In 2003, the EU set an ambitious goal of replacing 10% of transportation fuel with nonfossil fuels by 2020. To achieve this goal, the bloc agreed that its governments would phase in tax breaks and rules to encourage their production and use.
But the bloc currently uses nonfossil fuels for less than 2% of transportation fuel consumed and now has a glut of biodiesel. By last year, Europe's annual capacity to make the fuel had climbed to 10 million metric tons from two million tons in 2003. The world consumed only nine million tons of biodiesel last year. Europe's producers found buyers for just five million tons.
The industry is in trouble, under pressure from soaring costs, disappearing tax breaks, less-costly imports and waning public support. However, scientists say it's likely to be at least 2010 before any breakthroughs are made on costs, or on producing a biodiesel than can run in regular diesel engines effectively at a much higher blend than the current standard of 5% per gallon of diesel sold at the pump.
U.S. ethanol producers are facing some similar problems. Buoyed by $7 billion a year in subsidies and a tariff on foreign imports, U.S, farmers planted a quarter more corn this year, most of it going toward making ethanol. But supply of ethanol is outstripping demand, mainly because of the difficulty and cost of transporting ethanol, which needs special pipelines, unlike biodiesel which can be mixed with regular diesel fuel and, when blended, doesn't need any special pumps or engine design changes. Some U.S. ethanol producers are idling production and a debate has begun over whether the pressure that ethanol production puts on agricultural land is worth the modest cuts in carbon-dioxide emissions it yields.
Source: WSJ, 27/12/07
