27 März 2006

Germany’s Biofuel Industry Booming, Opening For Malaysia?

In what has come as a major setback to budding German biofuel manufacturers, the German Government announced this week that from August this year it will be imposing a tax on biofuel as well as on coal and coke used in heating.

The draft bill on energy taxation was also passed this week by the Cabinet.

Barbara Hendricks, the highest-ranking official in the German Finance Ministry, stated that for each litre of biodiesel, the manufacturers would be required to pay a 10 cent tax.

Indeed, the state would collect 15 cents a litre if the biofuel was mixed with fossil elements.

These taxation rates would also be applied to vegetable oil-based fuels.

Farmers who used biofuel would continue to be exempted from the tax.

The German biofuel industry, which has been encouraged to look for alternative fuel in the face of spiralling oil prices, is outraged by this decision.

“We simply cannot understand the logic of our politicians. On one hand, they encourage us to produce biofuel based on renewable sources of raw-materials. On the other hand, they tax us,” an angry German industrialist based near Cologne, who wished to remain anonymous, told Bernama.

“How can we produce economically-viable biofuel? This (taxation) will raise the production costs and, in effect, the consumer prices,” he said.

The German company is looking for suppliers of raw materials in Malaysia, Indonesia and Thailand which are the world’s largest producers of commodities used in the production of biofuel.

When asked to explain the rationale behind the government’s decision to levy the biofuel 10 cent tax, a spokesman for the Finance Ministry told Bernama that the new imposition would generate an additional revenue of 50 million euro in the current year for the government which is facing huge budget deficits.

Next year, the revenue is expected to increase to 226 million euro and in 2007 about 245 million euro.

Meanwhile, German experts say that rape (a type of European plant) enjoys high popularity among producers of biodiesel, given that the market for biodiesel is booming.

According to guidelines laid down by the European Union, producers will be required by the year 2010 to mix at least 5.75 percent biofuel in conventional fuel.

However, the increasing cultivation of rape is also fetching criticism. The extended monocultures require generous quantities of fertilisers and pesticides.

Added to this is the pollution of the environment because biofuel emits more sulfur dioxide than petrol or diesel.

The Institute for Environment and Energy Research in Heidelberg, which closely monitors the development of biofuel, has assessed that there are “many reasons not to support the increase in production of biofuel, particularly because of its relatively low environmental advantages”.

This view was also voiced by Stephan Ramesohl, an expert with the Wuppertal-based Institute for Environment, Energy and Climate, warning about a “turbo agriculture with energy plants, which is climatically suboptimal and ecologically objectionable”.

Indeed, the German Environmental Minister Sigmar Gabriel also reinforced at a recent conference in Berlin held under the motto “Biofuels of the Future” that the “rape-oil mills of the individual farmer is not an answer to the 85 million strong people”.

What was needed was an industrial-policy strategy requiring “synthetic fuel”.

Meanwhile, three leading German car manufacturers and two petrol producers have come together to form a new alliance to push what is described as “designer fuel”.

Germany’s automobile industry has expressed its support for a further increase of the mixture quota for biofuel in petrol and diesel.

Gabriel called for an increase of the bioshare to 10 to 20 percent.

“Designer fuel”, in contrast to biodiesel, can be manufactured from any kind of biomass, including the remains of timber or plants or even straw.

By heating them to 1,400 degree Celsius in air-tight containers, the biomass can be converted, initially, into coke and liquid gas.

This so-called synthetic gas is separated and converted under high pressure to liquid hydrocarbon. This is the actual fuel.

As one of the world’s pioneers in the production of biofuel, Malaysia can study the German market which is currently open to inexpensive production and purchase of commodities used in the production of such fuel.

Malaysia has already been involved in the production of biofuel though some experts questioned the economics of such product compared to conventional fuel.

Meanwhile, the Cologne-based German industrialist said that he has already established contacts with some biofuel manufacturers in Indonesia, Thailand and Malaysia to “learn from their experiences”.

Source: Bernama.com March 27, 2006.

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