31.8.92 OfficialJournaloftheEuropeanCommunities NoC223/1
II
(PreparatoryActs)
ECONOMIC ANDSOCIALCOMMITTEE
OpinionontheproposalforaCouncilDirectiveonexcisedutiesonmotorfuelsfrom
agriculturalsources(*)
(92/C223/01)
On20March1992theCouncildecidedtoconsulttheEconomicandSocialCommittee,
underArticle99oftheTreatyestablishingtheEuropeanEconomicCommunity ,onthe
abovementioned proposal.
TheSectionforEconomic,FinancialandMonetaryQuestions,whichwasresponsiblefor
preparingtheCommittee'sworkonthesubject,adopteditsOpinionon12May1992.The
RapporteurwasMrRomoli.
Atits297thPlenarySession(meetingof26May1992),theEconomicandSocialCommittee
unanimouslyadoptedthefollowingOpinion.
1.Introduction
1.1.InFebruary1988theEuropeanCouncildecided
toasktheCommissiontoinvestigateallpossibleways
ofincreasingthenon-fooduseofagriculturalcommodi­
tiesandtosubmitproposalsonthesubject.1.3.1.However,theCommitteenotedthatthepro­
posedprogrammeseemedtoogenericandall-embrac­
ing,andcouldoverlapwithotherprogrammesalready
underwayintheagricultureandforestrysector,con­
cerningfoodandbiotechnology research(3).Conse­
quently,theCommitteefeltthattherewasnoclear
indicationoftheguidelinestobepursued.
1.4.On13December1989theCommissionpresent­
edtotheCouncilitsReportontheuseofagricultural
commodities inthenon-foodsector[doc.COM(89)
597final].Thisacknowledged thatresearchunderthe
frameworkprogrammewasinsufficienttoensurethat
newtechniqueswouldbetestedonawideenoughscale
toprovetheirfeasibilitytothefarmersandprocessors
whoweremostdirectlyinterested.1.2.TheCommissionhassofarrespondedwitha
numberofmeasuresconcerningresearchanddevelop­
ment,demonstration projects,andproductionofcereals
onset-asidelandprovidedthattheyarefornon-food
use.
1.3.TheCommissionincludedtheuseofagricultural
productsasrawmaterialsforindustrialandenergy
applicationsinitsproposalforthethirdframework
programmeofCommunityactivitiesinthefieldof
researchandtechnologicaldevelopment (1990-1994),as
partofthespecificprogrammeonagricultureandagro­
industry.TheCouncil'sDecisionof23April1990(2)
statesthat'research(inthisarea)mustasamatterof
prioritybedirectedtoinnovativeprocessesaimedat
industrialexploitabilityoftheby-productsoffood­
orientedapplicationsandatdevelopingnew,cleaner
industrialandenergyapplicationsholdingoutfavour­
ableeconomicprospects'.1.4.1.Accordingly ,aprogrammewaslaunched(out­
sidetheframeworkprogramme )toconductagro-indus­
trialdemonstration projectsinvarioussectorsthatpro­
duceanduseagriculturalcommoditiesforindustrial
andenergypurposes.
(*)OJNoC73,24.3.1992,p.6.
(2)OJNoL117,8.5.1990,p.39. (3)OJNoC332,31.12.1990,p.137.

NoC223/2 OfficialJournaloftheEuropeanCommunities31.8.92
1.4.2.Anumberofpreparatoryprojectswerelaun­
ched,withextensiveinvolvementoffarmers,businesses
andtheirassociations .effectontheuseofbio-fuelsandallowthemtocompete
withpetroleumproducts.
2.3.1.Developmentofpetroladditivesandbio-diesel
couldgiveasustainedboosttothemarketinthese
products,whichtheCommissionestimatescould
accountfor5%ofmotorvehicleconsumption .1.5.Aspartoftheset-asidepackage,theCom­
missionproposed(*)thatfarmersparticipatinginsuch
programmesshouldbeauthorized,subjecttocertain
conditions,toproducecerealsfornon-fooduse(indus­
trialprocessing).Temporarygrantsandotherformsof
supportweretobeprovided.
1.5.1.TheproposalwasadoptedasCouncilRegu­
lation(EEC)No2176/90of24July1990(2).2.4.TheCommissionconsiders(3)thatthetech­
nologyinthetwosectorsissufficientlywell-advanced ,
andthatrawmaterialsareavailableatcostsnear
enoughtoworldmarketprices,fortheproposedtax
incentivetosufficeto(a)covertheextraproduction
costsvis-a-visthepetroleumproductstheyarereplac­
ing,and(b)facetheeconomic,industrialandcommer­
cialriskswhichthelaunchofanewproductentails.
2.ContentoftheproposalforaDirectiveonexcise
dutiesonmotorfuelsfromagriculturalsources
2.5.Theproposalappliestoallmotorfuelsfrom
agriculturalsources,regardlessoftheiroriginorthe
typeofagriculturalorvegetable-based productused.2.1.Theproposal[doc.COM(92)36final]waspre­
sentedbytheCommissiontotheCouncilon28Februa­
ry1992.Ittakesadifferentstartingpointfromthe
measuresmentionedabove,inthatitisbasedonuse
oftaxationasaninstrumentforachievinggeneraland
specificECpolicyaims.2.6.TheCommissionproposestoestablishareview
mechanismtoascertainthatthemeasureisequaltoits
task.
3.Generalcomments2.1.1.Theproposaltoreduceexcisedutiesonmotor
fuelsfromagriculturalsourcesisdesignedtoachieve
objectivesthatconcerntheCommonAgriculturalPol­
icy(CAP),healthandenvironmental protection,secur­
ityofenergysupply,andtransportpolicy.
2.1.2.TheproposaltiesinwiththeCommunity's
measuresforthecompletionofthesinglemarketby
1January1993.3.1.TheCommitteeendorsestheproposedlaunch
ofalong-termpolicytodeveloptheuseofagricultural
commoditiesforenergypurposes.Theproposalmarks
astepinadirectionwhichtheCommitteehasalways
supportedandrecommended .
2.1.3.Inparticular,itcomesundertheharmoniza­
tionofexcisedutiesonmineraloils.Itfollowsthesame
lineastheCommunityhastakenontaxincentivesfor
theuseofunleadedpetrol[draftDirectivesindoc.
COM(89)526finalanddoc.COM(91)43final].3.2.On29March1990theCommitteeadoptedan
Own-initiative Opiniononincreasingtheuseofagricul­
turalandforestryresourcesinthenon-foodindustrial
andenergysector:prospectsopenedupbyresearchand
technologicalinnovation.TheOpinionanalyzedthe
situationinthesector,examineditsdevelopmentpoten­
tialandidentifiedthepreconditions forfulfillingthis
potential.
3.2.1.TheCommitteeispleasedthattheCom­
missionandtheCouncilhavedecidedtosetupa
mediumandlong-termagro-industrial policyfornon­
fooduseofagriculturalcommodities ,takingonboard
theCommittee'spastrecommendations .2.2.Theproposalspecifiesthattherateofdutyin
theMemberStatesmustbenomorethan10%ofthat
chargedonthefuelbeingreplaced.
2.3.Theproposedcompulsoryreductionisbasedon
adetailedcosts/benefitsanalysiswhichconcludesthat
asubstantialcutinexcisedutycouldhaveadecisive
(1)OJNoC31,9.2.1990,p.7.
(2)OJNoL198,28.7.1990,p.6.(3)SeetheForwardStudiesUnit'sreportonBiotnass:ANew
Future,6.1.1992,pp.27-29.

31.8.92 OfficialJournaloftheEuropeanCommunities NoC223/3
3.4.3.Eachoftheseaspectsrequiresspecialconsider­
ation;aswellastaxconcessions,otheraccompanying
provisionscoveringthevariousstagesofproduction
willalsobeneeded.Thesearesetoutbelow.3.3.Theproposedstrategyisbothusefulandnecess­
aryforhelpingtosolvethestructuralproblemssur­
roundingreformoftheCommonAgriculturalPolicy
withinabalancedframeworkofinternalandexternal
ECrelations,giventhattheagriculturalsectorwill
undoubtedlybethemainbeneficiaryoftheDirective.
3.5.Withoutclaimingtohavefullycoveredthe
requirementsofsuchacomplexoperation,theCom­
mitteewouldmakethefollowingcommentsandrec­
ommendations onthesituationandproblemsofthe
differentsectorsinvolved.3.3.1.TheCommitteesupportstheCommission's
provisionforacosts/benefitsanalysisoftheproposed
measure.Thisistotakeaccountofnotonlythefiscal
implicationsbutalsotheconsequences intermsof
energydiversification ,thesecurityofsupplyandthe
reduceddependenceonoilimportswhichthisentails,
thefavourableeffectsonthetradebalance,andthe
prospectsforbetterrelationswithsomeoftheEC's
partnersinthenegotiationsontheGeneralAgreement
onTariffsandTrade(GATT),notablytheUnited
States,thankstothereducedpressureofCommunity
agriculturalexportsontheworldmarkets.3.6.Problemssurroundingtheproductionofagricul­
turalcommoditiesforenergypurposes
3.6.1.AlthoughtheDirectivecomesundertaxhar­
monizationprovisions,itclearlyhasadirectlinktothe
reformoftheCAP,whichseekstostrikeabetter
balancebetweensupplyanddemandwithintheCom­
munity. 3.3.2.Accountmustalsobetakenoftherisksof
sharpfluctuationsinworldoilpricesinthefuture.
AppropriateuseofpartofCommunityagricultural
productionforenergypurposescouldcushionthese
risks. 3.6.2.Basically,theproductionofagriculturalcom­
moditiesforprocessingintobiofuelsistobelinkedto
theset-asideofagriculturalland(ameasurewhichhas
hithertohadlittlepracticalsuccess).
3.3.3.Lastly,theCommitteeendorsestheconsider­
ationgiventotheimportantproblemofenvironmental
protection,whichtheuseofbiofuelsmayhelpby
reducingexhaustemissions.3.6.3.Tothisend,theproposal(stillunderdis­
cussion)tosetasideareasoffarmlandshouldbegiven
aboostbyalsoauthorizingthegrowingofcropssuch
ascerealsforenergypurposes.
3.4.TheCommitteewouldneverthelessliketopre­
sentsomegeneralandspecificcommentsdesignedto
helptheCommunityachieveitsobjectivesmoreeasily
andeffectively .3.6.4.Thiscouldhavepositiveeffectsonenviron­
mentalprotection,giventhewell-known'neutrality'of
biomassasregardsCO^emission,andtheabsence
duringcombustionofemissionsofsulphurcompounds
andothersubstances .
3.4.1.Firstly,theCommitteenotesthatonecannot
hopetolaunchsuchanimportantandcomplexstruc­
turalpolicysimplybygrantingtaxconcessions (essen­
tialasthesemaybe)tobiofuelusers.3.6.5.Furtherbenefitscouldbegleanedbyusing
agriculturalcropsthatcanbegrownwithlimited
recoursetofertilizersandpesticides.
3.6.6.Selectionofthemostsuitablecropsforenergy
purposesisadelicatematterwhichcouldleadtosignifi­
cantsavingsonproducercosts,narrowingthecost
differentialvis-a-visproductsfromothersources.3.4.2.Itmustberememberedthatacompletelynew
productionsectoristobesetup,whichmayattain
significantproportionsandwhichmustbeabletopro­
motespecificagriculturalcommoditiesforenergypur­
posesandnewindustrialactivitiestoprocessthem.It
willalsohavetooffertheproductsunderconditions
whichmakethemattractivetothefinalconsumer .3.6.7.TheCommitteerecommendsthattheCom­
missionstepupresearchanddevelopment (R&D)in

NoC223/4 OfficialJournaloftheEuropeanCommunities 31.8.92
ofindustrialprocesses,thesizeofinstallationsandtheir
abilitytocopewiththelikelyseasonalfluctuations
inagriculturalcommodities ,andthestorageofsemi­
processedproducts.
3.7.4.Theprocessor'scontractualrelations(withthe
farmerswhomustensurecontinuityofsupplyandwith
theoilindustrywhichmusttaketheendproduct)will
beaverydelicatematterbyvirtueoftherisksinherent
inthedevelopmentofacompletelynewsector.
3.7.5.Moreover,itisdifficulttopredictwhatwill
happentoagriculturalcommodityprices(todayfar
inexcessofworldprices)aftertheCAPreformsare
introduced .Furtheruncertaintysurroundstheoutcome
oftheproposaltotaxenergysourcesinaccordance
withtheirC02emissions(fromwhichbiomassshould
beexempt).thisfield(geneticandbiotechnological selectioningen­
eralandtrials),withnewcropsandtechniquesbeing
widelydisseminatedthroughoutthefarmingcom­
munity.
3.6.8.IntheCommittee'sview,ECresearchpro­
grammesshouldfocusmoredecisivelythanatpresent
ontheselection,developmentanduseoffast-growing
treevarietiesandligno-cellulose plantsforenergypur­
poses.
3.6.9.TheCommitteealsorecommendstheadop­
tionofR&Dprojectsforrehabilitation andexploi­
tationofmarginallandatriskofdeteriorationor
desertification .
3.6.10.TheCommitteewouldhererefertoits
AdditionalOpinionontheuseofagriculturalcommodi­
tiesinthenon-foodsector(!).ThisOpinionhighlighted
theriskofthecountrysidedeterioratingasfarmlandis
abandoned,andtheneedtominimizethisphenomenon .
3.6.11.Lastly,theCommitteewoulddrawtheatten­
tionoftheCommissionandtheCounciltothecasefor
transferringtechnologyandknowhowregardingthe
energy-related useofagriculturalresources,where
necessary,tothecountriesofEasternEurope,theCom­
monwealthofIndependentStates,anddeveloping
nationsingeneral.
3.6.12.IntheCommittee'sview,theCommission
shouldbearthispointinmindwhenconsideringthe
contentofthecooperationagreementswithEastern
EuropeancountriesandtheBalticStates.Futureguide­
linesforagriculturalproductioninthesecountries,the
needtocontrolandreduceenvironmental pollution
andthescopeforlimitingthesecountries'dependence
onoilimportsarematterswhichcouldtakeoncon­
siderablesignificance .3.7.6.TheCommitteecallsontheCommission to
assistthenewprocessingindustrybysettingupresearch
anddemonstration projectsfortheestablishmentof
pilotandexperimentalplantsdesignedtopavetheway
forindustrialapplications .
3.8.Problemssurroundingthepreparationofbiofuels
atrefineriesandatthedistributionstage
3.8.1.Thefinalstageofbiofuelprocessing,inwhich
itismixedwithpetroleum-based fuels,willnecessarily
involvetheoilrefininganddistributionsector.Here
thereareproblemswhichtheoilindustryitselfwill
havetosolve.
3.8.2.EC-supporteddemonstration projectscouldbe
veryusefulinthiscontext,soastohelpoilcompanies
developtechnologiesgearedtothesizeandstructure
ofEuropeanoilrefineries.3.7.Problemssurroundingtheprocessingofagricul­
turalcommoditiesforenergypurposes
3.7.1.Therearewell-established andwidely-used
technologiesforconvertingagriculturalcommodities
intobiofuels.Theyhavebeendevisedandtestedover
severaldecades,mainlyintheUnitedStates.
3.7.2.ThemainproblemfacingtheembryonicEuro­
peanindustryishowtochoosethetechnologiesbest
gearedtoEuropeanneeds.
3.7.3.Tothisend,companieswillhavetotackle
suchproblemsaswhattypeofrawmaterialtoprocess
(e.g.cereals,rape,sugarbeet),thechoiceandrefining3.8.3.Inparticular,itshouldbepossibletodesign
flexibleinstallations (abletodealwithbothMTBEand
ETBE)thatareabletotreatintermediateproductsof
bothmineralandvegetableorigin.
3.8.4.Theproblemofwhatarethebestblendsof
petrolformarketingiscloselytiedtofutureECenviron­
mentallegislationinthemotorvehiclesector. (i)OJNoC332,31.12.1990,p.67.

31.8.92 OfficialJournaloftheEuropeanCommunities NoC223/5
3.8.5.ExperiencewiththeUSCleanAirActshows
that,inordertoreduceemissionsofvolatileorganic
matter(particularlyhighlytoxicandcarcinogenicaro­
matics),measuresmustbetakentoalterthepetrol
mixes.
3.8.6.Insomeareaswheretheriskofmotorvehicle
pollutionisparticularlyhigh,theCleanAirActhas
madetheadditionofoxygenatedagentstopetrol
obligatory,inordertoincreasetheoctaneratingwith­
outcausingharmfulpollution.
3.8.7.Asaresult,useoftheseoxygenatedadditives
(includingethanol,ETBEandMTBE)intheUSAhas
recentlyrisensharply.
3.8.8.Europe'soilcompaniesaretodayfacedwith
theneedtoraisetheoctaneratingofpetrolinthewake
ofthesharpcutintheleadcontentofpetrollaiddown
inECDirectives .
3.8.9.Oneoptionwouldbetousemorestringent
refiningprocesses (alkylation),althoughthesewould
requiremajorinvestmentandsignificantlyincreasepro­
ducercosts.
3.8.10.Thealternativewouldbetoaddoxygenated
agentsofmineralorvegetableorigin(ashappensinthe
USA).Europeancompaniesarefamiliarwiththisoption
astheyhavebeenfollowingtheproblemforyears.
3.8.11.Onepointtobearinmindisthatmarketing
ofthesenewtypesofcleanerpetrolcouldleadtolower
andlessharmfulemissionsnotonlyfromnewcars
(equippedwithcatalyticconverters)butfromallcars
ontheroad.
3.8.12.Thereisoneotherproblemwhichwillrequire
theactivecooperationoftheEuropeanoilindustry:
theneedtodecidehowthenewblendsofpetroland
biofuels(alsoblended)fordieselenginescanbestbe
retailed.alcohol(methanol),vegetableoilandchemicallymodi­
fiedvegetableoil.ForeachofthesetheCommission
citestheCombinedNomenclature codefromtheCom­
munity'sintegratedtariff.
4.1.1.TheCommitteeaskstheCommission tobe
moreexplicitandclear,giventhattheprovisionwill
alsobeofconcerntoanumberofsmallfarmersand
smallbusinesses .Forexample,itwouldbehelpful
tospecifythatbiofuelalcoholsobtainedfromwine
distillationareincluded,aswellasmethylalcoholobtai­
nedfromthedistillationofligno-cellulose forestprod­
ucts.
4.2.UnderArticle3,aMemberState'srateofduty
onbiofuelsmustnotexceed10%ofthatleviedon
unleadedpetrolanddiesel.
4.3.TheCommitteedrawstheCouncil'sandCom­
mission'sattentiontotheneedtoensurethatMember
Statesdoinfactharmonizetheirexcisedutiesonoil
productsasrequiredbyotherproposedDirectives[doc.
COM(89)526finalandCOM(91)43final].Iftheydo
not,therewillalsobeseriousimbalancesanddiver­
gencesinthetaxtreatmentofbiofuels.
4.4.Article5providesforthesetting-upofamechan­
ismtoreviewperiodicallywhetherthemeasureisequal
toitsobjective.Specialaccountwillhavetobetaken
offiscal,economic,agricultural,energy,industrialand
ecologicalaspects.
4.5.TheCommitteeconsidersthatperiodicreview
ofthemeasuremaybejustified.However,itiscon­
cernedthatthecontinuityofthetaxregimeforbiofuels
mightbejeopardizedbythis,andthatinterestedoper­
atorscouldbediscouragedfrommakinglong-term
investmentdecisions .
4.6.TheCommitteeconsidersitimportantthatthe
Councilshouldmakeaformalpoliticalcommitment
guaranteeingthecontinuityanddurationofitscon­
cessionarytaxpolicyforfuelsofagriculturalorigin.4.Specificcomments
4.1.Article2oftheproposalliststhefuelswhich
thereducedrateistoapplyto:ethylalcohol,methyl
DoneatBrussels,26May1992.
TheChairman
oftheEconomicandSocialCommittee
MichaelGEUENICH