EU Directives will Fuel Growth of the European Biodiesel Market, Says Frost & Sullivan

    LONDON--Nov. 12, 2001--The imminent announcement by the European Commission of its proposals for two new directives to ensure that biofuels make an important contribution to the total automotive fuel consumption in the EU will give a huge boost to the European Biodiesel industry.
    The directives will make changes to tax laws to enable EU member states to introduce tax breaks for biofuels, and will stipulate that biofuels must make up a fixed percentage of all automotive fuel sales across Europe.
    A new study of the European Biodiesel market by Frost & Sullivan forecasts that this firm backing by the Commission will help increase the biodiesel market from todays $504million to $2.4billion by 2007, a compound annual growth rate of 25% over the forecast period.
    Gordon McManus, research analyst with Frost & Sullivan explains, "Biodiesel can cost over twice as much to produce as conventional diesel, without some form of tax exemption it cannot compete at the pumps. Until now these exemptions have only been available in some countries, leading to huge geographical variations in the biodiesel market and uncertainty for producers. The politicians are laying the challenge firmly at the feet of the producers to meet the volumes of biodiesel needed, meaning a lot of hard work in terms of raw material procurement, capacity expansion and market development."
    As part of the Kyoto Agreement, the EU committed to reducing emissions of CO2 by 8% by 2012. The life cycle analysis (LCA) approach to the overall atmospheric CO2 contribution of a fuel suggests that biodiesel uses about 50% less CO2 than mineral diesel. This is one of the main incentives for individual governments, and the European Commission, to support the development of the biodiesel market.
    However, 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 main source of oil for the biodiesel industry. But, 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 possible supply, restraints on the availability of raw materials is likely to be a major restraining force as the biodiesel market grows.

    The European Biodiesel Market
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