2003/238/EC: Commission Decision of 15 May 2002 on the aid scheme implemented by France applying a differentiated rate of excise duty to biofuels (notified under document number C(2002) 1866) (Text with EEA relevance)
Date: 2002-05-15
Institutions: European Commission
Subjects: France, State aid, aid system, control of State aid, excise duty, substitute fuel

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 15 May 2002

on the aid scheme implemented by France applying a differentiated rate of excise duty to biofuels

(notified under document number C(2002) 1866)

(Only the French text is authentic)

(Text with EEA relevance)

(2003/238/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(2)

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments
pursuant to the provisions cited above (1) and having regard to
their comments,

Whereas:

I. PROCEDURE PROVIDED FOR IN ARTICLE 88(2) OF
THE TREATY

(1)

Following an appeal by BP Chemicals Ltd (BP),
in its
judgment of 27 September 2000 in case T-184/97 BP
Chemicals v Commission (2), the Court of First Instance
partially annulled the Commission’s decision of 9 April
1997 (3) (the decision) in which it had declared an aid
scheme for biofuels (methyl esters of vegetable oils and
ethyl tertiary butyl ether or ETBE), notified by France by
letter dated 29 November 1996, to be compatible with
the common market.

(1) OJ C 60, 24.2.2001, p. 4.
(2) [2000] ECR II-3145.
(3) SG(97) D/3266.

its decision not

By letter dated 28 April 1997, the Commission had
any
notified France of
objections to the provisions relating to the State aid
involved in the exemption from the domestic tax on
petroleum products which France intended to grant to
certain volumes of ETBE and methyl esters.

to raise

(3)

(4)

(5)

(6)

By application lodged at the Court of First Instance on
20 June 1997, BP Chemicals Ltd appealed against the
Commission’s decision.

In its judgment of 27 September 2000, the Court of
First Instance gave the following ruling:

(cid:145)1.
Dismisses as inadmissible the action brought
against Commission Decision SG(97) D/3266 of 9
April 1997 concerning an aid scheme for biofuels in
France in so far as that Decision relates to measures
applicable to the esters sector.

Annuls the contested decision to the extent to
2.
which it relates to measures concerning the ETBE
sector.(cid:146)

The judgment was notified to the Commission on 2
October 2000. (4)

Pursuant to Article 233 of the Treaty, the Commission
is required to take the necessary measures to comply
with the judgment of the Court of First Instance.

(4) The Commission lodged an appeal against the judgment.

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(7)

As far as the measures concerning the ETBE sector are
concerned, since the annulment of the decision of 9
April 1997 withdrew the coverage of the authorisation
under Article 87(3)(c),
the administrative procedure
must revert to the preliminary examination stage, which
an
the Commission must
appropriate decision.

conclude

taking

by

(8)

the Commission
By letter of 27 December 2000,
notified its decision to initiate the procedure under
Article 88(2) of the Treaty in respect of the measures
under the scheme that related to the ETBE sector.

(9)

By letter registered as received on 30 January 2001,
France submitted its comments.

(10)

(11)

(12)

Following the publication in the Official Journal of the
European Communities of
the notice informing third
parties of the initiation of the procedure provided for in
the Treaty (5), 19 third parties,
Article 88(2) of
including
(BP
Petroleum Chemicals
British
Chemicals) and the United Kingdom (in support of BP
Chemicals), submitted their comments before the end of
March (6).

Ltd

The comments were forwarded to France by letters
dated 18 and 30 April 2001 (7). By letter registered as
received on 11 June 2001, France
submitted its
comments on the third party comments.

the

parallel with

abovementioned

In
procedure,
following the partial annulment by the Court of First
Instance of the Commission’s decision of 9 April 1997,
the French authorities, by letter dated 17 November
2000, acting in accordance with Article 8(4) of Council
Directive 92/81/EEC of 19 October 1992 on the
the structures of excise duties on
harmonisation of
oils (8),
by Directive
as
mineral
94/74/EC (9), asked the Commission for authorisation to
apply an exemption from the domestic consumption tax
on vegetable oil esters and ethyl alcohol derivatives
where the alcohol component is of agricultural origin.

amended

last

(5) See footnote 1.
(6) Apart from BP Chemicals and the United Kingdom, the following
parties also submitted comments (by order in which the comments
received): AGPB CØrØaliers de France, Ethanol Union,
were
de
Sofiproteol,
l’environnement et de la ma(cid:238)trise de l’Ønergie, SAF Agriculteurs de
France, Saint Louis Sucre, DRC, Syndicat national des producteurs
d’alcool agricole, Association pour le dØveloppement des carburants
agricoles, Sucrerie de Touri, Sucrerie Bourdon, ConfØdØration
gØnØrale des planteurs de betteraves, Ouest-ETBE, Total Fina Elf and
Nord-ETBE.

Ethanol Holding, Union

SDA, Agence

(7) In the second letter, the Commission forwarded translations into
the comments submitted by BP Chemicals and the

French of
United Kingdom.

(8) OJ L 316, 31.10.1992, p. 12.
(9) OJ L 365, 31.12.1994, p. 46.

(13)

the Commission’s

Following
further
information, France supplied the details necessary for
examination of the matter in letters dated 18 January
2001 and 21 February 2001.

requests

for

(14) On 11 December 2001,

to Article 8(4) of Directive 92/81/EEC,

the Commission adopted a
proposal for a Council Decision (10) authorising France,
pursuant
to
grant, from 1 November 1997 to 31 December 2003,
permits for the application of differentiated rates of
excise duty to the fuel mixtures (cid:145)petrol/ethyl alcohol
derivatives whose
of
agricultural
agricultural origin(cid:146) and (cid:145)diesel/vegetable oil esters(cid:146) and to
the mixture (cid:145)domestic heating fuel/vegetable oil esters(cid:146).

component

is

(15) On 25 March 2002, by Decision 2002/266/EC (11), the
Council authorised France to apply, from 1 November
1997 to 31 December 2003, a differentiated rate of
excise duty to biofuels in accordance with Article 8(4)
of Directive 92/81/EEC.

II. THE JUDGMENT OF THE COURT OF FIRST
INSTANCE

(16)

In the decision which was partially annulled,
Commission had:

the

(cid:151) examined the aid scheme in the light of the rules
governing State aid and found it to be compatible,

(cid:151) declared

the

that

the
notified
characteristics of a pilot project within the meaning
of Article 8(2)(d) of Council Directive 92/81/EEC,
which allowed the Commission to declare the aid
scheme compatible with the common market,

scheme

had

(cid:151) decided to raise no objections

to the notified

scheme.

(17)

In its judgment, the Court of First Instance found that
by adopting the contested decision, as it relates to the
ETBE sector,
the Commission exceeded the powers
conferred on it by Article 88(3) of the Treaty, as the
scheme does not meet the requirements laid down by
Article 8(2)(d) of Directive 92/81/EEC. In particular, the
Court found that by deciding that the aid scheme was
to be regarded as a pilot project for the technological
development of more environmentally-friendly products,
the Commission infringed Article 8(2)(d) of Directive
92/81/EEC.

(10) COM(2001) 744 final.
(11) OJ L 92, 9.4.2002, p. 22.

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(18)

(19)

The measure proposed by France, as it stands, goes
beyond the scope of a pilot project, as interpreted by
it appears
the Court of First Instance, and, therefore,
that
the
have
notified measure
characteristics of a pilot project within the meaning of
Article 8(2)(d) of Directive 92/81/EEC.

does

not

the

Furthermore, the Court states in its judgment that there
is no obstacle to tax-exemption schemes for better
market penetration by biofuels being the subject of a
Council decision adopted pursuant to Article 8(4) of
Directive 92/81/EEC:

that

finally,

(cid:145)It must be observed,
there is no
obstacle to tax-exemption schemes for better market
penetration by biofuels, such as the one at issue in
this case, being established in accordance with the
Altener programme, provided that the requirements
of Directive 92/81/EEC are complied with, since
such schemes may be the subject of a Council
decision adopted pursuant
to Article 8(4) of
Directive 92/81/EEC. Numerous programmes in the
Member States designed to encourage the use of
more environmentally-friendly fuels have, moreover,
been approved by the Council in accordance with
that provision, as is clear from the answers given by
the Commission to the written questions put to it
by the Court and from the statements of
the
Commission’s representative at the hearing.(cid:146)

III. DESCRIPTION OF THE MEASURE

(20) On the basis of the scheme notified in 1996, France
planned to grant a reduction in the domestic tax on
petroleum products (TIPP) for certain products obtained
be
from vegetable
raw materials
incorporated
The
differentiation in excise duty is granted to these
products irrespective of the method of cultivation or of
the vegetable raw material used to produce them. The
aim of the measure is to introduce a limited quantity of
biofuels into motor vehicle fuels and domestic heating
oil.

intended
combustibles.

fuels

into

or

to

(23)

(24)

There is one differentiated excise duty rate for ETBEs
(and one for methyl esters of vegetable oils). A specific
rate is applied to each sector because of the different
characteristics, production costs and uses involved. The
rate applicable to each sector is set by the annual
Finance Acts adopted by the French Parliament. The
maximum volume of biofuels which may qualify for the
reduction can be determined on the basis of
the
budgetary appropriation allocated to the scheme.

In the amending Finance Act for 1997 (12), France made
provision, in Article 25, for partial exemption from the
TIPP, which was set at FRF 230 per hectolitre for esters
of vegetable oils incorporated into domestic heating oil
and FRF 329,50 per hectolitre for the alcohol content of
the derivatives of ethyl alcohol (ETBE in particular) of
agricultural origin incorporated into high-grade fuels
and petrol. That exemption from duty is given to the
production units approved by the French authorities
following a tendering procedure announced in a notice
published in the Official
the European
Communities.

Journal

of

(25)

Furthermore, the rates of reduction in the TIPP must be
scaled back in line with the productivity gains achieved
by these sectors and with changes in the rules on the
incorporation of biofuels into fuels and combustibles.

(26)

The benefit of this exemption from the TIPP is granted
to biofuel production units approved by the French
authorities following a tendering procedure published in
the European Communities. Such
the Official
approval authorises the units to market
in France a
specific volume of biofuels that will benefit from the tax
exemption provided for by the annual Finance Act.

Journal of

(27)

The eligibility criteria for requesting approval are as
follows: the production unit must:

(21)

The measure applies
to ETBEs where the alcohol
component is of vegetable origin (and to methyl esters
of vegetable oils).

(cid:151) be up-to-date with its

security and tax
obligations vis-(cid:224)-vis the country on whose territory
it is established,

social

(22)

The marketing of the products in question qualifies for
total or partial exemption from the TIPP, subject to an
in order to compensate in part
annual appropriation,
for
such products
compared with fossil fuels. The excess cost is assessed
on the basis of the average cost prices of biofuels sold
in France.

excess production cost of

the

(cid:151) be in compliance with the environmental rules and
regulations of the country on whose territory it is
established,

(12) Act 97-1239 of 29 December 1997,

Journal officiel de la
RØpublique fran(cid:231)aise (JORF) of 29 and 30 December 1997,
p. 19101.

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(cid:151) provide a technical

report describing its biofuel
plant and demonstrate its capacity to produce fuel
that meets the technical specifications set out in the
notice. Samples will be taken to establish proof of
such capacity,

production capacity as a result of new investment
specifically for the production of biofuels. The year
with the highest production level amongst the last
three years will be taken as the relevant reference
year,

(cid:151) submit a detailed report on the activities of the unit
during the last three financial years, specifying the
production of biofuels,
the unit’s other chemical
activities and relating the unit’s activities to those of
any industrial site to which it may belong,

(cid:151) in the case of recent and specifically built units
whose capacity is being built up,
the technical
production capacity of the sites will be taken as the
reference. This criterion applies
to investments
carried out in the last three years,

(cid:151) detail the investment carried out specifically for the
production of biofuels (technical specifications and
financial amounts),

(cid:151) undertake to ensure that the biofuels are marketed
in accordance with the

in French territories
provisions of the law,

(cid:151) a unit which has been adapted to produce biofuels
without any new investment, but which has not yet
produced any biofuels can, during an initial
(cid:145)test(cid:146)
period, be given approval for a maximum quantity
of 5 000
tonnes a year. This quantity will be
allocated in respect of the first invitation to tender
(where the application is admissible); once a second
invitation to tender has been published, the relevant
production unit may apply for additional quantities
if, during the previous
it has
financial year(s),
marketed the approved quantities in France,

(cid:151) undertake to provide a six-monthly report on the
conditions under which the biofuels are produced,
the quality controls carried out and their results and
to specify in the sales contracts for biofuels that the
purchasers must carry out technical monitoring of
the marketing and use of the biofuels sold in France,

(cid:151) specify the quantity and the type (ETBE or methyl
ester of vegetable oil) for which approval is being
requested.

(cid:151) operators carrying out new investment

for

the
production of biofuels may request approval for the
planned technical capacity provided that, on the day
of the application for approval, an irreversible start
has been made on the projects. The approval will be
final only once the relevant unit has been built and
started operating. According to the French
has
the requirement and operation of the
authorities,
condition regarding the irreversible nature of
the
investment are similar to those provided for in
Council Regulation (EC) No 1868/94 of 27 July
1994 establishing a quota system in relation to the
production of potato starch (14).

(28)

The quantities for which a unit may request approval
are determined on the basis of the following criteria:

(29)

Each individual approval will be checked every year, and
the approved operators will have to provide evidence
each year that:

(cid:151) in the case of units which are already operating and
have regularly marketed biofuels, the criterion will
be the production capacities of these sites that allow
effective and regular production of biofuels (13),
unless the units are already in operation and have
previously obtained approval
in a Member State,
though without producing up to the level approved.
In that case, they may not apply for approval for a
actual production
than their
greater
quantity
they can show an increase in
hitherto, unless

(13) This criterion relates to all production units in regular operation,
whether or not they have received approval from a Member State.

(cid:151) they have a supply of vegetable matter consistent
with their approval and that the quantities produced
the previous year have indeed used only vegetable
raw materials,

(14) OJ L 197, 30.7.1994, p. 4. Article 2 of the Regulation provides
that (cid:145)a reserve of a maximum of 110 000 tonnes shall be created
to cover production realised in Germany in the marketing year
1996/1997
from
such
investments irreversibly undertaken before 31 December 1994(cid:146).
France will also examine the irreversible nature of the relevant
project,
to that which the
adopting an approach similar
Commission adopted under this Regulation.

production

provided

results

that

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(cid:151) they have marketed in France a quantity of biofuels
is
complying with the French specifications that
equal to the quantity specified in their approval.

(32)

The tax exemption measure is not
limited in time.
Approval is granted for only three or nine years as from
the date on which approval is given (Article 3 of Decree
No 98-309 of 22 April 1997).

(30) A notice of invitation to tender for approval of biofuel
production units, for maximum quantities of 350 000
tonnes of esters and 270 000 tonnes of ETBE, was
the European
published in the Official
Communities (15). By letter dated 18 February 1998, the
French authorities notified the details of the scheme to
the Commission together with the results of
the
invitation to tender. Four applications for approval were
lodged, covering a total quantity of 227 600 tonnes a
year for the ETBE sector.

Journal

of

(31)

The national measure (16), which entered into force on
1 November 1997 and was established on the basis of
the Commission’s decision of 9 April 1997, may be
summarised as follows:

Number of recipients
on the basis of the
number of applications
for approval deemed
eligible by the
committee responsible
for examining
applications

Amount of the benefit
per recipient depends
on the quantity
approved

Expected annual budget
expenditure

Three factories approved

FRF 329,5 FRF/hl or FRF 1 950,5/t

Quantity of 270 000 t of ETBE
proposed in the first invitation to
tender in 1997, i.e. a ceiling of
FRF 527 million. Quantity actually
approved: 219 000 t; maximum
annual expenditure FRF 427
million. For 2001 (in line with
what was planned), new invitation
to tender for additional capacities
of 155 000 t/year.

Rate of excise duty
actually charged

ETBE incorporated into high-grade
lead-free fuel at the level of 15 %:
FRF 335,20/hl.

(33)

The tax exemption for
the approved quantities of
biofuels applies to biofuels which meet the technical
specifications laid down by law and which are produced
in the units approved by France, up to the approved
quantity. Only ETBE (17) may benefit
from the tax
exemption, and it must be mixed with fuels and/or
combustibles in bonded warehouses for production or
storage located in the Community.

(34) No production may be subcontracted. Each unit’s
production must be monitored by the competent
authority designated by the Member State of production
in agreement with France, and all production intended
for the French market must be covered by a production
authority, which must
certificate
accompany the biofuels and be presented at the customs
office responsible for the bonded warehouse in which
the mixing is to take place.

issued by

that

(35)

The rate of exemption is specified on the exemption
certificate. The exemption certificate allows the same
quantity of
fuel or combustible to be released for
consumption, at a reduced rate of excise duty, as the
quantity of biofuel specified on it.

(36)

The approved units must not receive any aid, including
production aid, that is incompatible under Article 87 of
the Treaty as regards their biofuel production activity.

(37)

The approval given to the units selected is valid for nine
years or
three years. The type of approval given
depends, firstly, on the volume of physical investment
in the biofuel production and its depreciation in relation
to the biofuel production capacity of the relevant site
and, secondly, on the volume of biofuel production in
relation to the total production of
the site in the
chemical sector.

(15) OJ C 350, 19.11.1997, p. 26.
(16) These provisions are based on Article 25 of the amending Finance
Act for 1997, on Decree No 98-309 of 22 April 1998 laying
down the conditions required for taking part in the invitation to
tender for the marketing on French territory of biofuels on which
the TIPP is reduced, and the Decree of 22 April 1998 setting up
the committee for examining applications for approval of units
producing biofuels.

(38)

In order to measure the investment carried out, the ratio
(cid:145)net assets immobilised (18)/production capacity(cid:146) applied
to the biofuel production workshop is used. For the
purposes of this ratio, the French authorities distinguish

(17) Esters of vegetable oils are in fact also eligible, but are not covered

by this Decision.

(18) Straight-line depreciation over ten years.

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two categories of unit (19),
those with ratios greater
than FRF 2 000/tonne for the ETBE sector (and FRF
700/tonne for the ester sector) and those with ratios of
the order of FRF 400/tonne. If the values are greater
than the threshold of FRF 2 000/tonne for the ETBE
the ester sector), a
sector
nine-year approval
threshold,
approval is for three years.

(and FRF 700/tonne for

is granted. Below that

(39)

In order to gauge the scale of biofuels activity, the ratio
(cid:145)biofuels activity/chemical activity of the site (biofuels +
chemicals)(cid:146) is used.

(45) Applications

for approval must be submitted by a
deadline to be specified, and France reserves the right
not to examine applications received after the deadline
or incomplete at such time. Applications must be drawn
up in French, and any official documents drafted in
another language must be accompanied by a French
translation.

(46) All tenderers must be informed of the results of the
examination of their application within a given period
following the date on which it was submitted.

(40) Only one type of approval

is granted per production
unit. The type of approval is determined by all of the
technical
immobilised,
production capacity and scale of biofuels activity in
relation to the total activity of the site) on the date the
approval was requested.

characteristics

assets

(net

(47) As far as the tax mechanism is concerned, when the
biofuels enter
the oil establishments under customs
control (bonded warehouse for storage or production) in
which they are to be incorporated into the petroleum
products,
the operation is
issued with an exemption certificate for the amount
corresponding to the quantity received multiplied by the
rate of exemption. These certificates are then set against
the
of
release
petroleum products.

the operator carrying out

consumption

declarations

for

of

can either

(41) At the end of the period of validity of the approval,
France
the volume of biofuels
reduce
benefiting from the measure or start a new tendering
procedure in respect of
If a
producer is not able to supply the quantities for which
approval will be
approval has been given,
withdrawn.

the volume released.

the

(48)

If the mixing is carried out in a Member State other
than France, the document accompanying the product
will state that the petroleum product contains a biofuel
and will
specify its nature. When the excise duty
becomes payable in France, an exemption certificate will
be issued for an amount corresponding to the quantity
in the petroleum product
contained
of
multiplied by the rate of exemption.

biofuel

(42)

The selection of projects is carried out by the Ministry
of Agriculture, Fisheries and Foodstuffs and the Ministry
of Economic Affairs and Finance, once a committee
appointed for this purpose by the Prime Minister has
given its opinion. The number of firms selected and the
approval quantities allocated to them are decided by
those two Ministries, which for
this purpose take
account of the criteria stipulated and the tax exemption
appropriations available.

IV. COMMENTS FROM INTERESTED PARTIES

1. General

(49) A total of 19 third parties, including British Petroleum
Chemicals Ltd (BP Chemicals) and the United Kingdom
(in support of BP Chemicals), submitted comments (20).

(43)

If the tax exemption appropriations are not sufficient to
the quantities for the projects selected,
cover all of
approval
to the
applications deemed admissible.

is given in proportion (quantity)

2. Comments from BP Chemicals

2.1. Introduction

(44)

If a firm considers that its interests have been harmed,
an ex gratia appeal may be lodged with the relevant
Ministries.

(50)

in its
In its comments, BP Chemicals explains why,
view, the existing State aid arrangements for the French

(19) Since they do not know the figures for a larger number of
production units, the French authorities can only refer to the
ratios presented by companies approved in France.

(20) See footnote 6. BP Chemicals restated its arguments at a meeting

held on 29 January 2002 at the Commission in Brussels.

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bioethanol scheme distort competition on the traditional
ethanol market. On this question, BP Chemicals refers at
the outset to a sentence at the end of the explanatory
memorandum to the proposal for a Regulation on the
common organisation of the market in ethyl alcohol of
agricultural origin:

(cid:151) BP Chemicals’ concern for distortion of competition
in the ethanol market therefore arises from the fact
that ethanol can currently be made in the same
production unit for both the fuel market and the
traditional market, allowing various (cid:145)cross-subsidies(cid:146)
to benefit the competitive position of the product
sold on the traditional market,

(cid:145)the EU alcohol industry can expect challenges on its
traditional market outlets from alcohol produced
under
large-scale biofuel programmes, with tax
exemptions as an additional incentive(cid:146) (21).

(cid:151) BP Chemicals believes that most of this distortion of
competition could be eliminated if fuel ethanol was
made on different production sites
to those
supplying the traditional market for ethanol,

(51)

BP Chemicals proposes measures which, in its opinion,
would remove this distortion of competition. It provides
some details on the Spanish bioethanol promotion
scheme, which is currently operating in a way which, in
its view, minimises the distortion of competition. BP
Chemicals
is not opposed to the
that
production and voluntary use of biofuels.

states

it

(cid:151) BP Chemicals therefore suggests the introduction of
conditions in the scheme to ensure that bioethanol
production plants are physically separate from the
non-fuel ethanol production plants,

(52)

BP Chemicals emphasises that
issues concerning biodiesel.

it has not raised any

(cid:151) in essence, BP Chemicals would like to see that the
State aid is approved, but only on condition that
production units for fuel ethanol are not used to
produce ethanol for the traditional market,

(53)

BP Chemicals is not convinced that the French scheme
the scheme
is not discriminatory, since,
provides for different rules for access of new entrants
compared to firms which were already members of the
previous scheme.

in its view,

(cid:151) it is announced that the French Government will
support a larger scheme in the future. It would be
easy to place this additional fuel ethanol production
into those plants which are currently producing for
both the fuel and traditional markets. By doing this,
these plants would be
fully
dedicated to fuel production,

converted to be

(54)

The main points in the comments submitted by BP
Chemicals as part of this examination are as follows:

(cid:151) its concern is that there should be no distortion of

competition in the traditional ethanol market,

(cid:151) the ethanol producers who have contracts under the
French bioethanol
scheme are also involved in
producing ethanol for the traditional market. The
effect of the State aid for French fuel ethanol is to
these producers and
improve the economics of
increase their competitiveness
in the traditional
market,

(cid:151) in view of

the above, BP Chemicals can see no
reason why a separation of
the two types of
production would be difficult or onerous to achieve
in the near future. It should be particularly easy to
achieve this condition for any new distilleries that
may be built in future,

(cid:151) BP Chemicals believes that

this condition should
apply to fuel ethanol schemes in other Member
States,

(21) COM(2001) 101.

(cid:151) if the State aid scheme is to be approved, it must

include a specific condition,

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(cid:151) this condition would be that fuel ethanol must be
from the

produced in separate production sites
production of ethanol for the traditional market,

(cid:151) if this guarantee is set, BP Chemicals’ concerns over
the French scheme would be fully addressed, and
the way would be cleared for expansion of
the
voluntary use of bioethanol in the Community.

(55)

BP Chemicals then goes on to put forward very detailed
arguments against the French tax exemption scheme for
biofuels.

2.2. BP Chemicals’ comments on the ethanol market

this sector uses agricultural alcohol. The Community
rules on spirit drinks allow synthetic alcohol to be
used in drinks up to an alcoholic strength of 15 %
(but not above that strength), though for reasons of
habit and perception, the (cid:145)potable(cid:146) sector uses only
agricultural alcohol,

route

(cid:151) the third largest sector currently is fuel ethanol.
Although both agricultural alcohol and synthetic
alcohol can be used for fuel, the cost of producing
ethanol by either
is high compared to
convention fuel costs. In consequence, ethanol can
only be an economic component of gasoline when
some form of aid is provided. Since State aid is
provided only for agricultural alcohol under various
biofuel programmes,
the fuel sector is in effect
reserved, by virtue of the economics, for agricultural
alcohol.

(56)

is made

(cid:145)alcohol(cid:146). When it

BP Chemicals points out that ethanol is also described
as (cid:145)ethyl alcohol(cid:146) and often simply though inaccurately
from agricultural
as
feedstocks by fermentation, it tends to be described as
(cid:145)agricultural alcohol(cid:146) and when made for use in the fuel
is generally called (cid:145)bioethanol(cid:146). Ethanol
market,
produced by chemical
is generally called
that all
(cid:145)synthetic alcohol(cid:146). BP Chemicals points out
these products are the same chemical substance and,
provided they undergo an appropriate purification
process, they are technically equivalent.

synthesis

it

(57)

BP Chemicals states that there are three basic sectors
within the Community ethanol market:

very

diverse

is currently the industrial sector. This
(cid:151) the largest
comprises
solvent
a
applications and chemical
feedstock uses. Solvent
applications include ink manufacture, cosmetic and
aerosol manufacture, certain paints, cleaning agents,
car care products (such as windscreen wash) and
pharmaceutical purification solvent,

range

of

(58) According to BP Chemicals, synthetic ethanol competes
with agricultural ethanol
industrial
sector, but it is not allowed to compete with agricultural
in the rest of the ethanol market. Currently,
alcohol
synthetic ethanol
the
supplies about
industrial sector and agricultural ethanol supplies the
rest.

in the traditional

two thirds of

(59) According to BP Chemicals, this situation means that
competitive position of
any improvement
in the
agricultural alcohol products has an effect
in the
industrial market. BP Chemicals therefore welcomes the
in the decision to initiate the procedure
fact
that,
provided for
the
Commission has identified the need to examine whether
the
distort
competition with synthetic alcohol on the traditional
market.

in Article 88(2) of

production will

the Treaty,

growth

biofuel

in

(60)

BP Chemicals argues that, because the State aid is in the
hands of only a few of the many agricultural ethanol
producers, there will also be distortion between aided
and unaided agricultural ethanol producers and that this
will be manifest in all parts of the market.

(cid:151) the second largest is currently the (cid:145)potable(cid:146) sector,
which comprises alcohol as an ingredient for spirit
drinks (such as vodka, pastis and gin) and as a raw
for manufacturing vinegar. Traditionally,
material

(61)

BP Chemicals provides the figures given in the following
table. EU wine alcohol is not included in the analysis:

10.4.2003

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Official Journal of the European Union

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EU ETHANOL MARKET

1999 EU ethyl alcohol market

EU supply

EU production

Opening stock

Closing stock

Net sales from EU producers

Imports duty-free

Imports duty-paid

Fuel ethanol

Drinks and vinegar

Drink exports

Drink imports

Industrial

Industrial exports

Industrial imports

Fuel ethanol

Synthetic ethanol

Agricultural ethanol

Bioethanol

EU demand

By production type

By end-use sector

Drinks and vinegar

Solvents and chemical feedstock

Fuel

’000 hl

14 245

3 156

2 890

14 511

832

243

1 300

Total supply

16 886

’000 hl

4 327

470

650

9 247

573

425

1 300

Total sales

16 992

’000 hl

6 800

9 400

1 300

Total

17 500

’000 hl

5 447

10 245

1 300

Total

16 992

L 94/10

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Official Journal of the European Union

10.4.2003

(62)

for ethanol

BP Chemicals considers that, in evaluating the impact of
the French State aid scheme on the traditional ethanol
market, it is essential to remember that the traditional
market
is a single market within the
European Union and that consequently any distortion in
the French market has wider repercussions. Similarly, if
bioethanol State aid in other Member States also distorts
the market, BP Chemicals considers that it too builds
upon the distortion caused by the French scheme. BP
Chemicals states that it is also essential to take into
account other bioethanol projects in the Community. BP
Chemicals
the
Commission is fully aware of various bioethanol units
which are already operating or which are planned for
the near future.

therefore wishes

ensure

that

to

Member State

Italy

Netherlands

Spain

Sweden

Total planned production
hectolitres per annum

2001 to 2004

2005 onwards

1 875 000

3 000 000

300 000

300 000

4 000 000

4 000 000

500 000

500 000

Total

9 101 600

10 376 600

(63) As far as France is concerned, BP Chemicals notes that
the
French Government
in 2000 the
construction of
two new ETBE units which would
produce an extra 155 000 tonnes of ETBE. As with the
existing three units, both of these would be built by
Total Fina Elf.

approved

(68)

BP Chemicals points out that these planned production
figures should be seen in the light of the Commission’s
own targets for growth in biofuels. BP Chemicals notes
that the Altener programme is currently aiming at 5
million tonnes of liquid biofuel production.

(64)

(65)

(66)

In Spain, one ethanol unit
is already in production.
Construction has already begun on a second ethanol
unit. The
converted
methyl-tertio-butyl-ether
(MTBE) units at Repsol and
CEPSA refineries.

appear

ETBE

units

be

to

In Sweden, a relatively small-scale bioethanol project
fuelling the buses in Stockholm has been implemented.
A new scheme is now being launched, supplied by the
company Agroetanol. The plant is already in place and
was expected to produce 0,5 million hectolitres in
2001.

In Italy, bioethanol production has not yet commenced.
However, a number of Italian producers are involved in
very ambitious plans
for a large-scale production
scheme. According to BP Chemicals, the production of
fuel ethanol
to 1 900 000
in Italy should amount
hectolitres a year in 2002 and 3 000 000 hectolitres in
2003.

(67)

Summarising, BP Chemicals provides
figures:

the following

Member State

Finland

France

Total planned production
hectolitres per annum

2001 to 2004

2005 onwards

200 000

350 000

2 226 600

2 226 600

(69)

(70)

2.3. BP Chemicals’ comments on bioethanol benefits and

disbenefits

BP Chemicals states that it is impossible to know what
the environmental balance will be without having details
of the ethanol production process being used. While the
primary environmental
is a
relative lowering of CO2 emissions compared to the use
of fossil
fuels, BP Chemicals considers that there are
other aspects of bioethanol production which also need
to be considered.

justification of bioethanol

It

for

is heavily influenced,

the ethanol processing,

In the view of BP Chemicals, the CO2 balance from a
bioethanol or ETBE scheme depends entirely on the
CO2 balance from the ethanol production chain. This
can vary substantially.
for
example, by what is done with the co-products from the
process. Where they are used as animal feed rather than
being used as fuel
the
balance is much less favourable. BP Chemicals suggests
in its comments that the beneficiaries of the French
State aid scheme all sell their co-products rather than
using them as fuel, so the scheme is not as beneficial as
regards the CO2 balance as it might otherwise be. In
view of all the possible differences between feedstocks,
the
the method of
treatment of waste and between individual fermentation
plant and distillation operations, BP Chemicals considers
that it will not automatically be true that there is a net
CO2 reduction versus conventional fuel.

feedstock production, harvesting,

(71)

BP Chemicals notes that emissions other than CO2 arise
from the production of bioethanol. It also notes that
many of these are significant and that there is a high

10.4.2003

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potential
to be
for greater environmental burdens
generated than in the conventional production of fuel.
By way of example, BP Chemicals cites the potential for
an increase in water pollution (especially nitrate run-off
from intensive agriculture) and nitrous oxide emissions,
from the greater use of fertilisers and pesticides.

BP Chemicals considers that the extent of land required
to produce liquid biofuels on a large scale would impact
significantly on biodiversity. For example,
it has been
shown that to offset the CO2 emissions that result from
10 % of United States gasoline consumption would
require an area equivalent to 48 % of current United
States cropland to be devoted to biofuel crops.

reducing

BP Chemicals also points out that liquid biofuels are one
of the highest cost routes amongst the various options
for
emissions. Other
alternatives such as energy forestry can be far more
cost-effective (production of renewable electricity by
using crops such as miscanthus grass directly as fuel).

greenhouse

gas

(72)

(73)

(74)

BP Chemicals states, however, that, in its comments:

(cid:145)We are not seeking to establish whether bioethanol
brings benefits to the European Community. We are
not seeking to make a case against
the use of
biofuels, nor are we trying to make a case against
the State aid being needed to make such biofuels
economically viable. We are seeking only that the
State aid for bioethanol production is associated
with measures that minimise the distortion of the
the
traditional
comments).

ethanol market(cid:146)

(point 4.6 of

(75)

BP Chemicals concludes its comments on the benefits
and disbenefits of bioethanol by asking the Commission:

(cid:145)to compare two versions of the French scheme:

(cid:151) one is the scheme as proposed by the French

Government;

(76)

(77)

(78)

(79)

2.4. BP Chemicals’ comments on the intensity of the

aidintensit(cid:228)t

BP Chemicals recognises that State aid for bioethanol is
required on a long-term, continual basis for production
to be viable. By way of example,
it cites the United
States federal tax exemption scheme started in the early
1980s, with the latest renewal in 1999 leading out to
2007. BP Chemicals comments that the decline in the
intensity of subsidy paid in the United States federal
bioethanol aid scheme has been only 4 % over nearly
30 years, whilst the total subsidy has soared due to the
growth in the quantities produced.

the Treaty,

BP Chemicals notes that, in paragraph 57 of the letter
informing the French Government of the initiation of
proceedings under Article 88(2) of
the
Commission points out that, by applying a single tax
exemption rate for bioethanol under the French scheme,
it is inevitable that, even amongst those benefiting from
the
be
over-compensated than others. BP Chemicals concludes
that the scheme is set up in a way that will increasingly
strengthen the competitive position of a small number
of producers.

some will

be more

likely

aid,

to

BP Chemicals states that the aid paid under the French
scheme is high, at almost EUR 50 per hectolitre.
It
calculates that the actual level of the TIPP is less than
EUR 10 per hectolitre, well below the minimum rate for
gasoline in Directive 92/81/EEC (EUR 287 per 1 000
litres, i.e. EUR 28,7 per hectolitre).

it

the aid can increase
the firms receiving it,

BP Chemicals argues that, to appreciate the extent to
the
which the
intensity of
competitive position of
is
necessary to have an estimate of the production costs of
bioethanol. BP Chemicals estimates the basic cost of
producing bioethanol from sugar beet at around EUR
42 per hectolitre. According to BP Chemicals, the State
aid of EUR 50 per hectolitre is intended to allow Total
Fina Elf
instead of methanol and to
process this into ETBE rather than MTBE (which is the
product obtained if methanol were to be used). BP
Chemicals adds that the conversion costs for making
ETBE and MTBE are similar.

to buy ethanol

(cid:151) the other is an equivalent scheme in which fuel
ethanol production is obliged to be in separate
production facilities from ethanol production for
the
the
comments).

traditional market(cid:146)

(point 4.7 of

(80)

Since it estimates the cost at EUR 42 per hectolitre for
bioethanol, BP Chemicals finds the amount of State aid,
which it estimates at EUR 50 per hectolitre, surprising.

L 94/12

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Official Journal of the European Union

10.4.2003

(81)

(82)

(83)

(84)

BP Chemicals adds that
the way is now open for
perhaps 1 million hectolitres of wine alcohol to be fed
into various EU bioethanol schemes and that this needs
to be taken account of in the overall analysis.

(cid:151) capital

investment

and other

fixed

costs of

production are reduced per tonne of production,

the

has

notified,

Commission

Lastly, BP Chemicals notes that, since the French scheme
was
introduced
Community guidelines on State aid for environmental
protection (22). Though it is not clear to BP Chemicals
whether
the State aid in question counts as an
investment to promote renewable sources of energy, it
considers that, if such is the case, then section E.1.3.32
of the guidelines would allow the rate of aid to be up to
40 % of the eligible costs.

2.5. BP Chemicals’ comments on what it terms (cid:145)market

distortion mechanisms(cid:146)

BP Chemicals explains that its problem with the scheme
is not a fear that ethanol would be produced and State
aid claimed for it and that then, instead of going into
the biofuel market, that ethanol on which aid had been
claimed would be sold into the traditional market
(solvents, drinks and chemicals). This, according to BP
Chemicals, would be a straightforward fraud. According
to BP Chemicals, this is not happening in the French
scheme (cid:145)so far as we (BP Chemicals) are aware(cid:146) (point
6.1 of the comments).

BP Chemicals’ concern is, rather, that the scheme gives a
range of
to the
important competitive advantages
participating ethanol producers which have a distorting
effect on their competitive position in the traditional
ethanol market. BP Chemicals states that this emerges
very clearly from the explanatory memorandum to the
for a Council Regulation (presented by the
proposal
Commission) on the common organisation of
the
market in ethyl alcohol of agricultural origin. In it, the
Commission is quite
increased
explicit
competition on the internal market for ethanol:

about

the

the

implementation

(cid:145)Given the close interrelationship between alcohol of
agricultural origin and alcohol of non-agricultural
origin,
proposed
Regulation should take account of the global market
situation in the alcohol sector and therefore not
introduce measures that discriminate between the
two types of alcohol on the internal market(cid:146) (point
10 of the explanatory memorandum).

the

of

(cid:151) coproduct scale is increased, giving an increased
competitiveness in other markets such as animal
feed,

(cid:151) the contracts for fuel ethanol give the assurance of a
large contracted volume at an attractive sales price
over long periods of time,

(cid:151) this

situation also opens

for plant
debottlenecks which would not otherwise be
the scale offered by the fuel
credible without
contracts,

the way

in comparison to many of

(cid:151) the biofuel market does not demand very high
purity product
the
traditional outlets. This means that, for a producer
who is serving both the fuel and the traditional
the fuel outlet provides a home for
markets,
material which would be off-specification for the
traditional non-fuel applications. This gives a cost
saving on re-processing off-specification material,

(cid:151) the existence of an undemanding end-use (fuel)
actually allows the plant to be deliberately operated
in a more efficient way. It is possible to run the
purification section to produce only a fraction of
high-grade material and all the rest at fuel-grade,

(cid:151) having a base load of fuel ethanol allows the fixed
costs of the plant to be covered. This means that
marginal cost accounting can be applied to the
a
whole of
cross-subsidy on fixed costs.

the non-fuel production. This

is

(86)

BP Chemicals concludes that, when all these advantages
are
also
focused on a production site which is
producing ethanol for the solvents/chemicals or drinks
to the cost
market,
structure of that ethanol. BP Chemicals estimates the
amount of advantage gained on making marginal sales
into the high-quality traditional market at EUR 45 per
tonne (EUR 3,5 per hectolitre).

they give a substantial boost

(85)

BP Chemicals considers that the French State aid scheme
confers the following competitive advantages on the
producers receiving aid under it:

(22) OJ C 37, 3.2.2001, p. 3.

(87)

BP Chemicals states that the scale of the unit plays a
significant part in the overall economics for the plant. A

10.4.2003

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distillery scaled at 1 million hectolitres/year with the
technology in process control and design can
latest
operate with a typical fixed operating cost of EUR 60
per tonne of ethanol
(EUR 4,5 per hectolitre). Any
increased volume will be produced at a lower cost. In
contrast, a site producing at the relatively small level of
100 000 hectolitres a year of potable/industrial ethanol
would expect to be producing with a fixed operating
cost of EUR 150 per tonne of ethanol (EUR 11,5 per
hectolitre).

(91) According to BP Chemicals,

result

from the extension of

the extra fuel ethanol
the
demand that will
French scheme could be placed into plants currently
supplying both fuel and traditional outlets. There is a
sufficiently large additional demand coming from the
new ETBE units, so that it would be easy to fully load
those sites to become fuel only. In this way, they would
suffer no loss of production. BP Chemicals argues that
their traditional market sales would then be available to
be competed for. Swap arrangements between producers
could then easily be put in place in order to allow a
producer who had previously made traditional market
sales to continue to do so.

(88)

(89)

(90)

BP Chemicals concludes its comments by acknowledging
that it is difficult to assess the exact effect of the aid on
market prices because of other pressures which are
simultaneously putting pressure on the EU alcohol
market. BP Chemicals does not specify what these (cid:145)other
pressures(cid:146) are, but simply refers to the explanatory
memorandum to the proposal for a Council Regulation
common
(presented by the Commission) on the
organisation of
alcohol of
agricultural origin.

the market

in ethyl

(92)

2.6. BP Chemicals’ comments on options for minimising the

distortion of competition

The most significant step which BP Chemicals feels can
be taken to guarantee that distortion is minimised is to
permit the bioethanol for fuel use to come only from
ethanol production sites dedicated 100 % to fuel
production. BP Chemicals describes this as (cid:145)ringfencing(cid:146)
the fuel ethanol production sites. This would mean, in
its view, that no sales into the industrial and drinks
market should originate in a production facility that is
manufacturing ethanol under a State-aided fuel scheme.
Physically segregating those sites that wished to take
fuel ethanol would
contracts for the production of
eliminate, or at
the unfair
advantages.

least minimise, most of

BP Chemicals believes that, for companies with more
than one site, some of the advantages on procurement
could still be accessed. Some producers (cid:145)might engage in
swap arrangements, where one site produces only fuel
and the other site produces only for the traditional
market, then they swap product in order to maintain a
presence in both markets (this could be between sites
within one company or between different companies
each having perhaps only one site)(cid:146) (point 7.4 of the
comments). The introduction of such a system would
not be onerous for
the
following reasons.

the relevant producers for

(93)

2.7. BP Chemicals’ comments: conclusion

for

BP Chemicals concludes its comments by stating that, in
order to be approved,
the State aid scheme under
include a specific condition. This
examination must
condition would be that fuel ethanol must be produced
in a plant that is physically separated from any plant
producing ethanol
the traditional market. At a
meeting held on 29 January 2002 at the Commission in
Brussels, BP Chemicals reiterated the arguments set out
in its comments,
the final decision
requesting that
should include the condition that the production of fuel
ethanol should be in separate production sites from the
production of ethanol for the traditional market. In the
alternative, in the event that such separation were not
feasible and that the plant simultaneously produced fuel
the traditional market, BP
ethanol and ethanol
Chemicals
the final decision should
authorise the aid scheme subject to the condition that
capacity restrictions should be introduced to neutralise
the advantages described in recital 85 of this Decision,
and in particular
the advantage resulting from the
economies of scale.

for
requested that

3. Comments from other interested parties

3.1. Comments from the United Kingdom

The United Kingdom states
the
promotion of renewable energy sources, while at the
same time putting forward arguments similar to those
put forward by BP Chemicals, namely:

supports

that

it

(cid:145)There could be a risk of aid to promote the use of
in fuels and combustibles distorting
bioethanol

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Official Journal of the European Union

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competition in other markets,
for example the
production of synthetic ethanol for use in solvents
and chemical processes. Distortion of competition
might occur,
through
cross-subsidisation within plants producing both
through diversion of bioethanol
substances or
produced with the benefit of a tax relief linked to a
particular use to other markets for other uses.(cid:146)

two examples,

to give

(100) Ethanol is produced in existing units which have spare
i.e. without any increase in capacity and

capacity,
without the building of new plants.

(101) The production of traditional alcohol and fuel ethanol
in parallel, adapting them to market
to the

are carried out
requirements and without any disturbance
traditional alcohol market.

3.2. Comments from the Syndicat National des Producteurs

d’Alcool Agricole (SNPAA)

(94)

The Syndicat national des producteurs d’alcool agricole
(SNPAA) represents the interests of French beet- and
cereal-based ethyl alcohol producers, part of whose
production is geared to the manufacture of ETBE for
fuel use. The SNPAA’s comments may be summarised as
follows.

(102) Compared with the situation that existed before the
appearance
alcohol
ethanol,
production in France has remained relatively stable,
whereas synthetic alcohol has seen some increase.

agricultural

fuel

of

(103) French alcohol producers,

like

their European
counterparts, have had to deal with disturbances on the
traditional markets as a result of a steady rise in imports
from third countries. The SNPAA makes the following
points in this respect.

all

(95) Alcohol producers are aware of the many advantages
linked to the production of biofuels and embarked on
this path as soon as the French authorities showed the
political will to create the right conditions.

(104) The Community alcohol market is supplied, in the case
of all uses except spirits, where only agricultural alcohol
is used, by European-produced alcohol of agricultural
and synthetic origin and by imports.

(96)

(97)

(98)

The Commission has for some time been setting out the
for example in the
arguments in favour of biofuels,
explanatory memorandum to the proposal
a
Directive on the taxation of biofuels in 1992. The
Altener programme also takes them into account. More
the White Paper on renewable sources of
recently,
energy and the Green Paper on security of energy
supply took these arguments further and set objectives.

for

France has not been the only country to introduce a
biofuels programme, a number of other Member States
have done so as well,
though the measures adopted
have not been identical due to the lack of any
Community harmonisation.

In its conclusions, the Commission’s communication to
the Council on the implementation of the Community
strategy on renewable energy sources of 16 February
2001 states that:
(cid:145)at this stage, it is far from sure that
the indicative target of the White Paper [(cid:133)] will be
achieved in 2010(cid:146) and that (cid:145)considerable further efforts
will be necessary [(cid:133)] at the Community level and in
the national policies of the Member States(cid:146) .

(105) The substantial growth in imports in recent years has
caused serious disruption for European producers.

(106) A look at the Eurostat figures, which are currently the
only complete and reliable figures, shows the following
trends in imports.

share of more than 5 % for

(107) Community imports of alcohol from countries enjoying
full exemption from customs duties have resulted in a
loss of market
the
Community industry, on the basis of estimated overall
Community production of alcohol of agricultural origin
(excluding wine alcohols) and synthetic alcohol at
around 16 million hectolitres. Furthermore, the number
of exporting countries rose from six in 1995 to 16 in
1999. The great majority of
the distilleries which
currently export to the Community duty-free were set
up in the last 10 years, so as to take advantage of the
very
the
Community offers to the countries in which they are
situated. As regards the ACP countries, exports to the
Community are not
in
contrast to other alcohol-related products, such as sugar,
molasses and rum.

limited by a quota system,

conditions which

favourable

customs

(99)

In France, the distillers attempted to promote the direct
blending of ethanol
they came up
against the hostility of the oil companies and motor
vehicle manufacturers, who preferred ETBE.

into petrol, but

(108) As far as Community imports of alcohol subject

to
customs duties are concerned, it must firstly be borne in
the 36 %
following the application of
mind that,

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on

decided

the multilateral

reduction
trade
in
negotiations, the (cid:145)normal(cid:146) customs duties applicable as
(CN code
from 2000 are:
2207 10): EUR 19,2 per hectolitre;
for denatured
alcohol (CN code 2207 20): EUR 10,24 per hectolitre.
These amounts are further reduced by 15 % in the case
of GSP beneficiary countries.

for undenatured alcohol

(109) Overall, imports of undenatured and denatured alcohol,
at 254 341 hectolitres in 1999, already represent more
than 1 % of the market.

(110) Community

imports of mixtures

competing with
alcohol are declared under CN code 3814 00 90 so as
to avoid paying the customs duties applicable to alcohol
under CN code 2207 20. Through this classification, the
amount of customs duties is in large part avoided, thus
allowing imports to take place that would show little or
no profit if the customs duties applicable to alcohol
were paid. Though they have been classified otherwise,
the relevant products possess all
the properties of
essential
(which, moreover,
alcohol
constituent). Such imports amounted to 1 417 760
hectolitres in 1999, equivalent
the
markets for agricultural and synthetic alcohol, showing
an increase of 200 % over a period of four years.

to some 9 % of

remains

their

(111)

under

impact

combined

conclusion,

In
of
the
international agreements which substantially cut or
actually abolished customs duties, national
subsidy
programmes which produced surpluses sold at marginal
cost, dubious classifications or misclassifications under
CN code 3814 in order
to avoid the payment of
customs duties and currency devaluations that arbitrarily
improved the (cid:145)competitiveness(cid:146) of certain countries,
imports rose from 824 235 hectolitres in 1995 to
2 540 584 hectolitres in 1999, equivalent to 16 % of
the market
for agricultural and synthetic alcohol of
some 16 million hectolitres a year.

(112) This

import pressure has

threatened the European
alcohol
situation has become
the
sufficiently worrying for the Commission to propose the
introduction of rules in this sector.

industry,

and

(113) The explanatory memorandum to the proposal

(cid:145)during the last

for a
Council Regulation on the common organisation of the
market in ethyl alcohol of agricultural origin recognises
the sector has been
five years,
that
confronted with a series of problems, mainly related to
increased competition on the internal market as follows:
(cid:151) imports from third countries have increased since
[(cid:133)] 1995 [(cid:133)], (cid:151) in addition, greater quantities are
imported as blends of alcohol with denaturants[(cid:133)](cid:146).

(114)

It is therefore quite clear that disturbances have emerged
these are not due to the
on the market and that

production of fuel ethanol, as BP Chemicals suggested.
In support of these assertions, the SNPAA provides the
following table:

FRENCH PRODUCTION ETHYL ALCOHOL OF
AGRICULTURAL (BEET AND CEREAL) AND SYNTHETIC
ORIGIN

Marketing year

Agricultural alcohol

Bioethanol

Traditional
alcohol

(In hectolitres)

Synthetic alcohol

1990/1991

3 704 140

1 073 487

1991/1992

42 692

3 561 161

1 438 953

1992/1993

346 359

3 756 911

1 383 422

1993/1994

485 118

3 870 543

1 314 563

1994/1995

477 726

3 791 219

1 574 130

1995/1996

759 949

4 002 011

1 467 984

1996/1997

1 050 052

4 012 140

1 374 973

1997/1998

1 233 091

3 719 541

1 578 670

1998/1999

1 144 000

3 724 901

1 569 545

(115) The SNPAA also states that BP Chemicals has embarked
on an investment programme, reported in the press, to
increase its synthetic alcohol production capacity. The
relevant units appear to have had start-up difficulties,
and the resulting market
losses cannot of course be
attributed to the production of fuel ethanol.

(116) As far as the aid provided through the tax exemption
for the ETBE sector is concerned,
it should be noted
that the aid is not granted to the ethanol producer, but
to the distributor of petrol to which ETBE has been
added when it is released for consumption.

(117) The value of the ETBE is calculated on the basis of
petroleum-related criteria such as the octane value or
volatility, the ethanol price being only a resultant. The
amount of the exemption also includes the depreciations
linked to the substantial investments which have had to
be made for the construction of the ETBE units.

(118) The SNPAA also points out that the exemption does not
the TIPP applicable to petrol.
is subject to a TIPP of around 15 % of that

cover
Ethanol

the whole of

L 94/16

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Official Journal of the European Union

10.4.2003

applicable to petrol, a figure which is higher than that
provided for in the (cid:145)Scrivener(cid:146) proposal for the taxation
of biofuels (10 %).

of agricultural ethanol were correct, there would, once
the production of fuel ethanol started, have been an
increase
in the production of agricultural ethanol
(excluding fuel ethanol) and a decrease (at least partial,
in line with the location of markets) in the production
of synthetic ethanol.

3.3. Comments from Ethanol Union

(119) Ethanol Union submitted comments in its capacity as a
company marketing the ethanol produced by its distiller
shareholders (23) at
the ELF Antar France refinery at
Feyzin, this ethanol being used for the production of
then blended into the fuels
ETBE, which is
distributed by ELF Antar France.

itself

(120) Ethanol Union shares the Commission’s view that the
renewable energy sources has been
development of
clearly encouraged by the European authorities
for
many years and has been the subject of numerous
studies, recommendations and decisions.

(121)

the approaches adopted for

In France, one of
this
purpose has been to introduce fuel ethanol onto the
market through ETBE, a sector strongly backed by the
oil industry.

(122) The measure introduced by France is based on the
issuing of approval to ETBE production units, and, as
the Commission points out, this does not involve any
discrimination in the criteria governing the eligibility of
firms or any discretionary elements in the selection of
the firms receiving such approval.

(123) The measure

the

ensures

tonnages of ETBE
that
benefiting from the tax exemption are limited and
monitored, and, in future, the tax scheme applicable to
biofuels will no doubt have to evolve,
in line with
expected developments in this activity.

(124) Furthermore, the question of whether there is a risk of
distortion of competition in favour of the production of
agricultural ethanol and to the detriment of synthetic
ethanol may be assessed by looking at what has
happened in the past: comparison of the trend in the
volumes of agricultural ethanol (excluding fuel ethanol)
produced in France, on the one hand, and of synthetic
ethanol, on the other, over the last 10 years provides
enlightening information here.

(126) However, analysis of the production statistics available
for France for the period 1991 to 1999 shows that
production did not follow this pattern (24):

(’000 hectolitres)

1991/1992

1998/1999

Difference

Agricultural ethanol
(excluding fuel
ethanol)

Fuel ethanol (1991
and 1999 calendar
years)

3 561

3 725

+ 4,6 %

43

1 144

Not
significant

Synthetic ethanol

1 439

1 570

+ 9,1 %

(127) Over the relevant period, it can be seen that synthetic
ethanol production increased more
than
the risk of competition
agricultural ethanol and that
being distorted to the detriment of synthetic ethanol
was not at all borne out by the facts.

strongly

(128) On the other hand, it must be emphasised that, during
recent years, the ethanol market (excluding fuel ethanol)
has been considerably disrupted not by the growth of
fuel ethanol of agricultural origin, but by a massive
increase in imports of ethanol and ethanol-based blends
benefiting from customs arrangements favouring entry
into the Community.

(129) The total volume of Community imports of ethanol and
products competing with ethanol has thus tripled in five
years, rising from about 800 000 hectolitres in 1995 to
more than 2 500 000 hectolitres in 1999. This factor
has hit the whole of the ethanol market hard, and these
disruptions have moreover prompted
recent
adoption by the Commission of a proposal for common
organisation of the market for agricultural ethanol.

the

(125) On a market whose overall volume is relatively stable, if
the hypothesis of a distortion of competition in favour

(23) SociØtØ Cristal Union, Sucrerie cooperative agricole de Bourdon,
Sucreries distilleries des Hauts de France, Sucrerie de Toury,
SociØtØ Vermandoise Industries, SociØtØ Saint-Louis Sucre, SociØtØ
agricole de la VallØe de Loing, SociØtØ Dislaub.

(130) Against the background of the desired promotion of
renewable sources of energy, it must be borne in mind

(24) Source:

Journal Officiel de la RØpublique Fran(cid:231)aise and Direction
gØnØrale des douanes et des droits indirects.

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L 94/17

the economics of

that
the cereals and beet-based
production sector being established justify the granting
of tax aid and, accordingly, Ethanol Union firmly backs
the request made by France pursuant to Article 8(4) of
Directive 92/81/EEC.

(135) Between 1990 and 1999, it may be seen that, far from
having been penalised by the appearance of bioethanol,
French synthetic ethanol production actually increased
more strongly than agricultural ethanol production.

3.4. Comments from Ethanol Holding

(136)

In the light of
the figures cited, no sign of any
distortion of competition to the detriment of synthetic
fuel
ethanol can seriously be claimed as a result of
ethanol production.

company whose

(131) Ethanol Holding submitted comments in its capacity as
ethanol
a
fuel
in the
producers. Ethanol Holding is a shareholder
company Ouest-ETBE which
ETBE
the
production unit situated on the site of the Normandy
refinery at Gonfreville-l’Orcher.

shareholders

operates

are

(132) The

for many

European authorities have

years
consistently encouraged increased use of
renewable
energy sources. Many texts have been drafted in recent
years setting out guidelines or targets for the promotion
of biofuels: a proposal for a Directive on the taxation of
biofuels (1992), Altener programmes for the promotion
of renewable energy sources, the White Paper (cid:145)Energy
for the future: renewable sources of energy(cid:146) (1997), and
the Green Paper
(cid:145)Towards a European strategy for
security of energy supply(cid:146) (2000).

(133) Several Member

States,

including

have
introduced programmes to promote biofuels, but, in the
absence
the
arrangements differ appreciably from Member State to
Member State.

Community

harmonised

France,

rules,

of

(134) As far as fuel ethanol

is concerned, France has since
1992 opted for the ETBE sector. The choice of the ETBE
sector, in line with the oil industry’s wishes, meant that
substantial
investment had to be carried out to build
new ETBE production units (including the Ouest-ETBE
unit at Gonfreville-l’Orcher). The depreciation of such
investment was taken into account in determining the
duration of the approval granted.

As regards the effect of the aid on the ethanol market,
Ethanol Holding shares the Commission’s view that,
despite certain allegations,
the information available
does not show that growth in bioethanol production
creates a distortion of competition vis-(cid:224)-vis synthetic
ethanol. A look at the trend in the production in France
synthetic
of bioethanol, on the one hand, and of
ethanol, on the other, since the introduction of
fuel
ethanol on the market confirms this situation (25). The
to those
figures cited in this
provided by the SNPAA (see recital 114).

respect are identical

(25) Source: Journal Officiel de la RØpublique Fran(cid:231)aise and Direction

gØnØrale des douanes et droits indirects.

(137) The European ethanol market as a whole (agricultural
and synthetic ethanol) has certainly been disrupted in
recent years, but the cause must be sought, in particular,
in the recent increase in Community imports of alcohol
and alcohol-containing mixtures and not in the growth
in fuel ethanol production.

(138)

Imports of ethanol and competing mixtures have grown
steadily in recent years to over 2 500 000 hectolitres in
1999 (three times as much as in 1995) and account for
about 16 % of the European alcohol market.

(139) Promoting renewable energy sources means that

tax
support must be granted to the sectors that are being
established for this purpose.

Italy,

States

the
(Spain,
(140) A number of Member
Netherlands, Sweden,
the United Kingdom, Germany
and Austria) encourage or plan to encourage initiatives
that are in line with the various guidelines and targets
drawn up by the Community authorities. The measures
planned or already introduced are based on varying
systems of tax aid granted to biofuels, and the taxes
specific to this sector will have to evolve in line with
the foreseeable developments of these activities.

3.5. Comments from the Union des sucreries et distilleries de

l’Aisne (Union SDA)

is,

through its

(141) The Union des sucreries et distilleries de l’Aisne (Union
SDA)
subsidiaries Bio-Ethanol Nord
Picardie (BENP) and Brie Champagne Ethanol (BCE), the
leading French producer of cereal-based ethanol and one
of the producers of beet-based fuel ethanol. Its role is to
promote all
industrial uses likely to offer markets for
agricultural raw materials (beet and wheat) produced by
its members.

L 94/18

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Official Journal of the European Union

10.4.2003

(142) The BCE wheat distillery at Provins was built as a pilot
unit in 1989, i.e. well before the first outlet, the ELF
unit at Feyzin, which did not develop until April 1993.
The BENP unit at Origny-Sainte-Beno(cid:238)te was built in
1993 to produce ethanol from wheat and to dehydrate
the beet alcohol produced in the group’s existing
distilleries. These two units use wheat
from 20 000
agricultural producers in northern and central France.

(149)

It may be seen that
the production of agricultural
alcohol (excluding bioethanol) rose from 367 407 m3 to
381 886 m3, i.e. an increase of 3,9 %, whereas, during
the same period, the production of synthetic alcohol
rose from 129 862 m3 to 150 772 m3, i.e. an increase
of 16,1 %.

(143) Union

in

the

Total

SDA participated

group’s
investments in the two ETBE units at Dunkirk and
Gonfreville. The price of
the bioethanol supplied to
these units depends on the price level of ETBE,
determined on the basis of
the market prices of
Premium, Regular and butane. The bioethanol price also
includes amortisation of the ETBE units.

(144) Union SDA also stresses that bioethanol does not enjoy
full tax exemption, since it incurs about 15 % of the
TIPP charged on petrol, i.e. a rate higher than the 10 %
provided for
in a draft directive proposed by Mrs
Scrivener. Furthermore, the tax applicable to bioethanol
is much higher than that applicable to alternative fuels
such as natural gas for vehicles and LPG (liquefied
petroleum gas) or electricity.

(152)

(150) Like its French and European counterparts

in the
alcohol production industry, Union SDA has had to
cope with serious disruptions on the traditional alcohol
market due to a very significant increase in imports
from third countries, which amounted to 16 % of the
market in 1999.

(151) These

for

threats became

sufficiently serious

the
Commission to propose the introduction of common
alcohol of
organisation of
agricultural origin. In the explanatory memorandum to
its proposal, the Commission makes it clear that market
disruption is due to imports, and not to the production
of bioethanol in France, as BP Chemicals suggests.

the market

in ethyl

sector

In conclusion, Union SDA argues that the start-up of
in France has not prompted
the bioethanol
agricultural
step up their
production to the detriment of synthetic alcohol, BP
Chemicals having just invested in increasing capacity at
its plants.

alcohol producers

to

(145) Union SDA points out

that,

in its Green Paper
published in November 2000, the Commission noted
the key role of biofuels in reducing greenhouse gas
emissions and limiting the Community’s dependence on
energy imports and set ambitious targets for biofuels in
the short and medium term.

(146) Union SDA notes that this position is in line with the
analysis it carried out a few years ago on the advantages
of bioethanol, which reassures Union SDA on the
durability of its markets and justifies the economic risks
which it had taken in investing in wheat-based ethanol
units.

(147) Union SDA is also a leading producer of alcohol for

traditional uses.

(153) The European market has been disrupted in recent
years, this is due to imports from third countries, which
prompted the Commission to propose the common
organisation of the market.

(154) BP Chemicals’ action has the effect of

jeopardising
bioethanol production in France, which runs counter to
the Commission’s objectives.

(155) The growth of biofuel production in the Community
calls
for a tax harmonisation directive to prevent
distortions between Member States (as in the case of
France and Spain, for example) and establish a stable
any
framework without which there
significant growth in biofuels.

cannot be

(148)

It cites the French statistics on agricultural alcohol
production and synthetic alcohol production published
by the Direction gØnØrale des douanes et des droits
indirects and suggests that a comparison should be
made of production trends between 1990/1991 to
1992/1993 (the three years preceding the production of
bioethanol) and 1996/1997 to 1998/1999 (the three
years following the start-up of the Total group’s ETBE
units).

3.6. Comments from the Agence de l’environnement et de la

ma(cid:238)trise de l’Ønergie (ADEME)

(156) The Agence de l’environnement et de la ma(cid:238)trise de
l’Ønergie (ADEME) submitted comments on the energy
and environmental aspects relating to fuel additives and
biocomponents in France.

10.4.2003

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Official Journal of the European Union

L 94/19

(157) The

the

that

production

ADEME
states
of
and additives grew significantly in
biocomponents
France between 1992 and 2000. Ethanol consumption
grew by a factor of 27, amounting to 92 550 tonnes in
2000, while vegetable oil ester consumption grew by a
factor of 448, amounting to 308 600 tonnes in 2000.
This total of
401 000 tonnes produced in 2000 is
equivalent to 1 % of petrol and diesel consumption and
means that France is the leading producer in Europe,
followed by Germany, which produces only vegetable
oil esters, and by Spain, which produces only ethanol.

(158) This growth has gone hand in hand with a system of
tax incentives introduced by France, as well as by all the
other European countries concerned, for the benefit of
these biocomponents,
in the same way as for other
alternative fuels (LPG, natural gas for cars, and aquazole)
or for an alternative energy source such as electricity.
The resources deployed nationally for
research and
development work on improving their competitiveness
were stepped up in 1994, but fell back towards the end
of the period in favour of non-energy utilisations.

(159)

the transport sector

In France,
is more than 95 %
dependent on hydrocarbons, which are non-renewable
energy sources and whose use plays a key role in the
emission of greenhouse gases. The substantial growth of
the transport sector in recent years has had the effect of
making it the prime player in energy consumption and
the emission of pollutant gases, particularly in urban
environments.

(160) At European level,

the Commission’s Green Paper
published on 29 November 2000 set a 7 % target for
biofuels
for
substitute fuels as a whole.

in 2010 and a 20 % target

in 2020,

(161) These biocomponents, whose benefits are recognised,
both as fuel additives and for their contribution to
reducing harmful emissions and their benefit in terms of
reducing the greenhouse effect, are not used in their
pure state in France: they are either blended, in the case
of ester, as components up to 30 % in diesels, to be
used in vehicle
commercial
they are used in small
vehicles); or, principally,
quantities (a few per cent)
in petrol and diesel as
formulation or lubrication additives.

lorries,

(buses,

fleets

(162) Their use does not require vehicles and engines to be
adapted, which gives them an advantage over other
alternative fuels.

(163) Life-cycle analyses have been carried out on the two
sectors, providing comparative figures on energy and
environmental aspects.

(164) The energy balances of the two sectors are significant,
the year 2000: 337 000 toe/year
for example for
substituted; 220 000 toe/year economised; 810 000 net
tonnes of CO2 avoided with the production and energy
use of the fraction reserved for such use, without taking
account of the carbon contained in the rest of the plant;
energy efficiency of 2 for the ester sector as against 0,9
for the diesel sector; energy efficiency of 1,2 to 1,6 for
the ethanol sector as against 0,8 for the petrol sector;
additional production of coproducts, protein-rich in the
case of oilcakes and dried grains, and used as animal
feed (rapeseed and sunflower cake, dried wheat grains,
beet pulp) or in chemicals (glycerol).

(165) The main technical advantage of ethanol and its
derivative ETBE is to improve the octane number of
petrol. A quantity of 5 % of ethanol or 10 % of ETBE
increases
(RON) of
super-grade petrol by 1,2 points.

research octane number

the

(166) The other quality of ethanol or ETBE as an additive is to
add oxygen, which allows better fuel combustion: 2 %
oxygen in terms of mass is provided by 5,7 % of
ethanol or by 12,7 % of ETBE in terms of volume.

(167) With a 15 % blend of ETBE in petrol, UTAC tests on
light vehicles showed, in addition, reductions in harmful
emissions such as aromatic hydrocarbons, and a reduced
for photochemical reactions.
impact on the potential
ETBE’s
is,
moreover, 19 % less than that of MTBE of petroleum
origin.

contribution to the

greenhouse

effect

respect,

(168) The growth outlook is linked to the technical benefits
provided, but also to the use of biomass-derived
components as renewable sources. The oil companies
are carrying out research into these elements, which
allow some dilution of petroleum formulas and also
make it possible to add non-fossil carbon into fuels. In
this
synthetic ethanol obtained from fossil
carbon cannot compare with ethanol obtained from
vegetable sources, and in view of the overall energy and
environmental
same
it
economic value. Furthermore, ethanol derived from
vegetable material could be used in fuel cells and
currently offers
this
application. All these developments will be linked to the
dwindling stock of
reserves, but also to
fossil oil
increasing world oil consumption and, as a corollary, to
the oil price, which is subject to periodic surges which
no one can control. The drive to reduce the greenhouse
effect will also prompt research into substitute energy

energy balance

cannot have

the best

aspects,

the

for

L 94/20

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Official Journal of the European Union

10.4.2003

solutions. The medium-term energy outlook means that
consumption must be brought under control, harmful
emissions
sources
developed.

reduced and alternative

energy

(169) French bioethanol production was 83 370 tonnes in
1997 and 97 907 tonnes in 1998, deriving from wheat
and beet. The agricultural
land used is almost equally
divided between the two crops. The average ethanol
yields are 2 t/ha for wheat and 5,3 t/ha for beet.

(170) According to the 1996 ecobalance, carried out with
beet ethanol, the saving in CO2 equivalent is 0,66 t of
CO2/t of ETBE compared with MTBE. This
saving
corresponds to 1,404 t of CO2/t of beet ethanol used in
the manufacture of ETBE compared with MTBE. This
saving per hectare becomes 8,14 t of CO2/ha. The gain
in terms of 1998 production, which was 98 000
tonnes of ethanol
is
137 600 t of CO2/year.

(or 208 300 tonnes of ETBE),

(171)

It is possible to recover 60 % to 80 % of this CO2, i.e.
45 to 60 kg of CO2/hl of pure alcohol, or 0,567 to
0,755 t of CO2/t of pure alcohol. The abovementioned
saving for the sector of 1,404 t of CO2/t of ethanol
would then be 1,971 to 2,16 t of CO2/t of ethanol. In
this case, the gain in terms of 1998 production (98 000
tonnes of ethanol) would average around 202 400 t of
CO2/year.

(172) The greenhouse-effect balance is expressed in monetary
terms in accordance with the principle of negotiable
allowances, also known as the principle of emissions
trading, assuming a value of FRF 500/t of carbon
(monetary cost hypothesis):

Cost/t of carbon

Cost/t of CO2 saved

FRF 500/t

EUR 76/t

FRF 136/t

EUR 21/t

(175) As regards the carbon balance with the entire plant,
the carbon
such balance does not
contained in the rest of the plant (leaves, marc, etc.).
These parts also contribute to a periodic cycle and to
permanent fixing of carbon, and the phenomenon is
renewable:

take account of

Dry matter
obtained
(t/ha/year)

Coefficients

Fixed carbon
(t/ha)

Fixed CO2
(t/ha)

Marc

3,1

0,422

1,308

(cid:151)
4,8

Leaves

4,25

0,409

1,74

6,38

Total (*)

8,55

3,54

11,18

(*) This balance sheet is presented without extracted sugar, which is

also used to obtain bioethanol.

(176) Looking at the result obtained, the annual average value
of 30 % of this carbon flux in relation to the plant is
immobilised by the plant, then as an organic material in
the soil, and then constitutes a stock of carbon in the
soil, which would give about 3,3t/ha of fixed CO2 for
the three-year period of crop rotation.

(177) The economic value of this part would be: FRF 136/t of
CO2 (cid:215) 3,3 t CO2/ha/year = FRF 449/ha/year = EUR
the carbon
68/ha/year. The total economic value of
fixing would
to the
then be:
bioethanol/ETBE in relation to MTBE + the stocking of
carbon by the plant = FRF 1 107/ha/year + FRF
449/ha/year = FRF 1 556/ha/year = EUR 237/ha/year.

saving

due

the

3.7. Comments from Saint Louis Sucre

(178)

In its comments, Saint Louis Sucre states that it is a
producer of ethyl alcohol of beet origin. Part of
its
production is geared to the manufacture of ETBE for
carburation through the companies Ethanol Union and
Ethanol Holding,
in which Saint Louis Sucre holds
6,66 % and 16,24 % respectively.

(173) The value of the (cid:145)saving in terms of greenhouse effect(cid:146)
externality compared with MTBE and per tonne of beet
ethanol would then be: FRF 136/t of CO2 (cid:215) 1,404 t
CO2/t of ethanol = FRF 191/t of ethanol or EUR 29,1/t
of ethanol.

(179) Saint Louis Sucre also states that it has invested not
inconsiderable sums in the ETBE production unit at
Gonfreville (Ouest-ETBE). Every year, Saint Louis Sucre
buys from its beet suppliers about 100 000 tonnes of
beet for the production of ethyl alcohol for carburation.

(174) This value per hectare of beet would be: FRF 136/t of
CO2 (cid:215) 8,14t CO2/ha = FRF 1 107/ha or EUR 169/ha.

(180) Saint Louis Sucre reiterates the familiar arguments in
favour of biofuels, citing the White Paper on renewable

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Official Journal of the European Union

L 94/21

sources of energy and the Green Paper on security of
energy supply.

3.8. Comments from SAF Agriculteurs de France

(181) Saint Louis Sucre produces its ethanol

in an existing
plant which still has spare capacity available. More
for carburation can therefore be produced
ethanol
increasing capacity or building a new plant.
without
it produces traditional
Saint Louis Sucre states that
in parallel, adapting its
alcohol and fuel
production processes
and
requirements
without creating any disruptions on the traditional
alcohol market.

to market

ethanol

(182)

It seems clear to it that, compared with the situation
prior to the emergence of fuel ethanol, the production
of agricultural alcohol has remained relatively stable
whereas there has been some increase in synthetic
alcohol.

(183) However, Saint Louis Sucre has been confronted with a
shake-up on the traditional market as a result of a
steady
from non-Community
countries.

in imports

increase

(187)

In its comments, SAF Agriculteurs de France states that
bioethanol
to
1 150 000 hectolitres, corresponding to 0,6 % of petrol.

consumption

amounts

France

in

(188) This figure (together with 0,9 % for gasoil) is below the

2 % set by the Commission for 2003.

(189) These biofuels are currently used as additives, with the
rules allowing them to be added to petrol up to 1,5 %
in the case of ETBE. The objective pursued is not to
replace fossil fuels entirely by biofuels, but to use them
as one of
improving the environment
under a long-term development policy, particularly as
regards reducing the greenhouse effect, restoring balance
in
strategic
investment in independence in energy supplies and a
new source of trace proteins.

the means of

production,

innovation,

agricultural

(184)

In Saint Louis Sucre’s view, therefore, it is quite clear
that there has been disruption on the traditional market
and that this is not due to fuel ethanol production as BP
Chemical suggested in its appeal.

(190)

3.9. Comments from the Distillerie de la RØgion de Ch(cid:226)lons

en Champagne

comments,

the Distillerie de

In its
la rØgion de
the
Ch(cid:226)lons-en-Champagne (DRC)
Eridania BØghin-Say groups’ beet-based ethyl alcohol
production plant in France.

stated that

is

it

(185) Saint Louis Sucre also states that BP Chemicals has
launched an investment programme to increase its
synthetic alcohol capacity, as reported in the press. Saint
the relevant plants have
Louis Sucre suggests
experienced start-up difficulties, and the ensuing market
losses quite clearly cannot be blamed on fuel ethanol
production.

that

(186) Lastly, Saint Louis Sucre draws

the pilot nature of

the Commission’s
attention to the fact that the Court of First Instance’s
rejection of
the use of ETBE in
France seems linked to ethanol production. In fact, such
ethanol
is used for only one purpose, namely
carburation. France had since 1977 been the only
Community country to use it for this purpose, though it
had just been joined by Spain. Other Member States
such as Italy were taking measures along the same lines,
and the United Kingdom’s Finance Bill 2001 announced
duty reductions or exemptions for pilot projects relating
to hydrogen, bioethanol, methanol and biogas.

(191) DRC briefly outlines the context of the French scheme,
namely to partly replace fossil fuels by fuels of vegetable
origin so as to reduce the cost of oil imports, allow the
development of crops for industrial purposes under the
CAP and improve the environment,
in particular by
reducing greenhouse gas emissions. In its approach to
this task, France has opted for the ETBE ethanol sector,
which it saw as being well suited to taking account of
the technical constraints of motorists and the oil
companies.

(192) Production of this biofuel could be established only with
the help of partial tax exemption so that the sale of
ETBE could provide proper remuneration for growers,

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10.4.2003

ethanol producers
without
jeopardising this
makes the following comments.

fluctuations

and investment
oil

in ETBE units,
intermittently
prices
substantial programme. DRC also

in

(193) The aid is granted to ETBE plants that have already been
authorised by the national authorities; the invitations to
the purpose of granting these
tender organised for
clear
authorisations
and
been
have
transparent,
reliability were
even if guarantees of
required, which is normal. There does not appear to
volume
have been any discrimination,
proposed has not been fully taken up.

particularly

since

the

(194) Production of agricultural

ethyl alcohol

(excluding
carburation) has not increased since the establishment of
the programme. DRC says that
it has even had to
reduce its sales of traditional alcohol. DRC considers
that, contrary to what would have happened in the
event of direct blending of ethanol, the approach chosen
has in practice limited the volumes used for carburation
and has not entailed major distillery investment.

(195) All

in all, DRC notes

that, on a relatively stable
traditional alcohol market, synthetic ethanol has not
shown any distortion. DRC cites as evidence the fact
that, up to 1997 the Eridania BØghin-Say group owned
SODES, the only French producer of synthetic alcohol,
the two types of alcohol were managed
and that
without conflict within one and the same commercial
department. Since the sale of SODES, DRC has kept that
company for marketing all of its traditional alcohols.

(196) The recent market disruptions have been caused by the
imports, as the Commission
increase in preferential
acknowledges in its proposal for a Regulation on the
common organisation of the market in ethyl alcohol of
agricultural origin.

3.10. Comments from AGPB CØrØaliers de France

(197) AGPB CØrØaliers de France (AGPB)

is an association
representing suppliers of wheat for the production of
bioethanol used for the manufacture of ETBE. Wheat
bioethanol
is converted in plants belonging to the
company Total Fina Elf.

(198) AGPB gives the following figures:

Current agricultural ethanol
production

5 million hl

Bioethanol for ETBE

1.2 million hl (of which 1/3
wheat)

ETBE production capacity for
petrol

219 000 t

Petrol consumption (France)

14,5 million t

Land given over to ETBE
ethanol

18 000 ha wheat and
11 900 ha beet

Land under cereal crops

9,1 million ha, of which 4,9
wheat

(199) AGPB points out that BP Chemicals has not suffered any
damage through the introduction of the tax scheme for
biofuels in France.

(200) AGPB states that the figures for the French bioethanol

market over eight production years show that:

(cid:151) the production of synthetic alcohol,

the product
manufactured by BP Chemicals, has increased more
that the production of agricultural alcohol excluding
fuel bioethanol,

(cid:151) the increase in bioethanol production has not been
in the
excluding

accompanied by a similar development
production
bioethanol:

agricultural

ethanol

of

(in hectolitres)

Period

Bioethanol (beet
and wheat)

Synthetic alcohol

(a) Average 1990 to
1991 to 1992 to
1993

(b) Average 1996 to
1997 to 1998 to
1999

3 674 071

1 298 621

3 818 861

1 507 729

Variation (b) (cid:150) (a)

+ 144 790

+ 209 108

Variation in %

+ 3,9 %

16,1 %

Source: Direction gØnØrale des douanes et droits indirects, France.

(cid:151) these

figures

show that French production of
synthetic alcohol has not been affected by the
If such
encouragement of bioethanol production.

10.4.2003

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L 94/23

encouragement had been a disruptive factor on the
synthetic alcohol
market, French production of
would immediately have suffered, given its location
close to the bioethanol production areas.

(cid:151) other Member States have developed measures to
the
promote the use of biofuels. Most recently,
United Kingdom has proposed in the 2001 budget a
new rate for biodiesel at 20 pence per litre below
the duty rate for ultra-low sulphur diesel, applicable
as from 2002 without any quantitative limit,

(201) AGPB states that the figures on trade in alcohol show
that the volumes imported into the Community exempt
of customs duties (CN code 2207) and imports of
competing blends of alcohol (CN code 3814) have risen
considerably (from 0,7 million hectolitres in 1995 to
2,1 million hectolitres in 1999), under the combined
influence of several factors linked to international trade,
international
first
including
agreements
indeed
that have
abolished customs duties.

foremost
greatly

reduced or

and

the

(202) According to AGPB, on a stagnating Community market
of some 16 million hectolitres, such growth inevitably
contributed to a sharp deterioration in alcohol prices
and in the profitability of traditional non-food markets.
It would seem that synthetic alcohol adapted better to
this increased pressure on costs than agricultural alcohol
did, judging from the growth in its production.

(203) AGPB also emphasises the following aspects:

(cid:151) bioethanol

is subject to greater tax pressure than

alternative fuels of fossil origin,

(cid:151) the cost of bioethanol reflects a situation which is
still at the demonstration stage; cereal producers are
making some sacrifice in accepting a remuneration
for wheat used for bioethanol that is 10 % to 20 %
below the average price for conventional outlets.
Since July 2000, the sacrifice is even greater, since
the specific compensation for industrial fallow land
has disappeared:

Item

Raw material

Transport, handling, receipt

Cost of manufacture (including drying)

Revenue from draff

Forwarding to distillery

Total cost

FRF/hl

171

25

230

ﬂ89

20

357

(cid:151) energy has a natural connection with agriculture:
the ability of vegetable matter
to capture solar
energy by converting it and storing it in the form of
chemical
(or
forester) is basically a producer of primary energy,

energy suggests

any farmer

that

(cid:151) developing

has

energy

from plants

obvious
environmental advantages: the ability of vegetable
matter to take in CO2 in the atmosphere, absorbing
the carbon and emitting the oxygen, makes crops an
extremely useful means of combating increased CO2
in the air. Using vegetable carbon instead of fossil
carbon is particularly effective. Alternative fuels
derived from biomatter have the rare ability to
contribute to a positive CO2 balance,

(cid:151) securing hydrocarbon supplies has become

a
political priority: a proportion of 10 % of renewable
oxygenates in fuels could have an impact on oil
imports and prices,

(cid:151) the development of renewable sources of energy is
now a matter of policy in Europe. AGPB cites the
Altener research programme and the White Paper
on renewable sources of energy, the communication
on the European Union’s oil supply COM(2000)
631 and the communication on the implementation
of
the Community strategy and action plan on
renewable energy sources COM(2001) 69.

(204) AGPB points out that the challenge to the scheme by
the Court of First Instance relates only to the question
relating to the interpretation of the Directive on excise
duties and not to the (cid:145)State aid(cid:146) aspects. AGPB therefore
presumes that, since the contents are identical, the tax
redemption scheme
rules
governing State aid.

compatible with the

is

(205) AGPB notes that the production of agricultural alcohol
(excluding bioethanol) has increased by 3,9 %, whereas,

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Official Journal of the European Union

10.4.2003

during the same period,
the production of synthetic
increased by 16,1 %. The increase in
alcohol has
bioethanol has not been accompanied by a similar
increase
ethanol
in the production of agricultural
excluding bioethanol.

(211) Sucrerie de Touri embarked on production in response
to incentives introduced by the French public authorities
pending European harmonisation.

(206) AGPB also notes that the figures on trade in alcohol
show the serious disturbance on the traditional alcohol
market caused by a very significant increase in imports
from third countries, which accounted for 16 % of the
market
increase contributed to the
deterioration in alcohol prices and profitability of
conventional non-food outlets, a sector in which BP
Chemicals is predominant.

in 1999. This

(212) Sucrerie de Touri would have preferred direct blending.
ETBE was opted for. Since the quantity that can be
manufactured is governed by the capacity of the existing
plants, output is limited.

(213) Sucrerie de Touri’s production of

traditional alcohol

remained stable during the period.

(207) AGPB also points out

that other European countries
subsidise biofuels and that, pending harmonisation, the
French ETBE sector does not wish to be the target of
discriminatory treatment.

(214) Sucrerie de Touri has faced serious upheaval on the
traditional alcohol market as a result of a very
increase in imports from third countries.
significant
Sucrerie de Touri also notes
in synthetic
alcohol production by a number of oil companies.

increases

the bioethanol and vegetable oil

(208) AGPB also states that, over and above the problems
relating to the energy balance and fossil-fuel CO2
emissions,
sectors
provide high-protein by-products (draff and oilcake) for
use as animal feed. The Community has a particular
lack of these. It is importing more and more oilcake
made from genetically modified soya. This dependence
is further increased by the ban on the use of animal
meal as a source of protein.

(To avoid repetition,
following summaries
the
include only comments not already covered by the
comments summarised so far.)

3.11. Comments from the Association pour le dØveloppement

des carburants agricoles (ADECA)

(209) The Association pour le dØveloppement des carburants
agricoles (ADECA) represents producers, collectors and
transformers of
including
among others: the AGPB, the FØdØration nationale de
coopØratives
des
the
fabricants de sucre, and the SNPAA. Its comments are
similar to those presented by the AGPB.

fuels of agricultural origin,

Syndicat national

agricoles,

3.12. Comments from Sucrerie de Touri

(210) Sucrerie de Touri is a beet-based ethyl alcohol producer,
part of whose production is ETBE intended for
carburation.

3.13. Comments from Sucrerie Bourdon

(215) Sucrerie Bourdon is a small

independent cooperative
since 1992, has been producing 80 000
fuel

which,
hectolitres of alcohol and 30 000 hectolitres of
ethanol.

(216) Sucrerie Bourdon states that it (cid:145)does not understand why
the biofuel sector has been put on trial at this late stage(cid:146)
and puts forward similar arguments to those already
cited on the reduction of harmful emissions, the White
Paper on renewable sources of energy, the fact that the
scheme is in the nature of a pilot project and the fact
that the synthetic ethanol market is not affected.

(217) Sucrerie Bourdon also notes the inconsistency in the
fact that a tax on petroleum products is levied on a
product of agricultural origin.

3.14. Comments from the ConfØdØration GØnØrale des

Planteurs de Betteraves (CGB)

is a trade organisation representing

(218) The ConfØdØration gØnØrale des planteurs de betteraves
(CGB)
35 000
French sugar-beet growers. The CGB states that 11 000
hectares of beet produce 70 % of the ethanol that is
consumed, which amounted to a volume of 85 600
tonnes for the 1999/2000 marketing year. The CGB
puts forward arguments similar to those already cited
on the reduction of harmful emissions and reduction of
dependence on energy imports.

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Official Journal of the European Union

L 94/25

3.15. Comments from Ouest-ETBE and Nord-ETBE

Feyzin (Rh(cid:244)ne Department) and uses production from
units situated at Dunkirk and Le Havre.

(219) Ouest-ETBE and Nord-ETBE, which are ETBE producers,
present comments which are identical in content. The
comments set out arguments similar to those already
cited on environmental protection. They also note that
the volumes produced or planned represent marginal
quantities
for
products having similar characteristics and capable of
being incorporated into motor fuels instead of ETBE,
such as MTBE, or on the production of
synthetic
ethanol.

that have no impact on the market

(220) Ouest-ETBE and Nord-ETBE point out that,

figure

ethanol.

in France,
current ETBE production is some 200 000 tonnes a
to 100 000 tonnes of
year, which corresponds
vegetable-based
be
This
compared, firstly, with the 14 million tonnes of petrol
consumed annually in France and, secondly, with the
3,5 million tonnes of MTBE produced in Europe. On
this last point, Ouest-ETBE and Nord-ETBE note that
ONEXO recently announced the construction of a new
tonnes) at Antwerp, which
MTBE plant
shows
the
development of MTBE production.

that ETBE production does not prevent

(200 000

should

is greater

(221) The ETBE sector uses vegetable-based alcohol, whose
than that of equivalent
production cost
fossil-based products. However, the aid granted has not
had the
subsidising the production of
vegetable-based ethanol used for other purposes and is
not
therefore in competition with synthetic ethanol
production, as the published figures show.

effect of

(225) Total Fina Elf puts forward environmental arguments
forward by other

similar to those, cited above, put
interested parties.

(226) Total

Elf

also

Fina

of
physico-chemical properties which make ETBE
a
particularly appropriate component in the production of
motor vehicle fuels.

number

refers

to

a

(227) Total Fina Elf notes that

the proportion of ETBE in
petrol
in France amounts to no more than 1,4 %,
although, under the European rules applicable, up to
15 % of ETBE can be incorporated.

(228) Total Fina Elf states that the choice of the beneficiaries
is neither discriminatory nor discretionary, and that the
there has not been any
published figures show that
distortion of competition as far as synthetic ethanol is
concerned.

V. COMMENTS FROM THE FRENCH AUTHORITIES

(229) France

submitted comments

relating both to the
development of the synthetic ethanol sector (a point on
which the Commission had requested details) and on
the tax benefit, the implementation of the scheme and,
lastly, BP Chemicals’ comments.

(222)

It may be seen that overall production of synthetic
alcohol has increased in the last ten years twice as fast
as that of vegetable-based alcohol
(growth of 9 % as
against 4,5 %), while the production of vegetable-based
ethanol for carburation rose from 43 000 hectolitres in
1991 to 1 144 000 hectolitres in 1999.

Journal of

(230) France supplied figures published in the Journal officiel de
the French
la RØpublique fran(cid:231)aise (Official
Republic) which show clearly that
the tax benefit
granted to bioethanol used in carburation has not had
the effect of increasing the share of bioethanol at the
expense of synthetic alcohol in the other user sectors in
which the two products are in competition with one
another (solvents and chemical products in particular).

(223) The tax exemption comes under an invitation to tender
open to all operators, and Ouest-ETBE and Nord-ETBE
note that
the ceilings provided for by the French
government for the exemption have not been used in
full.

including
from 3 608 853

(231) The figures show that,
production,
rose
hectolitres, whereas

bioethanol
carburation,
4 868 981
production rose
hectolitres
1 569 545 hectolitres. During the same period,
production of bioethanol
42 962 hectolitres to 1 144 242 hectolitres.

from 1991 to 1999, French
for
that
to
alcohol
to
the
for carburation rose from

from 1 438 953

hectolitres

synthetic

used

3.16. Comments from Total Fina Elf

(232)

(224) Total Fina Elf has been distributing biofuels since 1987
in the United States and since 1988 in France.
It
operates an ETBE production unit situated in France at

It can be seen from the above that, between 1991 and
1999, the production of bioethanol excluding that for
to 3 724 739
carburation rose
from 3 565 891
hectolitres,
the
production of synthetic ethanol rose by 4,86 %.

of 0,07 %, whereas

an increase

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Official Journal of the European Union

10.4.2003

(233) France concludes from this that the tax benefit granted
to bioethanol used for carburation has not had any
impact on the synthetic ethanol market.

than BP Chemicals

alcohol producers other
came
forward with comments when the proceeding was
initiated. In the French authorities’ view, the real figures
available on trends on the ethanol market show that BP
Chemicals’ action is not justified by any distortion of
competition on the ethanol market.

duty

(234) France also points out that the minimum Community
excise
in Council Directive
specified
92/82/EEC of 19 October 1992 on the approximation
the rates of excise duties on mineral oils (26), as
of
amended by Directive 94/74/EC, is complied with.

rate

concerned,

(235) As far as the operation of the exemption and its effects
are
very detailed
in addition to the
information supplied under the procedure provided for
in Article 8(4) of Directive 92/81/EEC, France points out
that, if the recipient of the tax aid for the production of
biofuels is legally identified as being the authorised
warehouse-keeper who carries out the incorporation of
ethyl alcohol derivates, whose alcohol component is of
agricultural origin,
into super-grade fuels and petrol,
such tax aid nonetheless constitutes a means of opening
for agricultural producers. This
up a new outlet
and
consequently
is
environmental policy objectives,
the
emission of greenhouse gases, while at the same time
having a positive impact on regional development
planning and safeguarding business and employment.
France points out in this respect that, following reform
of the CAP, 1,5 million hectares (cereals, oilseed crops
and high-protein crops) have been laid fallow, making it
possible for the farmers to grow non-food crops on this
land.

agricultural

line with

since it

limits

in

(236) As far as the profit margin of farmers is concerned,
France considers that a remuneration giving farmers a
regarded as a
gross margin of FRF 1 000 /ha is
minimum level
them to grow the
necessary raw materials.

to encourage

(237) The partial exemption from the TIPP,

set at FRF
329,50/hl of ethanol, offsets the additional cost involved
in producing ETBE ethanol.

(238) France states that the appreciable increase in oil prices
and in the dollar as from the fourth quarter of 1999
compared with the average prices in previous years is
prompting the French authorities to consider indexing
the
the
petroleum products substituted.

tax exemption ceilings

to the prices of

(240) According to the French authorities, analysis of

the
French alcohol market since 1992, when the first tax
measures for ETBE ethanol were introduced, shows
clearly that the increase in the production of agricultural
alcohol for carburation via ETBE was not matched by
an increase in the volumes sold on the traditional
the
markets.
volume of
traditional markets
of
that
synthetic
agricultural alcohol used for purposes other
than
carburation.

far as
is
concerned,
increased more

In addition, as

the supply of

alcohol

than

the

(241)

it

is therefore quite clear that

In France’s view,
the
comments put forward by BP Chemicals, and by BP
Chemicals alone, are not justified by the existence of
duly proven distortion of competition, distortion which
is moreover disproved by the abovementioned facts.
According to France, BP Chemicals is obliged to justify
its action by citing hypothetical
risks which the
development of fuel bioethanol production backed by a
tax advantage could indirectly impose on the synthetic
ethanol market.

(242) France also points out

by

that

programmes

the (cid:145)large-scale(cid:146) biofuel
the
to
referred
development
Commission in connection with competition on the
traditional outlets for alcohol mainly involve Brazil and
the United States and not
the Community countries.
The production of ethanol for carburation in those two
countries is 120 and 60 million hectolitres respectively,
compared with estimated current European production
of around 2,35 million hectolitres. It should be noted in
this respect that no requirement that plants be dedicated
exclusively to the production of fuel ethanol is imposed
in Brazil or the United States, despite the existence of
plants with very large production capacities.

(239) As

far as BP Chemicals’ comments are concerned,
France notes that no MTBE producers and no synthetic

(26) OJ L 316, 31.10.1992, p. 19.

that even if,

(243) As far as the European ethanol market is concerned,
France considers
technically speaking,
synthetic alcohol can be used in carburation, the option
of preferring bioethanol stems not from some (cid:145)economic
rationale(cid:146) or other, but
from environmental criteria
(notably cutting greenhouse gas emissions) and the
desire
to reduce dependency on energy imports,
advantages which products of fossil origin cannot offer.

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(244) France states

that, contrary to what BP Chemicals
claims, most French bioethanol producers participate in
the fuel-bioethanol production programme.

estimate for bioethanol production in the Community
presented by BP Chemicals is out of all proportion with
the scenario described for the United States.

the

that,

estimates

account of

take proper

(245) France also states that BP Chemicals is lumping together
projects at very different stages of advancement and
does not
different
approaches adopted in the countries concerned. BP
Chemicals
7 000 000
additional hectolitres of
fuel bioethanol will be
produced. However, although three other Member States
have
their
significant
the
fuel-ethanol production in the
inevitable time lag between the announcement of the
building of a plant and the actual marketing of
its
output makes unlikely any increase in production such
as suggested by BP Chemicals.

increase
years

in
ahead,

announced

2004,

by

a

(246) Consequently, European fuel-bioethanol production in
2004 will probably be at a much lower level than the
figures suggested by BP Chemicals. At all events, the
increase is all the more modest in view of the fact that
the United States plans over the same period to double
its output to 120 million hectolitres a year.

(247) France also states

that BP Chemicals

is comparing
projects involving the direct blending of fuel bioethanol
in petrol with projects for the production of ETBE. As
far as the ETBE projects are concerned, BP Chemicals
does not distinguish between the building of new plants
and the conversion of existing MTBE plants, which
requires investment. Similarly, BP Chemicals does not
make any distinction between projects involving the
building of new ethanol plants that are required where
there are no available capacities and projects in which
the available distillation capacities are still sufficient, as
in the case of France.

the

sector

ecobalances of

(248) As far as the environmental aspects are concerned,
France points out
the
that
are known and show the
fuel-bioethanol
undeniable advantages in terms of CO2 emissions. BP
Chemicals does not make
to any
ecobalance on the petrol sector that would give any
including on harmful
credibility to its
argument,
emissions of other than CO2.

any reference

(249) With regard to risks to biodiversity, it should be noted
that
tied to the
fuel-bioethanol production is not
cultivation of only one crop, but may involve a broad
range of crops (wheat, barley, maize, sucrose-containing
plants, etc.). As far as land availability is concerned, the

(250) France

is

that

also points out

the need to reduce
dependence on energy imports was one of the main
reasons why the United States decided to support the
development of bioethanol, an objective which synthetic
ethanol certainly cannot meet. France argues that BP
Chemicals
comparing projects which are not
comparable. The costs of producing fuel bioethanol
from beet depend largely on the price paid to the
agricultural producer, which is not specified by BP
Chemicals. France is surprised that, at
this stage, BP
Chemicals did not indicate to the Commission its own
production costs, which would have made it possible to
assess the risk it is really running.

(251) At all events, the fuel-bioethanol sector has invested in
this
the construction of new ETBE plants. However,
point is not taken into account at all in the calculations
presented by BP Chemicals.

(252) France has opted for using the distillery capacity
available, this solution being less costly in a start-up
phase.
the reduction
granted to fuel bioethanol, only the direct distillery costs
have been taken into account (Levy report, February
1993).

In calculating the amount of

(253) Despite

the

advantages

considerable

from which,
according to BP Chemicals, French bioethanol producers
benefit,
substantial
that
the construction of a new alcohol
investment
distilling plant was
carried out by BP Chemicals
(Grangemouth plant, capacity 1,3 million hectolitres,
started production in 2001).

France
for

notes

only

the

fuel

does

require

bioethanol

(254) As far as quality is concerned, France states that not
purification
only
it must also go through a
(elimination of impurities),
water-removing process so as to eliminate all traces of
water and meet the specifications required by the oil
company. This operation, which requires
special
equipment, obviously has an impact on the final
production cost of fuel bioethanol. France states that the
example of a distillery with one million hectolitres a
year
regards France, where
as
production is piecemeal, with no plant having a
capacity of more than 600 000 hectolitres a year.

totally artificial

is

(255) France points out that the scale effect currently operates
ethanol production,

synthetic

benefit

the

to

of

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Official Journal of the European Union

10.4.2003

particularly where it is carried out in plants that are
integrated with oil refineries, with significant advantages
in terms of transfer of ethylene, steam, electricity and
distribution of the fixed costs of the installations.

advantage enabling it
impact on its production costs (27).

to make a saving having an

(256) France adds that, in setting a ceiling for the level of tax
reduction taking account of
the specific conditions
relating to the production of fuel bioethanol in France,
the French scheme does not operate against the interests
of BP Chemicals. France announces that,
in order to
take account of the recent trend of oil prices, the level
of reduction will be re-examined and index-linked when
France announces its forthcoming calls to tender.

(261) According to the judgments of the Court of Justice of
the European Communities, only advantages granted
directly or indirectly through State resources are to be
considered aid within the meaning of Article 87(1) of
the Treaty.

for

that

(ringfencing) makes

the system proposed by BP
(257) France considers
discrimination
Chemicals
between operators: a firm having only one site would
be obliged to choose one market, whereas
firms
established on several sites would be able to continue
operating on the two markets. Since at present the vast
majority of French distilleries (with the exception of
wine alcohol) produce fuel bioethanol, the system of
swap arrangements between producers is not feasible.

VI. ASSESSMENT OF THE AID MEASURES IN
QUESTION

1. Existence of State aid within the meaning of
Article 87 of the Treaty

(258) Article 87(1) of the Treaty provides that any aid granted
by a Member State or through State resources in any
form whatsoever which distorts or threatens to distort
competition by favouring certain undertakings or the
production of certain goods shall, in so far as it affects
trade between Member States, be incompatible with the
common market.

(259)

In order for a measure to be considered State aid, four
main conditions must be met:
the aid must be
granted by the State or through State resources; (ii) it
must confer an advantage on the recipient undertaking;
(iii) it must affect competition; and (iv) it must be at
least capable of affecting trade between Member States.

(i)

(260)

is settled case-law that

It
the concept of State aid
embraces any advantage granted by public authorities to
an undertaking. Such a definition covers therefore the
allocation
any
mitigation of the charges it normally has to bear, or any

undertaking,

resources

an

to

of

in various

(262) The concept of aid is wider than that of subsidy and
covers also interventions which,
forms,
mitigate the charges normally included in the budget of
an undertaking and which have the same effect as a
subsidy. It follows that a measure by which the public
authorities grant certain undertakings a tax exemption
which, although not involving a direct transfer of State
tax
resources, places
to whom the
exemption applies
financial
favourable
taxpayers constitutes State aid
situation than other
within the meaning of Article 87(1) of the Treaty (28).

the persons
in a more

(263) According to settled case-law, the condition of an effect
on trade is fulfilled where the recipient undertaking
carries on an economic activity which forms the subject
matter of trade between Member States. The mere fact
that the aid strengthens the position of that undertaking
in intra-Community trade compared with that of other,
competing undertakings makes it possible to consider
that trade has been affected (29).

(264) Pursuant to Article 6 of Council Directive 92/12/EEC of
25 February 1992 on the general arrangements for
products subject
to excise duty and on the holding,
movement and monitoring of such products (30), as last
amended by Directive 2000/47/EC (31),
the TIPP
becomes
for
time of
consumption of
the petroleum products into which
biofuels are incorporated. The person liable for payment
of
the
abovementioned products for consumption, as a rule an
authorised warehouse-keeper.

person who

chargeable

the TIPP

releases

release

the

the

at

is

(27) See: the judgments of the Court of Justice in Cases 30/59 De
Gezamenlijke Steenkolenmijnen in Limburg v High Authority [1961]
ECR p. 3, Denkavit italiana [1980] ECR 1205, and C-387/92 Banco
exterior de Espaæa [1994] ECR I-877.

(28) Judgment in Case C 387/92 Banco Exterior de Espaæa, cited above

(see footnote 27).

(29) Neither the fact that the aid is relatively small in amount, nor the
fact that the recipient is moderate in size or its share of the
the
Community market very small, nor indeed the fact
recipient
the
virtually
Community does anything to alter this conclusion.

that
its production outside

exports

all

(30) OJ L 76, 23.3.1992, p. 1.
(31) OJ L 193, 29.7.2000, p. 73.

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for

enter

control

(265) When biofuels
the oil
establishments under
or
(tax warehouse
customs
production) in which they are to be incorporated into
petroleum products,
the
operation is issued with an exemption certificate for an
received
to
amount
multiplied by the rate of exemption. These certificates
are then set against
release for
consumption of petroleum products.

the operator carrying out

the declarations of

corresponding

volume

storage

the

(266)

If the recipient of the tax aid for the production of
biofuels is legally identified as being the authorised
alcohol
warehouse-keeper who
incorporates
derivatives
the alcohol component of which is of
agricultural origin into super grade fuels and petrol,
such tax aid nonetheless constitutes a means of opening
up a new outlet for agricultural producers.

ethyl

(267) What is involved here is therefore a conduit through
which the effect of the tax aid travels from the nominal
recipient of the aid, through the bioethanol producer, to
the farmer. The effect of the measure is to reduce the
price of the biofuel to the level of that of fossil fuels,
the aim being to promote renewable energy while
helping to ensure that agricultural producers earn
enough to induce them to switch lastingly to this new
market.

(268) Since biofuels are in competition with fuels of fossil
origin as additives or substitutes and since they form the
the aid in
subject matter of
question is capable of affecting such trade and of
distorting competition.

intra-Community trade,

(269) The differentiated excise duty rate for ETBEs with which
this Decision is concerned falls, therefore, within the
scope of Article 87(1) of the Treaty.

(274)

2. Assessment of the compatibility of the aid

2.1. Assessment of compatibility with Article 87 of the

Treaty

(270) The measures in question do not constitute aid having a
social character, granted to individual consumers, or aid

to promote the execution of an important project of
common European interest; nor do they constitute aid
to remedy a serious disturbance in the economy or to
compensate for the economic disadvantages caused by
the division of Germany; nor, moreover, do they
and heritage
constitute
conservation.

to promote

culture

aid

(271) Since, furthermore, the measures do not constitute aid
to promote the economic development of areas where
the standard of living is abnormally low or where there
is serious underemployment, or aid to facilitate the
development of certain areas of France, the derogations
provided for in Article 87(3)(a) and, (c) first part, of the
Treaty for regional aid cannot be considered.

(272)

In so far as the beneficiaries of the aid scheme are not
the subject of any restructuring or rescue plan,
the
derogation provided for in Article 87(3)(c) of the Treaty
in respect of aid for restructuring or rescuing firms in
difficulty can likewise not be considered.

(273)

for

It remains, therefore, to be determined whether the aid
in question qualifies
the derogation in Article
87(3)(c) as being intended to facilitate the development
of certain activities, where such aid does not adversely
affect trading conditions to an extent contrary to the
common interest.

2.2. Conditions governing eligibility and absence of

discrimination

In order that the scheme at issue might be considered
compatible with the common market as being aid to
facilitate the development of an area of activity that it is
sought to promote in the Community, it must first be
ascertained that it does not adversely affect trade to an
extent contrary to the common interest. The derogation
provided for in Article 87(3)(c) may apply only if the
arrangement in question provides for objective criteria
in the conditions governing the eligibility of
the
undertakings concerned (that is to say, the possibility of
submitting an application for approval) and the absence
of any discretionary elements in the choice by the
public authorities of
the production units that can
benefit from the tax exemption.

(275) The points of

the

the
scheme
Commission must examine closely so as to be able to
exclude the presence of any discrimination are,
the
obligation on production units applying for approval to

in question that

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Official Journal of the European Union

10.4.2003

social

certain

comply with
tax
requirements, the obligation on such units to provide
the French authorities with a precise description of their
activities and the criteria governing the granting of
approvals of different durations.

security

and

(276) The taking into account in the new system, for purposes
of selecting recipient undertakings, of the production
capacities of French undertakings which were set up or
which expanded as a result of the previous aid scheme,
which was declared incompatible with the Treaty by
Commission Decision 97/542/EC of 18 December 1996
on tax exemptions for biofuels in France (32),
is a
further factor that needs to be examined.

(281) As

regards

the duration of approvals, France has
communicated to the Commission the objective ratios
that are to be taken into consideration for this purpose.
Moreover, Decision 2002/266/EC, by which the Council
authorised France to apply a differentiated rate of excise
duty to biofuels in accordance with Article 8(4) of
Directive 92/81/EEC, states that exemptions unlimited
in time cannot be authorised and fixes a period of six
years as the appropriate period in economic terms to
meet the planning needs of investment projects in the
individual
case
exemptions of a maximum duration of six years starting
from the date on which approval is given are capable of
satisfying
from the
Community provisions on excise duty.

question. Consequently,

requirements

resulting

only

the

in

(277) Production units applying for approval must be both
up-to-date with their social security and tax obligations
and in compliance with the environmental rules and
regulations of the country in whose territory they are
established. In this case also, these requirements do not
appear to be open to criticism: non-compliance with
them generally results in savings for undertakings which
undertakings that do comply do not enjoy.

(282) As regards the description of the volumes for which
production units may request approval (5 000 tonnes a
year in the case of a unit which has been adapted to
produce biofuels without any specific investment, or
from the
the volumes eligible to benefit
1,25 % of
measure), it should be noted that these provisions of the
scheme at
issue apply without discrimination to all
production units, French ones included, which are in
the situations described.

(278) As to the prohibition on a unit subcontracting all or
part of
received
the production for which it has
approval, this requirement meets the need for effective
monitoring of compliance with the abovementioned
obligations. Such monitoring would be difficult, if not
were
impossible,
subcontracted
did not
to production units
participate in the tendering procedure.

quantities
that

approved

the

if

(279)

In both instances, France accepts national certificates
attesting to compliance with these criteria.

(280) The

and

as
the

requirement

a precise
to the giving of
description of
investments of
activities
production units both in the area of biofuels and in that
the
of other chemical activities might
to obtain information
French authorities wish thus
constituting
secrets of
commercial
and
non-French undertakings. That is not the case, however,
as the information is confined to the technical details
needed to calculate the ratios indicating the nature of
the biofuel activity of a production site with a view to
granting approval.

industrial

suggest

that

(32) OJ L 222, 12.8.1997, p. 26.

(283) On the other hand, the question arises as to the extent
to which the production capacities that developed in
France, thanks to the aid scheme which the Commission
declared illegal and incompatible with the Treaty by its
Decision 97/542/EC, should be taken into account in
determining the volumes for which a unit may request
approval. It goes without saying that the aim is not to
render
such undertakings more
complicated than that of the other producers potentially
concerned. Nevertheless, a situation must be avoided
where the only ones
from the
arrangements are French biofuel producers thanks to
their already having on hand production capacities
developed on the basis of an aid scheme that does not
comply with Community law.

to actually benefit

eligibility of

the

(284) The Commission dealt with this question in its 1996
Decision, in which it stated that (cid:145)the advantage to the
(biofuel) manufacturers of the direct aid was temporary,
or at least marginal, although not quantifiable. While it
did enable them to supply biofuels at a competitive
price, the quantities concerned were generally not very
large in relation to the market
for fuels in general(cid:146).
Moreover, as regards (cid:145)the diester (esters of rapeseed oil
and sunflower oil) sector, which is preponderant(cid:146), the
data on which the Commission based this Decision
(cid:145)show that the aid to the plant-based fuels concerned did
not
excess
overcompensate
general
production costs(cid:146).

the

for

in

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(285) Moreover, in the same Decision the Commission stated
that it had found no evidence to suggest that the real
effect of the aid was to benefit biofuel manufacturers in
terms of higher sales or profits.

(291) As noted in the Decision of 9 April 1997, which was
partly annulled by the Court of First Instance, the policy
pursued by the scheme authorised by that Decision is
entirely consistent with the Community’s policies on
renewable energy.

97/542/EC,

(286) Having recognised the temporary, marginal nature of
the aid, the Commission must conclude, in keeping with
the
that
Decision
incompatibility of which it established was not the main
driving force behind investments carried out in recent
years.
It cannot therefore object to the fact that the
proposed measure does not bar undertakings which
received such aid from submitting an application for
approval under the current arrangements.

scheme

the

aid

(292) This policy of developing renewable energies has its
basis in the Treaty, and in particular in Article 174
thereof, which provides that Community policy must
contribute to (cid:145)prudent and rational utilisation of natural
resources(cid:146). The Commission considers
in the
balancing of interests provided for in the final part of
Article 87(3)(c) of the Treaty, account must be taken of
the fact
this scheme follows the line drawn at
Community level with a view to promoting renewable
energies.

that,

that

(287) As to the choice of undertakings benefiting from the
measure, the selection of projects by France is made on
the basis of the criteria set out above and determines
quantities
the number of undertakings
concerned. A clause expressly provides that, where the
budgetary resources are insufficient
the
quantities for the projects selected, approval is given in
proportion to the applications deemed admissible. So
far, recourse to this clause has not been necessary.

to cover all

and

the

(293) The development of

energies,

renewable

and in
particular of biofuels, was
first encouraged by the
Commission in 1985 when it proposed to the Council
that it adopt a directive on crude-oil savings through
the use of substitute fuel components in petrol (Council
Directive 85/536/EEC (33). The Directive stresses how
important biofuels are in reducing Member States’
dependence
the
imports
incorporation of ethanol in petrol up to 5 % by volume
and of ETBE up to 15 %.

authorises

and

on

oil

(288) To conclude, the draft exemption arrangement at issue
involve any discrimination in the criteria
does not
governing
any
eligibility of undertakings or
the
discretionary elements in the choice of beneficiaries and
the granting of approvals.

(294) By Decision 93/500/EEC (34) concerning the Altener
programme, the Council for the first time adopted a
instrument for promoting renewable
specific financial
energy sources.

2.3. Assessment of the compatibility of the arrangements in

the light of the Community’s energy policy

(295) The Green Paper

renewable
sources of energy (35)(cid:146) was the first step towards a
strategy in favour of renewable energy sources.

(cid:145)Energy for

the future:

(289) The French taxe intØrieure sur les produits pØtroliers (TIPP)
subjects mineral oils and equivalents to an excise duty.
Pursuant
the
TIPP applies irrespective of the source of the fuel.

to Article 2(3) of Directive 92/81/EEC,

(290) The development of renewable sources of energy to
reduce dependence on fossil fuels is a central concern of
Community energy policy and in November 1996
to Article
France notified the Commission, pursuant
93(3)
its intention to
the Treaty of
reduce
the TIPP on two products derived from
renewable sources, namely esters of vegetable oils and
bioethanol-derived ethyl tertiary butyl ether (bio-ETBE).

(now 88(3)) of

(296)

In its communication (cid:145)Energy for the future: renewable
sources of energy(cid:146) White Paper
for a Community
strategy and action plan (36),
the Commission stated
that renewable energy sources are currently unevenly
and insufficiently exploited in the Community. Although
many of them are abundantly available, and the real
economic potential
energy
considerable,
sources make a disappointingly small contribution of
less than 6 % to the Community’s overall gross inland
energy consumption, which is predicted to grow
steadily in the future.

renewable

(33) OJ L 334, 12.12.1985, p. 20 (as amended by Directive

87/441/EEC (OJ L 238, 21.8.1987, p. 40)).

(34) OJ L 235, 18.9.1993, p. 41.
(35) COM(96) 576 final.
(36) COM(97) 599 final.

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Official Journal of the European Union

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(297) The European Parliament has constantly stressed the
role of renewable energy sources. In its resolution of 17
June 1998, it called for a 2 % increase in the market
share of biofuels over five years through a package of
measures,
the
tax
establishment of a compulsory rate of biofuels for oil
companies.

exemption

including

and

(298) On this aspect of renewable energy the Commission
adopted the Green Paper (cid:145)Towards a European strategy
for the security of energy supply(cid:146) (37). The Union’s
external dependence for energy is constantly increasing.
Its structural weaknesses regarding energy supply consist
basically in Europe’s growing dependence on energy, the
role of oil as the governing factor in the price of energy
and the disappointing results of policies to control
consumption.

(299) The Commission considers

that demand should be
steered towards consumption that is better controlled
and more respectful of the environment. With regard to
supply, priority must be given to the fight against global
warming. The development of new and renewable
energies such as biofuels is the key to change.

(300) Renewable energy sources are of indigenous origin and
can therefore help reduce dependence on imports and
increase security of supply.

(301) The strategy and action plan described in the White
Paper are directed towards the goal of achieving at least
12 % penetration of renewable energy sources in the
Community by 2010.

(302) The overall Community target of doubling the share of
renewable energy sources to 12 % by 2010 implies that
Member States have to encourage the increase of
renewables according to their own potential. Targets in
each Member State could stimulate the effort towards
the available potential and
increased exploitation of
attaining
an important
could be
emission
decreasing
energy dependence
reduction.

for
and CO2

instrument

(303) The White Paper

states

specific measures are
needed to help increase the market share for biofuels
from the
significantly higher
current 0,3 % to a
percentage, in collaboration with Member States.

that

(37) COM(2000) 769 final.

(304) The Commission considers that biomass can make a
significant contribution to improving long-term security
of supply.

in some

(305) Ever since the first oil crisis in 1973, biomass has been
an
considered and,
alternative to fossil
fuels as a source of energy.
Particular attention has been given to the potential for
using biomass as the basis for producing alternative
motor vehicle fuels (diesel or petrol) because of
the
transport sector’s almost exclusive dependence on oil.

cases, promoted as

(306) Of the biological materials that can be used as fuel for
road transport, mention may be made of sugar beet,
cereals and other crops which can be fermented to
produce alcohol (bioethanol). This alcohol can be used
as a component in petrol, as motor fuel in neat form, or
as a petrol component after being converted to ETBE
through reaction with isobutene (a refining by-product).
There is reason to believe that future developments will
also make
economically
competitive bioethanol from wood or straw.

to produce

it possible

(307)

In principle biofuels offer an ideal alternative since,
when based on Community-grown crops,
they are
practically 100 % indigenous and CO2 neutral since
their carbon content is captured from the atmosphere.

(308) The proportionate share of biofuels in the Community
total

amounting to 0,15 % of
is
consumption of mineral oils as fuel in 1998.

small,

still

the

(309) Liquid biofuels are currently the least competitive
product from biomass in the market place, given the
low oil prices. It is, however, important to ensure their
continuing and growing, presence in the fuel market
since short/medium-term oil prices are unpredictable,
and in the longer term alternatives to the finite oil
reserves are needed.

(310) Biofuels are expensive (EUR 300 or more in additional
cost per 1 000 litres conventional fuel replaced). The
principal obstacle to their use is the price differential
from 1,5
fuels, which currently varies
with fossil
(biodiesel) to 4 for products before tax.

(311)

In view of this differential, priority should be given to
conducting more research and investigating other means
of reducing biofuel production costs. At present, the
means deemed appropriate with a view to increasing
biofuel use are: (i) granting tax relief; and (ii) promoting

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fuels of

the consumption of
renewable origin by
to be
requiring a minimum percentage of biofuel
present in all fuels sold (2 % in 2005, then 5,75 % in
2010, according to the proposal
for a European
Parliament and Council Directive on the promotion of
the use of biofuels for transport (38). A differentiation of
excise duties may be carried out under Directive
92/81/EEC.

introduction of natural gas or hydrogen there are no
objective reasons for further delay. Biofuels are in the
therefore
short and medium term the only option,
launching
to
appropriate
promote the introduction of biofuels will give a clear
signal that the Community is serious about developing
alternatives to petroleum products in transportation.

instruments

policy

the

(312) As the Commission acknowledged in its White Paper,
biofuels will not be able to play a bigger role unless the
gap between their production costs and those of
competing products is reduced.

(318) Consequently, several Member States have already taken
measures at national
level, mainly in the field of
taxation, to promote the production and use of biofuels.

(313) The gap between the prices of biofuels and those of
competing products should be reduced by measures
which,
initially, could be of a fiscal nature. The
application of excise duties to a price that is already
three times higher than that of European fuels inevitably
dooms biofuels to marginalisation on the market.

(319) Biofuels for transport could be marketed in the form of
(cid:145)pure(cid:146) biofuels for dedicated vehicles or in the form of
(cid:145)blend(cid:146) fuels in such a proportion that it does not affect
the performance of motor vehicle
engines. These
biofuels are mainly biodiesel, bioethanol and ETBE
produced from bioethanol. ETBE is etherised bioethanol
and can be used as a blending component in petrol at a
rate of up to 15 %.

(314) The additional cost of EUR 300/1 000 litres is based on
an oil price of approximately EUR 30/barrel. The price
of oil would have to reach about EUR 70/barrel before
biofuels could compete with conventional diesel
fuel
and petrol.

(320) The situation regarding biofuels varies enormously
throughout
in biofuel
Europe. A 93 % increase
production was recorded between 1997 and 1999. Only
six Member States make any real contribution to total
European biofuel production. Austria and France are the
most active countries in this area.

(315) Owing to the spectacular fall in oil prices in the early
and mid-1980s and the fact that they have remained
low since, biofuels are not competitive. Bioethanol can
be produced from a variety of crops, as a rule sugar
beet
same
(wheat,
considerations apply to biodiesel as to bioethanol. The
production cost per 1 000 litres may be lower, but it
takes 1 500 litres of ethanol to replace 1 000 litres of
petrol.

barley).

cereals

The

and

(316) On 7 November 2001, the Commission adopted two
proposals. The first concerns a directive requiring an
increasing proportion of all diesel fuel and petrol sold in
Member States to be biofuel. The second proposal
creates a Community framework allowing Member
States to apply under fiscal supervision differentiated tax
rates in favour of biofuels.

(317)

In this context, the Commission has already pointed out
introduction of
that
to the
biofuels

the implications of a gradual

are well

contrary

known,

and

(38) COM(2001) 547 final.

(321)

In France,
the total biofuels contribution in 1999
amounted to 0,7 % of total oil products consumption,
with approximately one third bioethanol and two thirds
biodiesel.

(322) Austria was one of the first countries to establish a
bio-energy programme. In 1991, one of the world’s first
industrial biodiesel production plants started operation
at Aschach (Province of Upper Austria).

(323) Germany is currently the second biggest biodiesel
producer. According to Eurostat official statistics,
it
produced 130 000 tonnes in 1999, or 15 % of total EU
biofuel consumption. In 2001, production was expected
to reach 250 000 tonnes, rising to 500 000 tonnes in
2002.

(324) Over the next 20 to 40 years, Sweden intends to replace
25 to 50 % of today’s fuel use by fuel based on forest
and agricultural residues. The Swedish National Energy
Administration believes it is possible to attain a 10 %

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Official Journal of the European Union

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market share for biofuel in 10 years’ time. Production of
biofuels in Sweden used to be about 50 000 tonnes.
The available surplus of wheat in Sweden could in the
future produce, with current yields, 500 000 m3 of
bioethanol, or
annual
consumption of petrol and diesel in that country. There
are around 300 ethanol-fuelled buses in Sweden, most
of them in the Stockholm area, and approximately 600
cars and 100 heavy goods vehicles running on biogas.

some 5,6 % of

total

the

(325) Production in Italy was 96 000 tonnes in 1999. The
national plan for the use of agricultural and forestry
biomass anticipates production of bioethanol, biodiesel
and ETBE of around 1 000 000 toe over
the next
decade.

(326) Production in Spain was around 50 000 tonnes in
2000. Liquid biofuels are included in the national plan,
with a recognised value for rural development and job
creation. Approximately 500 000 toe is anticipated in
2010 in the context of fiscal measures.

(327)

In the present Decision the Commission has also
assessed the advantages of biofuels in terms of CO2
supply,
emissions. oil
environmental policy and employment.

substitution for

security of

Commission stated that a vast number of energy policy
in
measures
oil-consuming countries put an end to rising oil prices
in the early 1980s.

substitution)

(energy

saving,

oil

(330)

example,

It is difficult to predict the effect of a single marginal
reduction in oil demand on world oil prices. However,
for
replacing 2 % of Community diesel
consumption with biofuel at an additional cost of EUR
250/1 000 litres would (cid:145)cost(cid:146)
around EUR 1 000
million/year. The resulting 2 % lower demand for OPEC
oil would have a certain buffering effect on oil prices
and the savings on the approximately four billion
barrels of oil consumed annually in the Community
could (partially) justify these additional costs.

(331) Moreover,

the

introduction of biofuels

could be
expected to have a modest effect
in dampening the
effect of changes in crude oil prices on prices paid by
consumers. For example, if a EUR 10 rise in the price of
a barrel of oil results in an increase in the price at the
pump of 10 cents per litre, blending in 5 % biofuels
could be expected to limit this price rise to 9,5 cents,
assuming that the prices of biofuels themselves were not
significantly affected by the rise in crude oil prices.

(328) As regards CO2 emissions, actual avoidance is less than
3,2 tonnes because of the emissions produced in the
process of growing the crops and the conversion of raw
material into biofuels. Realistic CO2 saving for biodiesel
is around 2 to 2,5 tonnes CO2/1 000 litres. According
to the ADEME, replacement of diesel by ethanol would
result in a reduction of two tonnes of CO2/1 000 litres.
If there were no other benefits, such as, for instance, in
the agricultural sector and in the security of supply, this
would mean that at current oil prices and biofuel
production costs the cost of CO2 avoidance would be in
the range of 100 to 150 EUR/tonne of CO2, which is
above the range for cost-effective measures to meet the
first Kyoto
commitments during the
Community’s
commitment period. However,
though the use of
biofuels at this moment cannot yet be justified by the
benefits alone of CO2 avoidance, it should certainly be
considered as a strategic choice for
future climate
change policy.

(332) As regards the environmental impact of the production
of biofuels, a number of studies into the energy and
environmental efficiency of alternative fuels have been
carried out since the early 1980s. Most of these studies
gave rise to animated discussions among advocates and
opponents, both experts and the general public alike.
An analysis of the most important studies shows that
the results only differ slightly. The studies confirm a
positive energy balance, stating that with one unit of
fossil fuel energy, two to three units of renewable fuel
can be produced. The reduction of greenhouse gas
emissions is also confirmed. The differences in the CO2
reduction depend on farming practices and the chain of
production. Apart from the impact on CO2 emissions,
the production of crops for biofuels, conversion of the
raw materials and subsequent use of biofuels have a
number of effects on the environment that could be
relevant to the attractiveness of replacing conventional
motor vehicle fuels with biofuels.

(329) The strength of the oil substitution argument is difficult
its
the

to
quantify
communication

In
2001 (39)

7 November

nevertheless

significant.

but

of

(39) COM(2001) 547 final.

(333) When assessing these effects it is important to be aware
that in principle what matters is the difference between
the overall impact of fossil fuel production, refining and
use versus biofuel production, conversion and use rather
than the impact as such of the biofuel life cycle.

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(334) To give some kind of order of magnitude,

of

total

set-aside

Fifteen. Mandatory

the total
surface area of arable land covered by the CAP capable
of producing cereals, oilseeds and vegetable protein is
limited to approximately 54 million hectares for the
Community
for
2001/2002 accounts four about four million hectares,
to which must be added 1,6 million hectares of
voluntary set-aside, giving a total of 5,6 million
hectares. Given this surface area and considering only
primary biomass as a function of
the crop grown,
between four and 15 million toe of biofuels could be
supplied for transport use, making for between 1,2 %
and 5 % of
European petroleum products
consumption. However, the extent to which producers
can use set-aside land for this type of crop will depend
on market prices and in any event on the limits
imposed by the Blair House Agreement on the use of
set-aside land for
the production of derivatives of
non-food crops, i.e. the equivalent of one million tonnes
of soya meal. Moreover, the Blair House Agreement also
limits the production of oilseeds benefiting from specific
subsidies to a maximum of five million hectares. It is
evident, therefore, that the decision taken in the context
of Agenda 2000 to align aid for oilseeds on the level of
thereby putting an end to specific
aid for cereals,
subsidies for oilseeds, has created the conditions in
which oilseed production in the Community can largely
meet demand,
irrespective of set-aside given that the
possibilities of recourse to such land are extremely
limited. Other sources of biofuel production such as
cereals, including maize, sugar beet and lignocellulose,
are not covered by the Blair House Agreement and
therefore remain subject only to the normal rules of
competition.

leakage

requires Member States

(335) Although the three crops (rape, cereals and sugar beet)
the
are normally farmed using intensive methods,
Community legislation on pesticides, biodiversity and
nitrate
to install
safeguards against any unacceptable negative impact.
factor, growing
Should biodiversity be an important
sugar beet would be a good option as the area needed
to produce a given quantity of biofuel is less than half
that needed to produce the same quantity from cereals.
On the other hand, cereals produce large quantities of
additional biomass in the form of straw, which makes
for a better CO2 balance if used for energy generation.

(336) Conversion of crops into biofuels is not subject

legislation,

environmental

to
Community
oil
refining. Nevertheless, some Member States, generally
believed to apply strict environmental
legislation, have
recently approved plants for the production of both
bioethanol and biodiesel. This is a strong indication that
it is perfectly possible to convert crops into biofuels in
environmentally acceptable production plants.

unlike

different studies agree on the scale. The German study
performed by the Fraunh(cid:246)fer Institute (40) showed the
rate of economic impact to be 16 employees per ktoe
per year. The Spanish national plan for biofuels puts the
figure at 26 employees per ktoe per year of biofuels
produced (source: IDAE).

(338) Extrapolation of

these

results would lead to the
conclusion that a biofuel contribution of around 1 % to
total EU fossil consumption would create between
45 000 and 75 000
these jobs
would be located in rural areas.

new jobs. Most of

2.4. Exemption from the TIPP and disturbances on the

ethanol market

(339) The total amount of aid to an individual beneficiary is a
function of two variables: the aid per hectolitre and the
number of hectolitres allowed to benefit from the aid.
The aid per hectolitre is limited to offsetting part of the
additional cost of producing these products compared
with those of
fossil origin and is likely to diminish
rather than increase since the productivity gains that
would be obtained would lead to a downward
adjustment of the value of the reduction of the TIPP.

(340) As to the number of hectolitres allowed to benefit, it is
the
precisely in order
amount was left open,
the
amount of aid would depend on the development of
production capacity of bio-ETBE, since at the time of its
adoption only France had bio-ETBE production units.

to avoid discrimination that
the Decision noting that

(341) BP Chemicals asserts that the Commission has not paid
attention to the effects of the current scheme on the
ethanol market. The Commission would point out that
back in 1997 it found no evidence to suggest that the
actual effect of the aid was to increase bioethanol sales
in traditional synthetic ethanol segments.

(342) BP Chemicals has commented at length on the alleged
the aid on the ethanol market and has
effects of
endeavoured to show that the French scheme is likely to

(337) Lastly, biofuels are highly labour intensive, especially in
rural areas during the exploitation phase. Although
precise numbers of jobs created are difficult to evaluate,

(40) Volkswirschafttliche Aspekte einer Herstellung von Biodiesel

in
Deutschland, IFO-Institut f(cid:252)r Wirtshaftsforchung (cid:150) 2nd EU Motor
Biofuels Forum, September 1996.

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cause severe disturbances in the established ethanol
the only argument advanced in
market. However,
support of this allegation is that the aid will encourage
increases in ethanol production capacity and that this
surplus capacity will
inevitably be used to supply the
industrial, potable and chemical raw material segments
of the ethanol market since the Commission has not
imposed conditions to prevent this from happening.

(343) The observation that French bioethanol production has
increased in recent years does not in itself show that the
scheme will cause major distortions on the ethanol
market. The Commission has
in
synthetic
and bioethanol production over
various periods.

examined trends

ethanol

(344) The Commission examined a period of no less than four
years from the launch of the previous scheme (1992 to
1995) and maintained during the legal proceedings
leading up to the judgment of
the Court of First
Instance of 27 September 2000 that, if BP Chemicals’
claims were well founded,
it would be able to show
injury to synthetic ethanol producers through price
depression and reduced profitability. BP Chemicals does
not mention this aspect, however, in its comments.

(348)

(345) Although BP Chemicals

refers

to the advantage to
producers of bioethanol and bio-ETBE, the Commission
considers that, since BP Chemicals produces neither
bio-ETBE nor, apparently, MTBE, its only interest in the
present proceeding consists in showing that the current
scheme will benefit bioethanol producers
to its
detriment in its capacity as a producer of ethanol from
non-renewable sources.

the

scheme

petroleum product multiplied by the rate of exemption.
aid to
Consequently,
bio-ETBE only when it is mixed with other fuels and the
aid can therefore benefit
ethanol producers only
indirectly in their capacity as producers of one of the
components of bio-ETBE.

issue grants

at

(347) There is at

factor

least a theoretical possibility that an
agricultural ethanol producer might benefit
indirectly
from the economies of scale he might achieve as a
result of the advantages focused on a production site
which also produces ethanol for the solvents/chemicals
or drinks market. However theoretical
this reasoning
may be, the Commission’s assessment nevertheless takes
this
to
into consideration when it
analysing the distortions to be taken into account in the
balancing of interests provided for in the final part of
Article 87(3)(c) of the Treaty. However, for the reasons
given below,
the
differentiated rate of excise duty in question has not
distortion of
produced,
competition likely to cause the said balancing of
interests to give a negative result.

the Commission considers

in the present

comes

case,

that

a

and

1991

output

between

In the legal proceedings leading up to the judgment of
the Court of First Instance of 27 September 2000, the
Commission showed that the increase in Community
ethanol
1992 was
attributable to a substantial increase in synthetic ethanol
output.
It was not until 1993 that synthetic ethanol
output fell compared with the previous year, having
exceeded that of 1990 every year except 1991. Even in
1995, while synthetic ethanol output greatly exceeded
that of 1990, bioethanol output was still lower than in
1990. The Commission supplied the following data on
ethanol output
the
(expressed in thousands of hectolitres) showing that,
during the period under review, French ethanol output
had almost doubled:

evolution of French synthetic

(346) As

the operator carrying out

(tax warehouse for storage or production)

the tax mechanism is concerned, when
far as
the oil establishments under customs
biofuels enter
control
in
which they are to be incorporated into petroleum
products,
the operation is
issued with an exemption certificate for an amount
corresponding to the volume received multiplied by the
exemption rate. These certificates are then set against
the
of
release
petroleum products. If the mixing is carried out in a
the document
Member
accompanying the product will state that the petroleum
product contains a biofuel and will specify its nature.
When the excise duty becomes payable in France, an
exemption certificate will be issued for an amount
corresponding to the volume of biofuel contained in the

than France,

consumption

State other

declarations

for

of

(000’ hectolitres)

1991

1992

1993

1994

1995

1 074

1 478

1 383

1 574

1 967

(349) At

the same time,

the Commission produced data
showing that the effect of applying differentiated rates
of excise duty to products containing ETBE had been to
promote the use of bioethanol exclusively for ETBE
production, without its invading the traditional market:

10.4.2003

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1990

1991

1992

1993

1994

1995

1996

(in tonnes)

France, bioethanol

268 604

292 542

298 783

324 063

337 099

376 125

376 201

Community, all

1 258 973 1 178 933 1 093 933 1 249 250 1 261 653 1 245 016 [1 251 973]

TIPP exempted

N/A

N/A

3 000

27 000

38 000

38 000

60 000

Non-exempted

268 604

292 542

295 783

297 063

299 099

338 125

316 201

Percentage

21,33 %

24,81 %

27,03 %

23,77 %

23,7 %

27,15 %

[25,25] %

(350) Total Community production figures for 1996 were not
yet available, but on the assumption that Community
output had remained stable compared with recent years,
the average of 1993 to 1995 output was inserted as an
indicative figure. The percentage figure relates to the
output of French bioethanol not accounted for by
TIPP-exempted ETBE production as a proportion of
Community output, since the central issue was whether
increased French bioethanol output had been used to
any significant extent
than the
production of ETBE.

for purposes other

insufficient

incentive was

(351) French bioethanol output had maintained a fairly
constant relationship to overall Community output. The
explanation for this situation resides in the fact that the
limited fiscal
to stimulate
production of bioethanol to the extent that bioethanol
could displace synthetic ethanol on the ethanol market
generally. Experience with the previous scheme shows
that the complaint that the current scheme contains no
mechanism to ensure that the increase in production of
bioethanol which is bound to result will be directed
exclusively to the ETBE sector is misplaced: no such
mechanism is required because no correlation can be
observed between the existence of the previous scheme
and bioethanol output in France.

(352) The Commission can only repeat

that,

if bioethanol
producers were faced with an increase in input costs, it
is inherently improbable that, burdened thereby with an
extra cost disadvantage compared with synthetic ethanol
producers, they would be in a position to attack market
segments which are currently the preserve of synthetic
producers.

(354) France has

supplied data, published in the Journal
officiel de la RØpublique fran(cid:231)aise, which show clearly
that the tax advantage granted to bioethanol used in
fuels has not had the effect of otherwise increasing the
share of bioethanol to the detriment of synthetic alcohol
in the other areas of use where the two products
compete (solvents and chemicals, in particular):

(in hectolitres)

Non-fuel
agricultural
ethanol

Fuel ethanol

Ethanol of
synthetic origin

1990/1991

3 704 140

(cid:151)

1 073 487

1991/1992

3 561 161

42 692

1 438 953

1992/1993

3 756 911

346 359

1 383 422

1993/1994

3 870 543

485 118

1 314 563

1994/1995

3 791 219

477 726

1 574 130

1995/1996

4 002 011

759 949

1 467 984

1996/1997

4 012 140

1 050 052

1 374 973

1997/1998

3 719 541

1 233 091

1 578 670

1998/1999

3 724 901

1 144 000

1 569 545

(353) The present assessment of a scheme which has been in
force now for five years enables the observer to assess
its real, and not just anticipated or theoretical, effects.

(355) These data show that, between 1991 and 1999, French
for use in fuel,
hectolitres to 4 868 981

bioethanol output,
increased from 3 608 853

including that

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10.4.2003

hectolitres, while synthetic alcohol production grew
from 1 438 953 hectolitres to 1 569 545 hectolitres.
During the same period, production of bioethanol for
use in fuel rose from 42 962 hectolitres to 1 144 242
hectolitres.

(361)

In addition, greater quantities are imported as blends of
tariffs. Once
alcohol with denaturants at
imported, the alcohol contained in the blend may be
extracted and used for traditional purposes.

lower

far

(356)

It follows from the above that, between 1991 and 1999,
the production of bioethanol for non-fuel uses increased
from 3 565 891 hectolitres to 3 724 739 hectolitres, or
by 0,07 %, while synthetic ethanol production grew by
4,86 %.

the traditional market

(357) BP Chemicals considers that, in evaluating the impact of
the French State aid on the traditional ethanol market, it
must be remembered that
for
ethanol is a single market within the Community and
therefore any distortion in the French market has wider
repercussions. Likewise, if bioethanol State aid in other
the market,
Member States also distorts
then BP
Chemicals
too builds upon the
it
considers
distortion caused by the French scheme. BP Chemicals
adds that it is also essential to take into account other
bioethanol projects in the Community.

that

(358)

Inasmuch as the French scheme has not had the effects
on the French market that BP Chemicals claims it has, it
can scarcely be maintained that it is likely to have a
knock-on effect elsewhere.

(359) BP Chemicals also refers, in support of its argument, to
the explanatory memorandum to the proposal
for a
Council Regulation on the common organisation of the
market in ethyl alcohol of agricultural origin, in which
the Commission is said to be sufficiently explicit about
the increased competition in the single market
in
ethanol. It omits to say, however, that the Regulation’s
raison d’Œtre is basically to react to imports from third
countries and that it is only towards the end that the
to
explanatory memorandum refers,
synthetic ethanol.

secondarily,

(360) The Commission notes in this connection that imports
from third countries have increased since the 30 %
reduction in tariffs as a result of the implementation of
the Uruguay Round Agreements of 1995 (from around
400 000 hectolitres in 1995 to just over 1,1 million
hectolitres in 1999). The impact of these imports on the
is significant given that a high
Community market
proportion (80 %)
is duty free or often subsidised
domestically.

(362) Furthermore, since January 2000, a zero tariff rate has
made it possible to import alcohol diluted with water
under the tariff heading for vodka in bulk. This change
from the
makes
imported product
tariffs
the
applicable to alcohol.

it possible to extract

the water
avoid

thereby

and

(363)

these reasons, and not

tax
It
is
reductions
induced the
Commission to propose the establishment of a common
market organisation for agricultural alcohol.

to promote biofuels,

the existence of

that

(364) This explains why the 17th recital to the Commission’s
proposal for a Regulation states that,
in applying the
Regulation, account should be taken of the fact that,
with the exception of
the
Community ethyl alcohol market is supplied with ethyl
alcohol of both agricultural and non-agricultural origin
without any restriction. With that in view, the same
recital provides that
the measures for applying the
Regulation must not lead to any discrimination between
the two types of alcohol.

the spirit drinks sector,

(365) Lastly, BP Chemicals’ request

that

if such separation is not possible,

the final Decision
include the condition that
fuel ethanol production
should be obliged to be in separate production facilities
from ethanol production for the traditional market or,
alternatively,
that
capacity limits should be introduced to neutralise the
advantages described in recital 85,
in particular that
resulting from economies of scale, is not justified in the
the data available. The possible advantage
light of
flowing from economies of scale has not materialised:
the spectacular, steady increase, thanks to State aid, in
fuel ethanol production in France between 1991 and
1999 has not given rise to a similar increase in the
production of agricultural bioethanol not intended for
fuel. The production of bioethanol for uses other than
in fuel has
to
3 724 739 hectolitres, or by 0,07 %, while synthetic
ethanol production has gone up by 4,86 %. In view of
the growth of
the sector, and given the temporal
limitation of the aid scheme resulting from Decision
2002/266/EC as detailed in recital 385 to this Decision,
the Commission considers that a condition such as that
suggested by BP Chemicals would be excessive in

risen from 3 565 891 hectolitres

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the

risks

indirect

distortions

relation to
of
of
competition that might result from the approval of new
ETBE plants in France before 31 December 2003. This
analysis
to the position the
Commission might adopt with regard to any tax
reduction for biofuels granted by France beyond the
period covered by Decision 2002/266/EC.

is without prejudice

(synthetic ethanol

petrol
like petrol, derived from
is,
crude oil), which suggests that bioethanol suffers from a
cost disadvantage in relation to petrochemicals.

(366)

In the light of the above, the Commission considers that
the tax advantage granted to bioethanol intended for use
in fuels has no negative impact on the synthetic ethanol
market and that, therefore, this situation is not likely to
weigh negatively in the balancing of interests provided
for in the final part of Article 87(3)(c) of the Treaty
having regard to the common interest pursued by the
scheme at issue.

2.5. Compensation for the extra cost of producing a

non-fossil fuel

(370) The fact

that

the amount of

isobutylene and the processing of

the tax reduction (41),
namely FRF 3,29/l, can be related to ethanol does not
mean that the aid is exclusively attributable to it. The
aid is granted only in respect of the production of ETBE,
which requires not only the purchase of bioethanol but
also that of
these
feedstocks into ETBE. The ETBE producer has to bear a
cost that is not limited to that of one litre of ethanol in
order to obtain FRF 3,29 in aid. According to the
information in the Commission’s possession, the cost of
producing bioethanol, drying included,
is about FRF
3 700/t (42). The raw materials used to produce one
tonne of ETBE therefore cost around FRF 2 000 for the
ethanol, plus FRF 640 for the isobutylene, to which
must be added some FRF 650 in production costs,
giving a total of approximately FRF 3 300/t. A tonne of
ETBE is TIPP-exempted to the tune of FRF 1 960,
reducing its price to FRF 1 340, which is still slightly
higher
super unleaded petrol
than the price of
(approximately FRF 1 200/t).

(367) ETBE of renewable origin needs to be aided if it is to be
commercially viable. The aid is needed to purchase
that would otherwise not be produced. The
ethanol
agricultural products used as
render
bioethanol uncompetitive. Farmers are, albeit indirectly,
among the beneficiaries of ETBE production. Decision
97/542/EC drew a similar conclusion when it stated that
(cid:145)from the point of view of the broad structure of the
system, the substantive effect of the aid bypassed the
manufacturers ((cid:133)) and benefited the producers of the
raw materials, who became the indirect recipients(cid:146).

raw materials

(371) The Commission considers, moreover, that to make a
comparison based on the cost differential with MTBE
would be to fail to appreciate the fundamental purpose
of the scheme, which is not to promote the use of one
oxygenate over another, but
to promote the use of
biofuels. The objective is not merely to persuade those
to
who already use MTBE to switch to ETBE, but
promote the use of ETBE as a partial substitute for
petrol, the only way to do this being to make such
substitution cost free for the consumer

(368) Given the existence of such a cost handicap, only an
ill-advised investor in bioethanol could be under any
illusions as to his ability to compete with synthetic
ethanol producers.

2.6. Community guidelines on State aid for environmental

protection

(369) The scheme at issue commits approved biofuel plants to
producing a fixed quantity of biofuels for a certain
period and requires them to guarantee their supplies of
source material. The distortion of
the market would
depend not only on the current scheme stimulating
production of sufficient bioethanol over and above the
production destined for bio-ETBE to have an impact,
but would also depend on that surplus bioethanol being
sold at a price low enough to displace synthetic ethanol.
BP Chemicals has adduced no evidence to show that
this would occur. One estimate puts the cost of a barrel
of bioethanol at EUR 60, compared with EUR 20 for

(372) According

to point 82 thereof,

the Community
guidelines on State aid for environmental protection
apply to all notified aid projects in respect of which the
Commission is called upon to take a decision after the

(41) Not the (cid:145)intensity of the aid(cid:146), as BP Chemicals wrongly states, since
the concept of aid intensity is applicable only to investment aid.

(42) The Curriere Vitivinicolo of

the Italian Wine Traders’ Union
regularly publishes European prices for ethyl alcohol obtained
from molasses and cereals. The bulletin of 6 June 2001 gives a
price for molasses alcohol of EUR 59,39/hl and for cereal alcohol
of EUR 64,56/hl.

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Official Journal of the European Union

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guidelines are published in the Official
the
European Communities, even where the projects were
notified prior
In the case of
to their publication.
non-notified aid,
the aid was granted before the
current guidelines were published the Commission will
apply the guidelines in force when it was granted.

Journal of

if

2.7. Consequences of the judgment of the Court of First

Instance of 27 September 2000 as far as the assessment
of the compatibility of the tax exemption for ETBE in
France is concerned

(377)

(373)

In the present case, the Commission’s initial decision
not to raise any objections on the basis of an aid project
notified by France having been challenged in due
time (43), it follows from the judgment of the Court of
First
the
Instance of 27 September 2000 that
Commission is now faced with an aid measure that has
been implemented in breach of Article 88 of the Treaty.

specific

(374) Consequently, the Commission is bound to apply, not
the current guidelines, but the guidelines that were in
force when the scheme at issue was implemented, i.e.
those published in March 1994 (44). These do not
contain any
rules on operating aid for
renewable energy sources, which must be (cid:145)judged on its
merits(cid:146)
(end of point 2.3). Since it has not made its
assessment subject to any prior conditions and must
therefore conduct it directly on the basis of the Treaty,
the Commission is of the opinion that the particular
merits of the present scheme (in the light of the above
developments) enable it to consider it compatible with
the common market.

(375) At all events,

the current guidelines state (section E
point 3.3)
that aid for the production of renewable
energy generally constitutes environmental aid which
may be
subject of a favourable Commission
decision, notably under the conditions set forth in point
60, which provides that:

the

come

to the

the Commission has

In the light of the above and following its assessment of
the tax exemption for ETBE in
the compatibility of
same
France,
conclusion as it did in its annulled Decision of 9 April
1997, namely that it considers that the said exemption
qualifies for
in Article
the derogation provided for
87(3)(c) as being aid to facilitate the development of
certain activities where such aid does not adversely
affect trading conditions to an extent contrary to the
common interest. However, following the judgment of
the Court of First Instance of 27 September 2000, the
issue
Commission cannot declare
compatible without exceeding the powers conferred on
it by Article 88(3) of the Treaty inasmuch as the scheme
does not meet the requirements laid down by Article
8(2)(d) of Directive 92/81/EEC, as interpreted by the
Court.

scheme

the

at

(378)

the Court states that

there is no
In its judgment,
obstacle to tax exemption schemes for better market
penetration by biofuels being the subject of a Council
decision adopted pursuant to Article 8(4) of Directive
92/81/EEC.

(379) The French authorities have drawn the necessary
consequences
judgment of 27
from the Court’s
September 2000, asking the Commission by letter dated
17 November 2000, in accordance with Article 8(4) of
Directive 92/81/EEC,
for authorisation to apply an
exemption from the domestic consumption tax on
vegetable oil esters and ethyl alcohol derivatives whose
alcohol component is of agricultural origin.

requires

(cid:145)Unlike most other renewable sources of energy,
biomass
investment but
relatively less
brings higher operating costs. The Commission will,
therefore, be amenable to operating aid exceeding
the amount of investment where Member States can
show that the aggregate costs borne by the firms
after plant depreciation are still higher than the
market prices of the energy.(cid:146)

(380)

In accordance with Article 8(4) of Directive 92/81/EEC,
the Council, acting unanimously on a proposal from the
Commission, may authorise any Member State to
introduce further exemptions from or reductions in
excise duties for specific policy considerations.

(376) The Commission considers

in this connection that
France has furnished sufficient evidence to show that
the costs of producing ETBE exceed the market prices of
fossil energy.

(43) See judgment in Case C-169/95 Spain v Commission (Pyrsa) [1997]

ECR I-135, paragraph 53.
(44) OJ C 72, 10.3.1994, p. 3.

(381) On 11 December 2001, the Commission adopted the
text of a proposal for a Council decision authorising
in accordance with Article 8(4) of Directive
France,
from 1 November 1997 to 31
92/81/EEC, to grant,
December 2003, permits
the application of a
differentiated rate of excise duty to the fuel mixtures
(cid:145)petrol/ethyl
alcohol
component is of agricultural origin(cid:146) and (cid:145)diesel/vegetable
by Decision
oil

derivatives whose

esters(cid:146). On

25 March

alcohol

2002,

for

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L 94/41

2002/266/EC, the Council authorised France to apply
during the period 1997 to 2003 a differentiated rate of
excise duty to these biofuels in accordance with Article
8(4) of Directive 92/81/EEC.

(382) To benefit

from a reduction in excise duty on the
biofuels in question, biofuel production units must have
from the French authorities by 31
received approval
December 2003 at
the latest. Such approval will be
valid for a maximum of six years from the date of issue.
The reduction specified in the approval may be applied
the
after 31 December 2003 until
approval, but may not be extended.

the expiry of

(386)

(383) The reductions in excise duty may be adjusted to take
account of changes in the price of raw materials to
avoid over-compensating for the extra costs involved in
the manufacture of biofuels.

2003 until the expiry of the approval, but may not
be extended,

(cid:151) the reductions in excise duty may be adjusted to
raw
take account of changes
materials to avoid over-compensating for the extra
costs involved in the manufacture of biofuels.

in the price of

In order to ensure that the present Decision is complied
with, a specific obligation must be imposed on France,
requiring it to submit annual reports listing the biofuel
production units that have received approval from the
French authorities by 31 December 2003 at the latest.
The French authorities must accordingly be called upon
to provide, each year, details of approved production
units (name,
the total volumes
approved, the volumes allocated to approved production
units and the volumes for which those units requested
approval. The Commission will also be informed, where
the main reasons why the French
appropriate, of
authorities
approval
inadmissible or do not grant approvals for the volumes
requested.

location, nationality),

deem certain

requests

for

2.8. Conclusion regarding the assessment of compatibility

VII. CONCLUSION

(387)

(384) Following its assessment of

the compatibility of

the
exemption of ETBE in France, the Commission considers
the exemption may be granted the derogation
that
provided for in Article 87(3)(c) as being aid to facilitate
the development of certain activities where such aid
does not adversely affect trading conditions to an extent
contrary to the common interest, having regard to the
the Council
fact
authorised France to apply a differentiated rate of excise
duty to biofuels in accordance with Article 8(4) of
Directive 92/81/EEC.

that, by Decision 2002/266/EC,

In conclusion, the draft scheme applying a differentiated
rate of excise duty as notified by the French authorities
does not distort competition and does not affect trade
to an extent contrary to the common interest since it
involves no discrimination as regards the eligibility of
undertakings and there is no discretionary element as
regards the choice of beneficiaries and the granting of
approvals.
the derogation
provided for in Article 87(3)(c) as being aid to facilitate
the development of certain activities in that it forms
part of a strategy of reducing dependence on imported
oil, developing alternative energy sources and improving
the use made of agricultural resources,

therefore qualifies

for

It

(385)

the judgment of

the Court of First
In the light of
the Commission
Instance of 27 September 2000,
considers that
the aid with the
the compatibility of
common market must relate to the aid scheme as
authorised by the Council, namely a scheme under
which only those biofuel production units which have
from the French authorities by 31
received approval
December 2003 at the latest may benefit, and this under
the
abovementioned
laid down in the
Decision, namely:

conditions

HAS ADOPTED THIS DECISION:

Article 1

(cid:151) such approvals are valid for a maximum of six years
from the date of issue. The reduction specified in
the approval may be applied after 31 December

The State aid implemented by France in the form of a
reduction in the domestic tax on petroleum products (TIPP) for
raw materials
certain products obtained from vegetable
intended to be incorporated in fuels or combustibles
is
compatible with the common market in so far as it is granted

L 94/42

EN

Official Journal of the European Union

10.4.2003

within the limits and in accordance with the procedures
authorised by Decision 2002/266/EC.

Article 3

This Decision is addressed to the French Republic.

Article 2

Done at Brussels, 15 May 2002.

France shall, each year, provide details of approved production
units (name, location, nationality), the total volumes approved,
the volumes allocated to approved production units and the
volumes for which those units requested approval.

For the Commission

Mario MONTI

Member of the Commission