France's Biofuel Tax Breaks To End By 2012

By Pascal Boehm, Paris

29 September 2008

The French government has outlined its plans to bring the preferential tax treatment of biofuels to an end, phasing out current tax breaks by 2012.

French producers of both biodiesel and bioethanol currently receive significant tax exemptions from the French Fuel Tax (TIPP). The current exemption amounts to 0.22 Euros per litre for biodiesel and 0.27 Euros per litre for bioethanol. These tax breaks will be phased out gradually over the next four years, as follows.

In 2009 the exemptions will be reduced to 0.135 Euros and 0.17 Euros respectively, then to 0.10 Euros and 0.15 Euros in 2010, to 0.06 Euros and 0.11 Euros in 2011, and finally removed completely in 2012.

The primary reason given by the government is that the cost price of biofuel production is no longer significantly different from that of standard fuels, pointing to the high cost of crude as an example. The government was also keen to point out the current stress on food production, which has resulted in rising prices, to which biofuel production is seen to be a substantial contributing factor.

Biofuel investment in France has reached 1.6bn Euros, and not surprisingly the sector has been quick to respond to the removal of its tax advantage. Philippe Tillous-Borde, head of Sofiproteol, has emerged as one of the main critics of the government's plan to phase out the benefits. Mr. Tillous-Borde was quick to suggest that the government had apparently ignored the environmental benefits of biofuels, going on to state that the move would favour imports from non-EU countries, which benefit from export subsidies.

The removal of these tax breaks is expected to net the government 401m Euros next year alone.

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