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Europe?s Ethanol Market Potential
Energy Business Reports, May 2008, Pages: 88
In 2003, European Commission issued directives that will govern European biofuels policy through 2010 and target of 5.75% biofuels consumption in the transportation sector by 2010. These include measures to increase ethanol demand and supply and providing tax benefits and exemptions to facilitate growth. The principal goals propelling bioethanol in European countries are improving energy security, boosting rural development, and reducing greenhouse emission reductions.
Transport is responsible for approximately 21% of the EU's greenhouse gas emissions, and recent European Commission directives have made biofuels in transport a regional priority. Not all member states are equally committed to the objectives set by the European Commission, but all are trying to some extent to achieve EU targets. Biodiesel accounts for 80% of European biofuels production and ethanol for the remaining 20%. Active market actors and lobbying groups have contributed immensely to the evolution of the market in recent years.
However, there are some issues that are concerning the overall growth of the ethanol industry in Europe. Most import among them has been the recent rise in the prices of food grains and subsequent decline in their supply. And many for this crisis have blamed biofuels, including ethanol. Though, the supporters of ethanol and other biofuels suggest that the global food crises are a result of growing oil prices along with increased food consumption in developing world and declining yields of food crops.
Another issue affecting further expansion of ethanol in Europe has been smaller number of cars in Europe that can run on Ethanol. Since a majority of the cars in the EU are diesel cars and there has been a diesel deficit the focus has been on biodiesel. However bioethanol has the advantage over biodiesel that it can be produced from a much larger variety of different feedstock. Furthermore, the ethanol industry in the EU has also had problems to compete with cheap imports of bioethanol, especially from Brazil. These cheap imports have made it very difficult for the local industry to grow strong and manage without subsidies. Most of the cheap imports have come through a loophole in Sweden. This loophole was closed in January 2006, and there are now an enormous amount of planned bioethanol production plants in the EU.
A further challenge is that even with the use of the most advanced production technologies, bioethanol produced in the EU are not cost competitive with fossil fuels. According to the most recent estimates, European ethanol would only break even at an oil price of €90 ($115) per barrel. New input crops and production methods could make ethanol more competitive. Lignocellulosic processing and biomass-to-liquid technologies have been mentioned as potential lower-cost alternatives to current technologies Countries including Germany and the UK are actively promoting research into second-generation biofuels.
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