From: Reuters
Published November 21, 2007 12:06 PM

Germany plans rise in biofuels blending

HAMBURG (Reuters) - Germany said on Wednesday it planned a long-term increase in biofuel blending to counter global warming, but the finance ministry said it would continue to raise taxes on biofuels which are reducing their usage.

Presenting a joint biofuels strategy agreed between the government, the automobile industry, oil companies and the farming sector, Environment Minister Sigmar Gabriel said Germany planned to raise the level of biofuels blended into fossil diesel and gasoline to 10 percent from 5 percent now by 2010.

By 2020, it was hoped biofuels levels would reach 20 percent, partly through use of new generations of biofuels which would permit more blending.

The strategy has been presented at a time many German biodiesel producers are closing or stopping production because the government is taxing biofuels.

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Industry groups estimate Germany's once-booming biodiesel industry is producing at about 20 percent of capacity following the government's taxing of green fuels.

A second round of tax increases on biodiesel is on the statute book and scheduled to be imposed in January 2008. The government has so far refused industry calls to reconsider this.

Asked at a presentation in Berlin about the planned tax rise on biodiesel, Agriculture Minister Horst Seehofer said this was still being discussed.

"I am fighting to keep the competitiveness of biofuels," Seehofer said. "There is still no agreement."

But a finance ministry spokesman said the tax rise would go ahead. A new report on biofuels to be presented by the government would show subsidies and special tax breaks were too high, the spokesman said.

(Reporting by Michael Hogan; Editing by Chris Johnson)

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