Tax Breaks For Biofuels

New UK legislation coming into effect on 15 April 2008 - the Renewable Transport Fuel Obligation - will mean that biofuels must show significantly smaller carbon footprints than their petroleum-based cousins in order to keep their government subsidies.

But governments of the UK, the EU, Germany and the US disagree seriously about biofuel footprints, and this could lead to confusion in the fuel markets, says Eric Johnson, editor of Environmental Impact Assessment Review, in an article published in the Society of Chemical Industry’s magazine, Chemistry & Industry (C&I).

For example, bioethanol made from US corn offers a carbon saving of over 40%, according to German proposals. The US government, by contrast, reckons a 22% saving while the UK rates it at 20% carbon negative. “Bioethanol from US corn will win in Germany, barely pass muster under US rules and lose in the UK,” he says.

“These differences will be problematic for producers. What works in Woking may not in Wermelshausen, and vice versa. Surely there soon will be a scramble of lobbyists to countries that have yet to define their rules. This also may be problematic for governments. The danger in proposing rules so different is that not just producers, but ultimately the public at large, may become cynical and begin to shy away from its so-far enthusiastic support of measures to combat global warming.”

Large sums of money are at stake. In 2007, tax credits handed out to biofuels in the developed world added up to €10 billion. But increasingly, the Government is looking to reward those biofuels that deliver higher carbon savings which will mean that future incentives will be linked directly to carbon savings, hence the new legislation in the UK, plus similar proposals have been tabled in Germany and the EU, and the legal framework is already in place for comparable rules in the Netherlands and the US.

What are Biofuels?

Fuels which are derived from biomass are referred to as biofuels. Agricultural products specifically grown to convert biomass to biofuels include corn and soybeans. Currently, research is being carried out to improve the conversion of non-grain crops, such as switchgrass and a variety of woody crops, to biofuels.

Biofuels are manufactured from biomass through thermochemical or biochemical process. Examples of biofuels used today include ethanol and biodiesel.

Using biofuels reduces greenhouse gas emissions, the buildup of toxic air particles and the dependence of imported oil, while at the same time, supporting agriculture and rural economies.

Biofuels contain oxygen, and unlike gasoline and diesel, the addition of biofuels to petroleum products allows the fuel to combust more completely. This reduces air pollution. When fossil fuels are burned, carbon dioxide that was captured by plants is released and contributes to global warming. On the other hand, when biofuels are burned, carbon dioxide released is balanced by the carbon dioxide capture by the recent growth of the plant materials from which they are made.

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