EU Biofuel Aid Slips

BRUSSELS - Oct 17/07 - SNS -- The amount of aid farmers can claim for growing biofuel crops will decline because the target area of two million hectares has been passed.

The Management Committee for Direct Payments unanimously backed a European Commission proposal to reduce the area on which each farmer may claim the special aid for energy crops in 2007. The aid was introduced in the 2003 reform of the Common Agricultural Policy to provide an incentive for farmers to increase the production of biofuels and electric and thermal energy produced from biomass.

Up to the maximum guaranteed area of 2 million hectares, farmers receive Euros 45 per hectare as long as they have concluded a contract with a collector/first processor in order to ensure the crops will be used for processing into the relevant energy products.

If this is exceeded, the area on which each farmer can claim aid is reduced by a coefficient to ensure that the Euros 90 million budget is not overrun. The area in 2007 reached approximately 2.84 million hectares and so a reduction coefficient of 0.70337 has been set. In other words, farmers will receive the Euros 45/ha aid for just over 70 % of the land on which they claimed the aid.

"This payment has been very useful in stimulating the European biofuels sector," said Mariann Fischer Boel, Commissioner for Agriculture and Rural Development. "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."

Figures presented by the Member States show that applications this year have risen to approximately 2.84 million hectares. This year is the first time that 10 of the 'new' Member States which use the Single Area Payment Scheme have been eligible for this aid. The maximum area was therefore increased from 1.5 to 2.0 million hectares.

The simplification of the scheme, introduced recently by the Commission, has apparently contributed to its popularity among both farmers and the processing industry. New elements, like the possibility for Member States to replace a security by the "Optional system of approval" of processors and first collectors, have significantly reduced the administrative burden.

The implementation of the scheme started in 2004, when the area covered totalled 0.31 million hectares. The area increased over the next two years (2005 – 0.57 million ha and 2006 – 1.23 million ha). This year the total area reached approximately 2.84 million ha.

The expansion of the areas under the scheme in 2007 reflects its successful implementation among Member States. The farmer's interest in production of energy crops has significantly increased in only four years and for the first time in 2007 the total budget of Euros 90 million will be fully used.