Jamaica Biofuels Report - Ministry of Energy

farmers and Midwestern states, whereas the opposition is led by environmental groups andothers who see the program as uneconomical for one reason or another.The practical significance for Jamaica is that as a member of the Caribbean Basin Initiative, thecountry can take advantage of the credit without offsetting tariffs, but the future of the credit ishighly uncertain and probably would entail significant risk for an investor who relied on it. Onthe other hand, a renewable fuel standard established by the Energy Independence andSecurity Act of 2007 requires 12.95 billion gallons from renewable sources in 2010, increasingto 36 billion gallons per year by 2022. Greenhouse gas and other environmental criteria mayfavor cane-derived ethanol over other sources.European UnionIn the EU both ethanol and biodiesel receive government financial support in almost allmember states predominantly in the form of reduced fuel excise taxes for biofuels. A recentstudy 10 concludes that EU governments spent $4.8 billion in 2006 to support biofuels in aneffort to reduce reliance on oil. By 2008 the financial support dropped to $3.9 billion on 1.68billion gallons of produced ethanol and 2.33 billion gallons of produced biodiesel because excisetaxes on biofuels were raised as mandatory biofuels blending policy gained popularity. Thisgovernment support translates to $3.64/gal for ethanol and $2.46/gal for biodiesel (calculatedat an exchange rate of $1.30 per euro).Interestingly, the same study makes the following recommendations to European policymakers:Institute a “polluter pays” principle, a form of carbon tax, to account for the consequences offossil fuel use;Phase out biofuels support except for research and development (R&D) programs;Eliminate tariffs on imported fuel ethanol;Implement transparency concerning EU member states' biofuels policies to allow properevaluation of their support measures.AustraliaIn 2001 Australia set a production target (but not a mandate) of 350M liters per year (92 mgy)of biofuels by 2010. The country has so far assisted biofuels prices mainly through an excise taxrebate of $1.34/gal to producers (calculated at an exchange rate of A$1.07 per US$). Thesubsidy is provided to domestically produced ethanol and biodiesel, as well as – surprisingly –to imported biodiesel, but not to imported ethanol. As a result, biofuels will enjoy an excisetax-free status until June 30, 2011. Subsequently, the taxes will progressively rise to 50% of thelevel of those imposed on gasoline and diesel by 2015-16 on an energy equivalent basis.10 Jung, A. et al., “Biofuels – At What Cost? Government support for ethanol and biodiesel in the European Union –2010 Update”, International Institute for Sustainable Development, Geneva, Switzerland, July 2010.31