Biodiesel in Europe

Two factors have contributed to Europeís aggressive biodiesel industry expansion. First, in 1992, reform of the Common Agricultural Policy addressed European agricultural surpluses by idling some land used for food production through a set-aside policy. This policy, which provides a substantial subsidy to non-food crop production, stimulated the use of set-aside land for non-food purposes. In some instances the set-aside subsidy is topped up if the land is planted to raw material for biodiesel production.

In response to increased demand for industrial oilseeds for the manufacture of biodiesel, set-aside land planted to oilseeds for industrial purposes is estimated to have increased by 50 percent in 1995-96 to about 0.9 million hectares. If recent increases in industrial oilseed production are maintained, the Blair House Agreement limit of 1.0 million tonnes in soybean meal equivalent could be approached and/or exceeded within the next few years.

Second, high fuel taxes in European countries normally constitute 50 percent or more of the retail price of diesel fuel. The majority of European governments believe that the alternative use concept for cereal grains has little economic justification and will in fact merely add to, rather than relieve, pressures on agricultural budgets.

Despite strong political opposition, however, the European Parliament in February 1994 adopted a 90 percent tax exemption for biodiesel. The combination of legislation supporting the use of alternative fuels, differential tax incentives and oilseed production subsidies, resulted in bidiesel being priced competitively with diesel fuel in a number of European countries. Tax incentives take the form of significantly reduced assessments or exemption from taxes normally assessed on diesel fuel.

As of 1995, western European biodiesel production capacity was over 1.1 million tonnes per year largely produced through the transesterification process. This adds over 80,000 tonnes of glycerine by-product to the market annually. This has created a glut of glycerine on the market. In fact, Germany is limiting production of biodiesel using the transesterification process because of an excess supply of glycerine. One method of disposal of the excess glycerine is incineration, however this wastes a manufactured product, creates an environmental risk and results in additional costs. Germany is now focussing on biodiesel production using the cold pressed rapeseed method to avoid the excess glycerine problem.

In some European countries some marketing cooperatives have produced biodiesel in a small scale through the transesterification process for their own consumption. However, disposition of the glycerine by-product remains a problem.

Biodiesel in Japan

In early 1995 Japan decided to explore the feasibility of biodiesel by initiating a three year study. A new biodiesel plant was to be contructed with its feedstock being recycled vegetable oils collected in the Tokyo area, estimated at 0.2 Mt annually.

Biodiesel in the United States

United States interest in biodiesel was stimulated by the Clean Air Act of 1990 combined with regulations requiring reduced sulphur content in diesel fuel and reduced diesel exhaust emissions. The Energy Policy Act of 1992 established a goal of replacing 10 percent of motor fuels with non-petroleum alternatives by the 2000 and increasing to 30 percent by the year 2010. By 1995, 10 percent of all federal vehicles were to be using alternative fuels to set an example for the private automotive and fuel industries.

There is, however, a strong petroleum industry lobby opposed to the promotion and usage of alternative fuels. Despite this, use of biodiesel in the U.S. is increasing, particularly in urban bus fleets.

Extensive testing in the U.S. has concentrated on biodiesel produced from soybeans. A number of public transi