German biodiesel output collapses

By Michael Hogan

HAMBURG (Reuters) - Germany's biodiesel industry is only producing at about 10 percent of capacity largely because a biofuels tax increase on Jan 1 hugely cut sales, the head of the German renewable fuels industry association BBK said on Tuesday.

This was down from output at 20 percent capacity in November 2007 and many companies were facing closure, Peter Schrum, the association's president, told the Reuters biofuels summit.

"We are not just in a crisis we are in a state of collapse," he said. "Many small companies have reduced production to zero, production is largely being continued by larger companies with large financial resources."

At a time when the European Union wants to increase biofuel use to stop global warming, Germany in late 2006 started taxing biodiesel as the government said it could not afford to lose the large tax revenue from fossil diesel.

A second round of tax increases on biodiesel was imposed on January 1 despite protests from biodiesel producers.

"Sales of biodiesel at petrol stations have really come to a stop," said Schrum. "The tax rise means that biodiesel is about the same price as mineral diesel or even more expensive. We cannot sell biodiesel at this price, it needs to be cheaper as it has a lower energy content."

Germany's once-booming biodiesel industry has annual capacity of around five million tonnes but the tax means that many plants are likely to be closed down and sold abroad in coming months, he said.

"I think that large numbers of German biodiesel plants will be dismantled, packed in containers and shipped abroad this year," he said. "They will be sold to countries such as the U.S. and Canada."

He said at least two German biodiesel plants had already been sold for dismantling and shipment to the U.S.

"I have inquiries from ten companies on my desk now asking for assistance in selling their production plants abroad," he said.

The association planned to continue lobbying Germany's government to relax its hard line on biofuels taxes but there was currently no sign of this happening.

To reduce the impact of biodiesel taxes, Germany introduced compulsory blending of biodiesel with fossil diesel at oil refineries in January 2007. The BBK says the 4.8 percent biodiesel blended content in fossil diesel would create a requirement for about 1.5 million tonnes of biodiesel annually.

"Biodiesel for blending is just coming from imports," he said. "Biodiesel used for blending can be of poor quality and the oil companies just go anywhere in the world and buy the cheapest they can find."

"Over 90 percent of biodiesel used for blending in Germany is imported."

He said that the majority of this was imports of subsidized biodiesel from the U.S., the so-called "splash and dash" biodiesel.  Continued...