figure 13. German biodiesel market in million tonnes (Rauch and Thöne, 2012).
A driver for introducing biofuels in Germany has been climate concern, but the importance of en-ergy security and rural development concerns have also weighed strongly – particularly in the early 2000s. A powerful actor has been the ministry of consumer protection, food and agriculture, from 2001 to 2005 led by Renate Künast of the Green Party. From this side it is clear that concern for development of rural areas in former East Germany was a significant driving force (Thuijl and Deurwaarder, 2006). Many car manufacturers in Germany have allowed fuel containing 100%
biodiesel B100 for some of their cars, but recently interest among manufacturers have shifted to-wards the truck market. The Association of the German Petroleum Industry has been against tax exemptions for first generation biofuels, such as biodiesel (Bomb et al, 2007).
In 1995, the first commercial production of biodiesel started. Leaded petrol was abolished in 1996 and this provided an opportunity for biodiesel as free tanks then became available at filling stations.
Within a couple of months more than 600 filling stations marketed pure biodiesel, none of which belonged to the major oil companies (Thuijl and Deurwaarder, 2006). In these early days, the focus was on pure biodiesel (B100). In 2004 a blended fuel with 5% biodiesel (B5) was authorized and from 2009 the maximum allowed blend was increased to 7% (B7) (Rauch and Thöne, 2012).
The main driver for biodiesel in Germany until 2007 was excise duty exemption. Originally it only applied to pure biodiesel, but from 2004 it also applied for low-level blends (Bomb et al., 2007). In combination with increasing oil prices in 2004-2006, these policy initiatives triggered a wave of new investments in the biodiesel industry.
A key concern for the German government then became the rapidly increasing tax losses due to the tax exemptions for biofuels. The tax losses reached an all-time high at 2.14 billion Euros in 2006.
As a response a quota system was launched on January 1, 2007. This caused tax losses to diminish to less than 0.1 billion Euro in 2010 (Rauch and Thöne, 2012). In this quota system there is one quota for diesel substitutes, one quota for petrol substitutes and one total quota. The development of these quotas is shown in Table 3. A total quota was introduced in 2009. The quota for diesel has been the same since 2007 while the quota for petrol has been raised from the start at 1.2% in 2007.
This has caused stagnation in biodiesel consumption while ethanol consumption has increased
f3 2013:15 43 rapidly, from negligible in 2003 to nearly 1.2 million tonnes in 2010 (ibid.). While more than 80%
of biodiesel consumption was produced domestically in 2010, the corresponding figure for ethanol was around 50%.
Table 3. German quota system (FNR, 2011, cited in Rauch and Thöne, 2012)
Year Quota: diesel Quota: petrol Total quota
2007 4.40 % 1.20 %
2008 2.00 %
2009 2.80 % 5.25 %
2010 6.25 %
2011 2012 2013
2014 4.40 % 2.80 % 6.25 %
2015 Decarbonisation 3.0 %
2017 Decarbonisation 4.5 %
2020 Decarbonisation 7.0 %
The general rule in the German quota system is that biofuels used within the quotas are levied with the same taxes as fossil fuels. Biogas, E85 and second generation biofuels are eligible for full tax exemption until 2015, but presently these fuels represent a negligible share in the German market (Rauch and Thöne, 2012). Pure biodiesel and vegetable oil have also continued to have tax exemp-tions efter the introduction of the quota system, but this has gradually been phased out between 2007 and 2013. The excise rates (cent/litre) for these fuels were 9.00 in 2007, 14.90 in 2008, 18.30 in 2009, 18.60 between 2010 and 2012 and from 2013 onwards 45.03 (Rauch and Thöne, 2012).
From 2015 the quotas will be calculated according to GHG reductions on a life-cycle basis instead of energy content as is now the case. The decarbonisation target for the total fuel mix used in road transport (fossil and renewable fuels) will be 3% for 2015 and 7% for 2020. The latter is calculated to correspond to approximately a 12% energy share for biofuels (ibid.).
An effect of the new system launched in January 2007 was that the gap between production capac-ity and actual production of biodiesel rapidly increased, see Figure 13. Between 2006 and 2008 production capacity almost doubled – due to projects “in pipeline” – while production increased by less than 10% (the dedicated biodiesel quota remained the same from 2007). That is, capacity use fell from nearly 100% to around 50% in only two years. This overcapacity had also been contrib-uted to by public co-funding of biodiesel plants. The consequence was that a number of companies became insolvent from 2008 and onwards (ibid.). The production capacity of these companies to-gether amounted to more than 1.3 million tonnes, which may be compared with total production of around 3 million tonnes in the peak year 2006. However, not all these biodiesel plants were closed down. More than 400,000 tonnes of annual production capacity were taken over by other compa-nies (Rauch and Thöne, 2012). It was also the case that many compacompa-nies that managed to avoid insolvency had ceased production at some of their plants.
f3 2013:15 44 Another interesting effect of the policies of 2007 was a radical shift from pure biofuel (B100) to blends. In 2006 two thirds of biodiesel production was used in the form of B100. Only four years later this share had diminished to 11% (ibid.). A related development is that the number of filling stations for B100 has diminished from 1900 to less than 200. There are thus strong indications that the market for pure biodiesel was very fragile – as the first steps away from tax exemption had such a dramatic effect.
In Figure 14 some key policies affecting biodiesel consumption in Germany are shown in relation to actual consumption. While other factors such as oil price, economic cycles and public opinions also affect the consumption of biodiesel, some conclusions may still be drawn. The impact of the quota system introduced in January 2007, which imposed a constant 4.4% quota for biodiesel be-tween 2007 and 2014, is rather clear. The market share for biodiesel was above 5% in 2007, but then fell back. In the quota system there is a total quota that is higher than the sum of the specific quotas for biodiesel and petrol substitutes (see Table 3 above), but biodiesel did not appear to be competitive enough to fill that quota. Rather, it was imported ethanol that increased rapidly be-tween 2007 and 2010.
f3 2013:15 45
Figure 14. Policies affecting biodiesel consumption in Germany in relation to actual consumption.
Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Tax exemptions for pure biodiesel
Tax exemptions for blended fuels
Biogas, E85 and second generation biofuels, tax exemption Quota system, 4.4% for biodiesel during the whole period.
Modified quota system focused on life-cycle GHG emissions B5 blend authorized
B7 blend authorized
0 0,5 1 1,5 2 2,5 3 3,5
2002 2003 2004 2005 2006 2007 2008 2009 2010
(Million tonnes biodiesel)
f3 2013:15 46