The European Commission has approved a UK scheme to introduce a reduced rate of excise duty on bioethanol used for road transport.
The excise duty reduction will take effect from January 2005 and last until 31 December 2010.
The UK government wants to encourage the use of bioethanol as road fuel by introducing the reduced excise duty. At this stage, however, bioethanol cannot compete with hydrocarbon based fuels because the cost of producing bioethanol far exceeds that of hydrocarbon oil.
For that reason, the UK government intends to set the excise duty for bioethanol at £0.20 below the excise duty of ultra low sulphur petrol and sulphur free fuel. The duty reduction will be granted automatically to any producer of bioethanol in the UK or importer of bioethanol.
At this time, bioethanol is neither commercially produced nor widely used in the UK. The UK Goverment hopes that an excise duty reduction will trigger a wider use of the environmentally friendly fuel source.
Bioethanol itself is ethanol produced by the biological fermentation of carbohydrates derived from plant material. In terms of fuel use, ethanol is mainly of interest as a petrol additive or substitute. Both synthetic ethanol and bioethanol are suitable for fuel use, but synthetic ethanol is classed as a fossil fuel.
According to UK-based Futura Petroleum, the most common crops grown in the UK for bioenergy are willow (short rotation coppice) and miscanthus. Around the world other crops are favoured depending on the climate and surrounding condition, both economic and environmental. Brazil has an extensive programme for the production of bioethanol from sugar, whilst the US relies heavily on corn for its ethanol production.
Brazil initiated a national fuel ethanol programme (Proalcohol) in 1975 to produce ethanol for blending with petrol in order to reduce dependency on imported oil and a similar programme was established in the US in 1979. The Brazilian programme was later extended to produce ethanol for use as a complete substitute for petrol, and by 1988 ethanol fuelled a third of the cars in Brazil.
In Europe, France, Sweden and Spain are the main producers and users of BioEthanol.