Farmers urge slash to green fuel tax
By : Juliet D. Golden
Farmers seeking to launch environmentally friendly fuels for the transport sector are pushing the government to exclude these from hefty excise duties usually slapped on fossil fuels, such as diesel.
The National Association of Rapeseed Producers (KZPR) is putting the final touches on blueprints to produce biofuels made from rapeseed as early as spring 2002. Farmers argue that the fuel, which can be mixed with diesel, will not only utilize Poland's rapeseed potential, it will also help the country meet rigorous environmental targets required by the European Union (EU).
However, heavy excise taxes on fossil fuels such as diesel threaten to prevent biofuel initiatives from getting started. "To have a factory up and running by 2002 we have to have guarantees that production will be free from excise tax," said KZPR Chairman Mariusz Olejnik.
Farmers here are looking to model the biofuel industry after the one in France, where six factories produce biofuel. This fuel is later mixed with diesel and sold at gas stations across the country. The biofuel industry in France consumes one-third of its annual rapeseed production of nearly 4 million tonnes.
Poland produces about one million tonnes of rapeseed annually, making it the fourth largest producer in Europe, after France, Germany and the U.K., according to the United Nation's Food and Agriculture Organization (FAO). But farmers and researchers said production potential is much higher. They said that by developing the biofuel industry, output would inevitably increase. It would also give farmers a stable source of income through crop sales.
"It would be easy for us to produce 1.5 million tonnes (a year)," said Ewa Rosiak, a scholar with the Institute of Agriculture and Food Economics (IERiGZ). "The production potential exists and fuel is needed, (so) we should produce it even just for environmental reasons." According to FAO statistics, Poland's rapeseed production peaked in 1989. That year, the country produced about 1.6 million tonnes. For Olejnik, it proves that production can improve on present levels." It would be no problem to double production within three years to about two million tonnes," Olejnik said. "That extra million tonnes could be used for non-food purposes."
The development of the biofuel industry would simultaneously serve as an impulse to improve the performance of Poland's beleaguered agricultural sector, experts said.
"The excise tax should be lifted as soon as possible, because it will lead to the activation of agriculture lands," said Romuald Gronkiewicz, director of the Department of Air Protection at the National Fund for Environmental Protection and Water Management (NFOSiGW).
To push along development plans, the KZPR has signed a cooperative deal with a French rapeseed growers association, Agropol. Starting next month, a team of Polish farmers will head to France for training in production, logistics, biofuel economics and legal and tax issues particular to the industry.
Farmers want to build the first biofuel plant in the Opole voivodship, which would produce 50,000 tonnes of biofuel a year from 110,000 tonnes of rapeseed. Olejnik estimates the factory will cost about zl. 40 million ($10 million) to construct. To cover costs, a French financial institution (Sofiproteol), which helped develop the biofuel industry in France, is prepared to back the Polish operation, Olejnik said.
But a key barrier remains the lack of government guarantees that fuel from rapeseed would remain tax-free. Excise tax on diesel is about zl. 948 per tonne. That means that about 49% of the price at the pump is excise tax.
For its part, the Finance Ministry is looking to farmers to present arguments justifying why the biofuel should be exempt from the excise tax. Following a meeting with Finance Ministry officials last month, Olejnik plans to complete an analysis justifying why the tax should be lifted on biofuel by late spring.
Impending EU membership might prove a catalyst in obtaining government backing, according to farmers and environmental experts. Poland lags behind the EU in terms of its use of renewable energy sources such as wind, solar, biothermal and biofuels. At present, less than 1% of energy used in Poland comes from renewable sources, compared to 6% in the EU.
As a candidate for EU membership, over the next decade Poland will have to obtain 7.5% of its energy requirements from renewable sources, according to Gronkiewicz of the NFOSiGW. In 20 years, that requirement will nearly double to 12.5%.
