Demand and Supply-side Dynamics in the EU Biofuels Market

By assessing production and imports of biofuel, in addition to service station and vehicle numbers in selected national markets, this brief considers the availability of the fuel. It also assesses the drivers for consumer demand for biofuels, including current taxation policies. Vitally it examines how this has changed over the last 12 months.

Report Highlights
The lack of fiscal incentives for biofuels has had a significant impact on sales. Sales of high-blended biofuels have suffered in particular as they have lost their price advantage against regular petrol and diesel. Falling demand for these stronger blends has also been a factor in a number of biofuel producers going bankrupt.

Europe's production base for biofuels has also been severely affected by the large increases in US imports to Europe. The disparity in the subsidies received by US biofuel producers versus EU producers, in addition to the increase in 'splash and dash' imports, has caused many to cease trading and to sell their machinery abroad.

Despite the growing popularity of other fuels such as LPG and CNG, biofuels will remain the core alternative fuel in the future. Whereas CNG and Autogas have gained a significant share in some markets, the use of biofuels has been enshrined in legislation and they will ultimately be blended into every liter of road fuel sold in Europe.
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DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
SOURCES 1
ANALYSIS 2
Although sales of low blended biofuels remain strong, demand for B100 and E85 is weak 2
Biofuels have been more successful in Germany than in any other European market 2
Germany is the only country where sales of B100 account for a substantial part of the market 3
Contrary to all other European markets, E85 has been a success in Sweden 4
In Portugal, low blends of biodiesel account for all biofuels placed on the market 5
Historically, biodiesel has accounted for all biofuel consumption in Austria 6
Consumption of biodiesel has been growing rapidly in France 7
Almost all biofuels placed on the Dutch market are in E5 or B5 form 8
In Spain, biodiesel has been the principal driver of biofuels consumption over the last two years 9
Low blends of biodiesel account for over two thirds of biofuel sales in the UK 10
Biodiesel is the only biofuel that is used as a road fuel in Italy 11
In some European markets, the temporary financial incentives for using biofuels have expired 12
In some EU states, fiscal incentives to use biofuels have been reduced 12
The expiry of tax benefits for biofuels has had a particularly negative effect on demand for high blends 13
Subsidies on the production of biofuels in the US have had a negative effect on the European production base 14
France, Germany and Spain are all major producers of bioethanol 14
The production of biodiesel varies significantly across Europe 15
European biofuels producers have been damaged by the subsidies provided to US producers 16
As a result of US imports, European producers of biofuels have spare capacity 17
Idle capacity is having a negative impact on biofuel producers' finances 18
Nevertheless, biodiesel production capacity is continuing to increase across Europe indicating that companies will continue to suffer 19
Fuel retailers should also seek to invest in refining capacity for second generation biofuels 20
Despite the wide range of flex-fuel vehicles on the European market, take-up has been slow 21
Low blends of biofuels are currently widely available across Europe 22
Sweden aside, lack of demand high blends of ethanol has limited its availability at the pump 23
Sweden has the highest number of service stations selling E85 24
In most markets, high blends of biodiesel are mainly sold through independent distributors 25
Although biofuels will continue to be the main alternative fuel, fuel retailers should keep abreast of developments in other alternatives 26
LPG has grown significantly in popularity due to the relatively low associated costs 26
In Italy and Sweden, CNG vehicles are popular with a significant proportion of motorists 27
Although the use of electric vehicles remains limited, they have become highly popular in some densely populated areas 28
Although other technologies will continue to develop, the EU directive will ensure that biofuels continue to be the main alternative fuel 29
APPENDIX 30
Further reading 30
Ask the analyst 30
Datamonitor consulting 30
Disclaimer 30
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Figure 1: Biofuels accounted for 6.6% of total road fuel consumption in Germany in 2007 2
Figure 2: In 2007 sales of B100 represented half of all biodiesel sales in Germany 3
Figure 3: E85 accounted for 19% of all biofuel sales in Sweden in 2007 4
Figure 4: Biofuels account for 3.4% of total road fuel in Portugal in energy terms 5
Figure 5: Austrian sales of biofuels represented 3.4% of road fuel in 2007 6
Figure 6: In France, biofuels account for 3.3% of total road fuel in energy terms 7
Figure 7: In 2007, biofuels accounted for 1.5% of all road fuel in the Netherlands 8
Figure 8: In Spain, biofuels accounted for 1.2% of total road fuel sales in 2007 9
Figure 9: UK sales of biofuels represent 0.8% of total road fuel in energy terms 10
Figure 10: In Italy, biofuels represent 0.51% of all road fuel in energy terms 11
Figure 11: Reductions on duty exemptions for biofuels have been curtailed in four European markets 12
Figure 12: France produced 600 million liters of bioethanol in 2007 14
Figure 13: Germany and France are the biggest producers of biodiesel 15
Figure 14: In 2007 there were 5.23 billion liters of spare biodiesel production capacity across Europe 17
Figure 15: Between 2007 and 2008 Germany added one billion liters of biodiesel refining capacity 19
Figure 16: Blending obligations have been the principal drivers for fuel retailers offering low blends of biofuels 22
Figure 17: Currently, E85 stations exist in only eight European countries 24
Figure 18: Germany is the only EU state with a significant number of public service stations selling high blends of biodiesel 25
Figure 19: LPG vehicles have become especially popular in Poland where they represent 16% of the total car parc 26
Figure 20: In Italy, CNG vehicles have gained at 1% share of the car parc 27
Figure 21: Electric vehicles are most popular in Sweden and Norway 28
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