French Aid for Biofuels Ruled Illegal

PARIS, France, September 28, 2000 (ENS) - A French program to boost the biofuels sector through reduced excise duty on agriculturally derived bioethanol for gasoline additives has been dealt a blow by the European Court of Justice.

In a judgement Wednesday, a subsidiary chamber of the court said the European Commission had been wrong to sanction the reduced rates, which are classed as state aid under European Union rules.

The court said the Commission wrongly interpreted a clause in the European Union's 1992 mineral oils law, which allows member states to lower harmonised excise rates in order to promote pilot projects that develop more environmentally friendly fuels.

The court said the plants benefiting from the lower rates were operating established processes and that the aid was thus for economic and industrial rather than technological purposes. In this case, lower duty rates could only have been approved by unanimous ministerial agreement, it said.


Cars pull up to the train station in Lille, France. (Photo by Ian Britton courtesy
In the wake of this month's fuel tax protests, French environment minister Jean Glavany announced two weeks ago that the existing 1992 biofuels subsidy package would be extended.

The government wants to stimulate production of 155,000 tonnes of ethyl tertiary butyl ether (ETBE), a gasoline additive produced from bioethanol that competes with methyl tertiary butyl ether (MTBE) derived from petroleum.

Earlier this year Italy announced similar moves to support biofuels.

The judgement casts doubt over the future of these schemes. It is not known whether the subsidies already paid out will have to be returned, or whether the Commission will defy the court and approve France's new aid proposals, which are expected mainly to benefit bioethanol plants operated by oil company TotalFinaElf.

The legal action was brought by oil major BP, the world's biggest producer of petrochemical ethanol. The company said today that it was pleased with the judgement.

A BP spokesperson stressed that the company is not aiming to stop biofuels development but that it fears the subsidies would affect its markets for "traditional" ethanol in applications other than fuels.


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