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 Mahamad Rodzi Abdul Ghani
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 EU directives will fuel growth of biodiesel market

LONDON, 11/13/2001 (BUSINESS WIRE) The imminent announcement by theEuropean Commission of its proposals for two new directives to ensure thatbiofuels make an important contribution to the total automotive fuelconsumption in the EU will give a huge boost to the European Biodieselindustry.The directives will make changes to tax laws to enable EU member states tointroduce tax breaks for biofuels, and will stipulate that biofuels mustmake up a fixed percentage of all automotive fuel sales across Europe.A new study of the European Biodiesel market by Frost & Sullivan forecaststhat this firm backing by the Commission will help increase the biodieselmarket from todays $504million to $2.4billion by 2007, a compound annualgrowth rate of 25% over the forecast period.Gordon McManus, research analyst with Frost & Sullivan explains,"Biodiesel can cost over twice as much to produce as conventional diesel,without some form of tax exemption it cannot compete at the pumps. Untilnow these exemptions have only been available in some countries, leadingto huge geographical variations in the biodiesel market and uncertaintyfor producers. The politicians are laying the challenge firmly at the feetof the producers to meet the volumes of biodiesel needed, meaning a lot ofhard work in terms of raw material procurement, capacity expansion andmarket development."As part of the Kyoto Agreement, the EU committed to reducing emissions ofCO2 by 8% by 2012. The life cycle analysis (LCA) approach to the overallatmospheric CO2 contribution of a fuel suggests that biodiesel uses about50% less CO2 than mineral diesel. This is one of the main incentives forindividual governments, and the European Commission, to support thedevelopment of the biodiesel market.However, limits on the production of non-food oilseeds, and a decrease insupport payments for oilseed producers means there is less incentive forfarmers to grow rapeseed -- the main source of oil for the biodieselindustry. But, whether the price of rapeseed rises high enough tosignificantly affect the biodiesel market, or whether demand for rapeseedfrom the biodiesel industry outstrips the possible supply, restraints onthe availability of raw materials is likely to be a major restrainingforce as the biodiesel market grows.

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