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Biofuels At What Cost? Mandating ethanol and biodiesel consumption in Germany

Currently, the German government plans to achieve the EU's renewable transport target mainly through the use of mandatory blending targets applied to the mineral oil industry for the use of biofuels.

This study highlights that the prevalent policy interventions in Germany—mandatory blending requirements and tax exemptions — have a number of related costs. These costs are not necessarily linked to direct fiscal costs imposed on German government, but rather channelled through to the private sector and consumers.

The study provides an overview of Germany's biofuel market and discusses current trends and developments in German biofuel support schemes. A number of issues linked to the use of blending mandates and other biofuel support measures are investigated and, where possible, an estimate of the potential costs provided. Areas examined in the study include:

  • The cost-competitiveness of biofuels: production costs for biofuels are generally higher than the production costs of fossil fuels they are supposed to replace
  • The monitoring costs incurred by government agencies and ministries for biofuel policies.
  • The cost of subsidies to farmers growing biofuel feedstocks provided under the Single Payment Scheme (SPS)
  • The costs of implementing sustainability criteria: expenses associated with producing sustainable biofuels and through the use of sustainable certification schemes
  • Funding for research and development projects supporting the biofuel sector
  • The additional costs to service station operators, fuel retailers and the mineral oil industry, of using blended fuels, drawing on the introduction of E10 in Germany as an illustrative example.

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