EU adopts new rules for biodiesel 'detaxation'

By Member nations must incorporate directive by the end of 2004 | January 28, 2004
In late October, the European Council of Ministers unanimously and definitively approved a new directive promoting the use of biofuels-mainly influencing biodiesel-in EU member nations. In particular, the directive establishes pan-EU rules for the "detaxation" of biodiesel.

The directive essentially calls for excise tax exemptions, or reduced tax rates, on sales of biodiesel and other biofuels. Once tailored by individual member nations, tax exemptions should take effect in 2004 and provide member nations with flexibility in defining the incentive.

This decision follows the European Parliament's initial approval of the directive in March, with a 531 out of 536 vote in favor of tax breaks for biofuels. The legislation is expected to pave the way to the establishment of a "clear and solid" legal framework promoting the use of biofuels in EU member nations.

Previously, the EU approved a provision requiring member nations to establish national plans in order to increase the use of biofuels to a minimum target of 2 percent of all the gasoline and diesel fuel sold for transport purposes by December 2005. This percentage should progressively increase to reach 5.75 percent by 2010. These promotion measures concern biodiesel sold pure as well as in blends.

The Directive also requires EU member nations to report regularly on the way in which these indicative targets will be met. Furthermore, along the lines of the new directive, national administrations will have to inform EU citizens and consumers about the possibility of using biofuels. Member states will have to incorporate this directive into their national legislation by the end of 2004.

The EU is currently the world's leading producer of biodiesel, with more than one million metric tons produced in 2002. The European biodiesel industry is well consolidated: Beginning this year, its production capacities were already above two million metric tons per year and prepared to handle the forthcoming market increase.

Source: European Biodiesel Board (EBB)
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