Commercial issues facing parties in the supply chain

12th November, 2007

Use of biofuels has grown significantly in recent years, based on political structures that have created market opportunity for entrepreneurial traders and those with strategic positions to capitalise on.

Changes in the political landscape are bringing new challenges to the market for biofuels, which may require different responses to achieve the balance and relationships required to build long term supply chains.

The EU originally established the Biofuels Regulations on 8 May 2003 as: Directive 2003/30/EC of the European parliament and of the council on the promotion of the use of biofuels or other renewable fuels for transport. This was accompanied by regulation that allowed member states to set duty rates on biofuels at different levels to fossil fuels in order to encourage the uptake of these fuels.

These regulations were reviewed through a process of consultation in 2006 and the European Commission in response to concerns raised through that process has also begun to consider the issues of demonstrating carbon benefits and environmental sustainability of biofuels.

The likely outcome of the consultation process that has stretched for more than five years now is a change in emphasis. This will change from a set of European parliament targets on member states, and the ability of member states to establish appropriate fiscal regimes to deliver on these targets, to a more structured approach.

Within this, some kind of obligation might exist at either member state or European level for suppliers of road transport fuels.

In addition, there will be a requirement for the obligated parties to source environmentally sustainable fuels as far as practicable. The supply chain response to the changing political tone is not fully developed. It is, however, possible to consider some of the issues and options that different parties may have.

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