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France not Ready for Compulsory Biofuel Blending

France not Ready for Compulsory Biofuel Blending
PARIS - France is not yet ready to introduce compulsory blending of biofuels with conventional fuels and wants to keep tax incentives to boost green fuel output, government and industry sources said on Tuesday.

Plans for compulsory blending already exist in Britain, which has announced oil companies would have to include five percent of biofuels in their fuel mix by 2010, in Germany, which plans to introduce compulsory blending and end tax breaks, and in the Netherlands, which has similar plans starting in 2007.

An official at France's upper house with responsibility for biofuel taxation said there had been significant discussions on making biofuel blending compulsory before the Dec. 20 vote that approved the government's 2006 budget.

In the budget, France decided to maintain an advantageous tax regime for biofuels, although it slightly lowered tax breaks. It also included new types of biofuels that can now benefit from tax breaks.

"You can't make the blending of a product (biofuels) obligatory if you don't have the corresponding output, and it may not be compatible with European law," the official said. She added that, without the required production levels, such a move could encourage imports.

"In reality, the blending of green fuels with traditional fuels is almost obligatory because of the tax breaks that France applies," she said.

Alain Jeanroy, general director of the French sugar growers group CGB and coordinator of France's ethanol producers, said he believed the French approach to offer incentives would result in the country meeting its output targets.

"It's true the ethanol industry had been all for it (compulsory blending) especially because we didn't feel the oil majors really wanted to make direct ethanol incorporation possible," he said.

However, a change of heart by the oil majors to allow direct incorporation, rather than the use of ether-based ETBE that they controlled, had opened up the market.

"The situation has changed since biofuel industry players met at a round table chaired by the French industry ministry in November," Jeanroy said.

"France will from March 2006 incorporate ethanol directly in fuels," he added.

France plans to raise biofuel incorporation to 5.75 percent by end-2008, seven percent by 2010 and 10 percent by 2015.

The targets go beyond the EU goals, which in 2004 set a non-binding target that fuel should contain 5.75 percent of biofuels in 2010.

To meet its own 2008 target, France has launched a tender to produce 1.8 million tonnes of biofuel, including 1.3 million tonnes of biodiesel and 500,000 tonnes of ethanol.

"The results are due at the end of January," Jeanroy said.

Story by Muriel Boselli

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