Wednesday, November 21, 2007

[PBN] France: Ethanol industry relies on subsidies


INTERVIEW: Subsidy cuts would wreck French ethanol sector

* Reuters
* Monday November 19 2007

By Valerie Parent
PARIS, Nov 19 (Reuters) - France's nascent ethanol sector could collpase
if the French government goes ahead with plans to slash subsidies key to
the survival of the sector, a top industry official said on Monday.
Ethanol, a combustible fuel largely made from sugar beet and cereals for
blending with conventional fuel, makes up just under a third of French
biofuel production.

The rest comes from biodiesel, mainly derived from crops like rapeseed.
The French ethanol sector is heavily reliant on subsidies in the form of
a lower TIPP fuel tax, that makes the fuel competitive with gasoline at
fuel pumps.

"The talks (on upping the TIPP tax) are well advanced in the framework
of inter-ministerial discussions and are causing great concern," said
Alain Jeanroy, co-ordinator of the ethanol industry group.
No one from the relevant ministries was immediately available to comment.

Biofuels, hailed for reducing reliance on crude oil and helping slow
down climate change, are coming under closer scrutiny.
In a recent report on the impact of biofuels, the Organisation for
Economic Cooperation and Development (OECD), urged governments to cut
their subsidies for the sector and instead encourage research into
second generation biofuels. Ethanol currently benefits from a 0.33 euro
per litre discount when sold at petrol pumps, but that amount could soon
be halved, said other industry sources.

"When taking into account commitments taken with industrial investments
of close to 1 billion euros and the recent start-up of production units,
we would not understand (such a move)," Jeanroy said. France produced
235,000 tonnes of ethanol and 631,000 tonnes of biodiesel in 2006, the
French farm ministry said.

France decided to go beyond the EU target and incorporate 5.75 percent
of alternative fuels by end-2008, seven percent by end-2010 and 10
percent by end-2015. (Additional reporting by by Mathilde Cru and Muriel
Boselli; writing by Muriel Boselli, Editing by Peter Blackburn)

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