EU cuts back on biofuel crop subsidies

Oct 18, 2007 02:00 AM

A special farm aid scheme aimed at developing Europe's energy crop sector will be scaled back, after it emerged that farmers have already massively shifted production towards biofuels, overshooting a 2 mm hectare target, the Commission has announced.
The amount of land for which farmers may receive a subsidy of EUR 45 per hectare (ha) in exchange for planting energy crops (such as rapeseed or sugar beet that can be processed into biofuels for cars or biomass for heating or electricity) will be reduced after the scheme proved too popular, the Commission said on 17 October.

The programme was introduced in 2004 as part of the reformed Common Agricultural Policy, in order to stimulate the European biofuels sector. At the time, just 0.31 mm hectares were devoted to biofuel crops and the Commission hoped to raise this to 2.0 mm hectares in 2007. But with applications already reaching 2.84 mm hectares this year, the EU's EUR 90 mm budget is unable to cope.
"Farmers' interest in the production of energy crops has significantly increased in only four years and for the first time in 2007 the total budget of EUR 90 mm will be fully used," stated the Commission, adding that farmers will now receive the EUR 45/ha subsidy for just 70 % of the land on which they claimed the aid.

EU Agriculture Commissioner Mariann Fischer Boel questioned the necessity of continuing the subsidy.
"This payment has been very useful… But when we come to the health check of the Common Agricultural Policy in November, we will have to ask whether it is still necessary. We now have a binding target for biofuels and a blossoming marketplace," she said, referring to a binding goal set by EU leaders to increase biofuel use in transport from its current level of under 2 % to 10 % by 2020.

The EU's push to develop biofuels has been under fire from all quarters lately. The Organisation for Economic Cooperation and Development (OECD) recently called on the Union to phase out support schemes of this sort, saying they "place a significant bet on a single technology despite the existence of a wide variety of different fuels and power trains that have been posited as options for the future".
The rush towards biofuels is also blamed for overstretching the EU's land availability and causing sharp price increases in basic food commodities such as milk and cereals. However, the Commission insists that its biofuels policy will only put limited pressure on agricultural markets.

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