The production cost of biofuels is often related to the net production cost, taking into account the profits made through the sale of by-products, but also the possible subsidies to farmers or biofuel producers. The figure below presents a comparison of current net production costs of liquid biofuels (CHF/l) in various regions ofthe world.
Figure: Net production cost (in CHF/l) of biofuels according to the producing country/region
If the net production cost of biodiesel varies relatively little from one country to another, the one of bioethanol, however, can vary significantly depending on the producing country and the raw materials. The production cost of bioethanol in the EU is on average three times as high than that in Brazil and twice as high than in the United States.
On the diagram of the figure above, production costs are given free-at-plant. One must therefore include the cost of transport to the place of use. In the case of bioethanol imports from Brazil to the EU, for example, ethanol must first be transported by rail or truck from the production plant to the harbour, from where it will then be shipped to Europe by tanker, and finally distributed to end users. Throughout this trip, bioethanol will also need to be kept free of water to remain anhydrous. For ethanol produced outside the EU, one must also include customs duties amounting to 10.2 €/hl for denatured ethanol (rendered unfit for human consumption) and 19.2 €/hl for non-denatured ethanol.
In Switzerland, the amendment of the mineral oil taxation law (Limpmin) requires the Federal Customs Administration to clarify the tax regimes applicable to imported and domestic biofuels.
While the possibility of somehow "protecting" domestic biofuels has been considered [1], the GATT/WTO agreements could however require the application of unilateral measures aimed at dealing with offshore goods on an equal footing [2]. Until the new mineral oil taxation order, biofuels produced in Switzerland in the frame of pilot and demonstration plants are exempt from mineral oil tax, while imported biofuels are subject to tax (720.60 CHF/1'000 l) just like fossil vehicle fuels (diesel and petrol).
In spite of the WTO principles, the EU has taken measures to support the production of domestic biofuels (subsidies to producers, differentiated system of tax relief for some producers, custums duties on biofuels imports, etc.). In the United States also, a tax reduction is granted to biofuels and the domestic production is subsidized. The government however refuses to grant the same tax reduction to imports as for domestic production, and also introduced a customs duty that exceeds the amount of tax relief. Despite this situation, the United States imported more than 2'500 Ml in 2006 (i.e. more than 1.5 times the production of bioethanol in the EU).
