Germany's Biodiesel Blues

Germany's Biodiesel Blues

        For the past several months, German biofuels producers have been complaining that their country's tax on biodiesel has crippled Germany's biodiesel industry. Various news reports have been saying that German biodiesel capacity has been running at 60-70% capacity in 2007.
        "If we will not have any change in our regulation in Germany it is very clear that within the next two years more or less 50 percent of the [biodiesel] capacity in Germany will vanish," Reuters quoted Karl Giersberg, chief financial officer for German producer EOP Biodiesel, as saying.
        This is all due to the biodiesel tax of €0.09 per liter that was implemented in August 2006. The German government had said that the tax, which was to be raised in stages to €0.45 per liter by 2012, was enacted to help offset losses in petroleum tax revenue.   
        The biodiesel companies are hoping that one or more of several actions will take place: that the German government drop a planned tax increase of six cents per liter in 2008, which is an action the conservative Christian Democrats are considering; that tax breaks to farmers are extended, which is what the Social Democratic party is suggesting; that the biodiesel blend in diesel increase from 5% to 7%; and that the biodiesel tax change from a fixed tax to a variable tax based on the price of crude oil.
        The question is, should Germany's government relieve biodiesel producers of the taxes imposed upon them? I may be comparing apples to oranges, but protecting German biodiesel producers from cheap foreign imports reminds me of the attempts by U.S. corn-ethanol producers to protect themselves from cheaper sugar-based ethanol. Of course, ethanol has more controversy surrounding it, from an emissions standpoint. Perhaps the best is from the viewpoint of environmental sustainability: oil from rapeseed, which is used to make biodiesel, doesn't have as much environmental impact as palm oil from Malaysia (which some say causes deforestation).