Agriculture Reference
In-Depth Information
Bio-fuels produced in France are rape-seed methyl esters (RME) to
be used in diesel engines and ETBE (ethyl tertio-butyl ether) extracted
from wheat and sugar-beet for gasoline engines. Total quantity of bio-fuels
production reaches currently about 600 thousand tons or 1% of the national
liquid fuels consumption. The conversion of biomass to bio-fuels is
concentrated at a few plants whereas the agricultural raw material is
produced by thousands of farms located in different parts of the country, at
various costs. Total production is expected to increase as new agreements
will be allocated to the industry by the government and three
supplementary conversion units by 2002, so that production of RME and
ETBE will reach 387 and 374 thousand tons respectively.
About 7 years after the take-off of the tax exemption program, bio-
fuels are still more costly than fossil fuels and the agro-energy industry
activity largely depends on government subsidies for its viability.
Earmarked funds for financing the tax exemptions have reached 1.4 billion
francs in 1999. On the other hand, environmental problems have become
more acute and international commitments mean that Greenhouse Gas
(GHG) emissions abatement require intensified efforts. Given that biofuel
substitution for fossil fuels reduces GHG emissions, could subsidies to bio-
fuels be justified on the ground of their contribution to attenuate the
greenhouse effect? Even if the recent rise in crude oil prices alleviates the
budgetary burden that bio-fuels represent, the question raised by
economists concerning the efficient allocation of this amount among bio-
fuel chains through tax exemptions to the bio-fuel processors is of primary
importance (Sourie and Rozakis 2000)
3
.
In order to respond to the above questions, an analysis of bio-fuel
production system in France has been done for the period till 2002, when
the first period of the C.A.P. reform implementation (known as 'Agenda
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