Conclusions

In Switzerland, the year 2005 marks the beginning of a growing interest in biofuels and of the large-scale distribution of blends of up to 5% vol. of biofuels in a large number of service stations across the country. The use of biofuels, however, is still only beginning and today barely exceeds 0.15% of the total quantities of diesel and gasoline consumed in Switzerland.

From the point of view of taxation, only the production of biofuels in Switzerland enjoys an exemption from the tax on mineral oils. Imported biofuels, however, are taxed on an equal footing with conventional fuels. The amendment of the Limpmin however aims at extending the exemption to all biofuels, whether they are imported or produced in Switzerland, and with no limit on the volumes involved. The decrease of the Confederation's revenues would be offset by an increase of the tax on gasoline, in proportion to the sales of biofuels, so that the gross product of fuels taxation remains constant. The main objective of this project is to reduce CO2 emissions and air pollution in road transport (FDF).

The potential for reducing greenhouse gas (GHG) emissions on a global scale is probably one of the main interests in biofuels, from an environmental point of view. Thanks to their renewable nature indeed, biofuels have a potential for reducing emissions in the range of 1,5-2,5 kg CO2 per litre (data from the FDF and the EU), especially when feedstocks include wastes and residues.

According to the values above and the cost of biofuels (higher than that of conventional fuels), the cost of reducing CO2 emissions is estimated at about 100-150 €/t CO2 by the EU. According to a recent estimate of LASEN and ENERS in the case of biodiesel, it would be of the order of 100-450 CHF/t CO2 in Switzerland, depending on the rate of incorporation, the origin and the nature of biodiesel.

The development and economic viability of biofuels is today still dependent on subsidies. The latter are generally limited in time, and can be direct (in the form of tax exemption or reduction) and/or indirect (in the form of aids to the agricultural and/or the industrial sector). In Switzerland, biofuels produced in the national territory as part of pilot projects are exempted from the tax on mineral oils. The amendment of the Limpmin however aims at extending the exemption to all biofuels, whether they are imported or produced in Switzerland.

Mxtures with up to 5% vol. biofuels (B5, E5), distributed to the general public in various service stations in Switzerland, are generally sold at the same price as conventional fuels (thanks to the tax exemption). The price of these mixtures is however strongly related to the price of diesel and gasoline.

The main barriers facing a higher penetration of biofuels in the EU remain economic and normative. The cost of biofuels in European Member States is still higher than that of conventional fuels (from 50% to 75% higher, even in the current situation where crude oil is expensive). Their economic viability therefore implies some kind of subsidy by the government, most usually in the form of tax exemption or reduction. The Member States where production growth was the most significant are those where biofuels were totally exempted from tax and where the tax exemption was not subject to quotas (e.g. biodiesel in Germany and bioethanol in Spain).

The present standards for vehicle fuels in the EU leave little space to biofuels, limiting the incorporation of biodiesel and bioethanol at a rate of 5% vol. in conventional diesel and gasoline respectively. Work is however underway within the EU to bring up the minimum rate of incorporation, which is actually a prerequisite for achieving the targets for 2010. In addition to these two barriers, one should also include the uncertainty associated with the agricultural policy in European Member States. The agricultural raw materials used for the production of biofuels usually represent over 60% of the production cost. If they involve higher costs of raw materials, the reforms of the Common Agricultural Policy (CAP) could lead to a deterioration in the competitiveness of biofuels and reduce their environmental merits (CHF/t CO2) with respect to alternatives.

In order to reach the targets set by the Commission for 2010, EU Member States must significantly increase the supply of biofuels on the market. This will involve adapting the standards in the short term and supporting biofuels strongly. In the medium-to-long term however, the dependence of these fuels on agricultural feedstocks can be a disadvantage if the price and availability of these raw materials are subject to a relatively high degree of uncertainty. Lignocellulosic materials (e.g. agricultural and forestry residues, dedicated production such as short rotation forestry, etc.) provide a more stable alternative. Two main fields have been the subject of advanced scientific research leading to pilot- and/or demonstration-scale applications, including (1) the conversion to ethanol by enzymatic hydrolysis and (2) thermochemical production of synfuels such as the Fischer-Tropsch process. The objective of research programmes is a deployment of these processes on the market between 2010 and 2015, at prices competitive with conventional fuels.

An essential condition to make the development of biofuels viable is that they become competitive. Scientific research together with the consideration of external costs in an equitable way must create the conditions necessary for subsidies to disappear gradually.