More German biodiesel plants face closure in 2009

By Michael Hogan

BERLIN (Reuters) - More German biodiesel plants face closure in 2009 following government's decision to raise taxes on green fuels and to scale back an increase in biofuel blending in fossil fuels, a biofuels industry leader said on Monday.

Germany's biodiesel industry, Europe's largest, was working at considerably under 60 percent of its five million-ton annual capacity, Johannes Lackmann, chief executive of German biofuels industry association VDB, said.

"Many medium and small size plants will have little chance of survival this year," he told Reuters at the Green Week food trade fair in Berlin. "I think more will close."

Germany increased taxes on biodiesel on Jan 1 this year which hit demand in the country's domestic market. A series of biodiesel plants closed last year, largely because taxes on green fuels had cut sales.

"Some larger biodiesel plants will seek to export more to the European Union and east Europe," Lackmann said. "But a large number of smaller plants do not have the ability to do this."

Germany's biodiesel industry is also suffering from great uncertainty and reduced demand because a series of key measures announced by the government for implementation on Jan 1, 2009, have either not yet passed through parliament or not yet taken force by publication in the country's official gazette.

A tax rise of six euro cents a liter had been in the statute books for Jan 1, 2009, but the government agreed in late 2008 to cut this to a three cent rise after biofuel industry protests that the rise was making biofuels too expensive compared to fossil fuels.

But the tax change is yet to come into law and technically the six cent rise still applies. "As this change has not come into force we do not know what tax level we have," Lackmann said.