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UK likely to miss EU target for biofuels

The UK will probably miss a 2010 European Union target to increase the use of alternative fuels in transport and should offer better tax breaks to increase production and consumption, the House of Lords said.

The EU wants biofuels, made from corn, sugar and oilseeds, to account for 5.75% of transport fuel by 2010. Only France, Germany and Sweden are on course to meet the target, partly because of the incentives they offer, a House of Lords committee said in a report today. Britain is „falling short of its targets on the use of biofuels,” Tim Renton, chairman of the environment and agriculture sub-committee, said in the report. „Some of our European partners offer significant tax concessions to stimulate investment in biofuels. We ask the government to consider whether more should be done in this area.” The 25-nation EU wants to use less fuel derived from crude oil or natural gas to improve energy security and independence, limit greenhouse gas emissions and support farmers.

The British government in 2005 introduced the Renewable Road Transport Fuel Obligation, which requires fuel suppliers to ensure that 5% of their sales are from renewable sources. It also adopted a duty reduction rate of 20 pence (38 cents) per liter on ethanol used for road transport, a rate „the domestic biofuels industry does generally not consider to be financially viable,” the report said. The UK is scheduled to introduce a program next year giving biofuel companies the right to claim 100% capital allowances on their infrastructure spending in the first year, provided they can demonstrate a cut in carbon dioxide emissions. „Legal guarantees on the duration of duty exemptions give certainty and predictability to investors in the energy market, thus providing for significant investment and growth,” the report said. In 2004, the UK produced 51,000 tons of biodiesel, compared with 1.7 million tons in Germany and 0.5 million tons in France. Biodiesel accounts for almost 80% of the EU's biofuel production. (Bloomberg)