EC reduces biofuels subsidies after land use boom

17 October 2007 12:44  [Source: ICIS news]

PARIS (ICIS news)--The European Commission (EC) will reduce the subsidy paid to European farmers to encourage them to grow biofuels after more land was planted with the crops than expected, the EC confirmed on Wednesday.

The management committee for direct payments unanimously backed the EC’s proposal to reduce the amount of land for which farmers may claim the energy crop premium because the target of 2m hectares for 2007 had been exceeded.

The energy crop premium, introduced in 2004 to encourage farmers to grow biofuel crops such as sugar beet, cereals and rapeseed was, until now, worth €45/hectare ($63/hectare).

Because biofuels were grown on 2.84m hectares in 2007, the EC agreed to set a reduced coefficient of 0.70337 to calculate the subsidy to stop spending topping the €90m budget.

Farmers will therefore now receive €45/hectare for around only 70% of the land on which they claimed the aid.

EU farm commissioner Mariann Fischer Boel warned that the success of biofuels may mean the disappearance of the subsidy altogether.

"This payment has been very useful in stimulating the European biofuels sector," she said.

"But when we come to the health check of the Common Agricultural Policy next month, we will have to ask whether it is still necessary. We now have a binding target for biofuels and a blossoming marketplace."

($1 = €0.71)

By: Philippa Jones
+44 20 8652 3214

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