29/11/2007

Bio-methane, a fuel in search of its french fiscal status

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On July 16, 2007, the French Environmental Ministry (MEDD) informed the Lille Metropolitan Community Authorities (Metropole Communauté Urbaine) that bio-methane, which is classified as natural gas for vehicles, will be taxed via the natural gas consumption tax (TICGN). Whilst it is possible to compare bio-methane with natural gas in terms of quality, there is one major difference; biogasis entirely renewable in environmental terms, in contrast to its counterpart! The Lille Metropolitan Community Authorities hope to convince authorities of this fundamental difference, in order to receive a total tax exemption on bio-methane.


After the ratification of the Kyoto protocol agreement in 2002, The European Union took effective steps relating to bio-fuels. The directive : 2003/30/EC of May 8, 2003 focused on various targets: the aim was to raise the bio-fuel consumption rate up to 5.75% by 2010 (and 10% by 2020, according the European Council in March, 2007).

The directive ; 2003/96/EC of October 27, 2003, which relates to restructuring the Community framework for the taxation of energy products and electricity, provides regulations to Member States that would like to financially support these directives.

Article 15, stipulates : 1. “Without bias to other Community measures, Member States (under tax audit) may apply total or partial exemptions or tax reductions to: (a) taxable fuels filed under tax audit(s) in the field of pilot projects for the technological development of more environmentally-friendly products or fuel-related products from renewable resources?. The usage of Bio-fuels is still in the research, development and demonstration phase, and remains expansive despite the high increase of fossil fuel prices, therefore, it requires financial support.

Bio-methane is a bio-fuel that merits attention because its feedstock can be human waste. Moreover, it is renewable and doesn’t contribute to increased concentrations of atmospheric CO2. Bio-methane is ‘carbon neutral’; its production comes from urban organic waste recycling. Therefore, it facilitates global urban management. Moreover, it does not contribute to the ever-increasing encroachment on agricultural land and provides an environmentally-friendly fertilizer from recycling (organic residue after methanisation). Finally, a number of studies have shown that bio-gas could sustainably feed 20% of the fuel consumption in European surface transports.

The Lille Metropolitan Community Authorities (Lille Métropole Communauté Urbaine, LMCU) built a bio-methanisation plant that is able to produce enough bio-methane fuel to supply about a hundred city buses. A company called Esterra was entrusted with the waste collection of the LMCU, to set a target to fuel 70 of these bio-methane trucks by 2013. A study has proven that this practice will prevent the emission of 9000 tons of GHG (Greenhouse Gas) a year. However, according Paul Deffontaine, LMCU vice-president who was interviewed concerning the bio-methane plant inauguration (Sept. 2007) “it would be beneficial that this bio-fuel product not be taxed in order to increase its economic profitability?.

The Lille Metropolitan Community Authorities (LMCU) are reflecting on a tax solution. Meanwhile, Bern, another Biogasmax partner, is already taking advantage of the financial aspects of an agreement with gas distributors. They are under a bio-methane re-purchase obligation agreement concerning 10% of gas per distributed vehicle.

LMCU had asked the French Environmental Ministry (MEDD) for the implementation of such a system (agreement). While creating a “green certificate? the matter is to lightly tax fossil fuels to benefit bio-methane gas. Nevertheless, it would be easier to re-allocate a part of the natural gas tax TICGN to the bio-methane market for vehicles.

 

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