TALLINN - Biodiesel could soon reach the fuel tanks of Estonian vehicles as the government has recently taken another step to excise production taxes on this nature-friendly combustible. The ministries of agriculture, finance and environmental affairs are just now finishing the necessary paperwork, which will soon be sent to the European Commission.
Once submitted, the commission has up to six months to either approve or reject the tax exemption.
Estonia's initiative to make biodiesel production tax-free is linked to an EU-sponsored renewable-energy increase. "Without doubt, the biodiesel sector looks promising in the macroeconomic sense," says Kalev Lindal, owner of WBT, a Tartu-based rape-product manufacturer. "Once an oil shortage occurs, it's unlikely that motor vehicles will get nuclear or hydrogen-based engines promptly."
According to EU regulations, by 2010 the share of renewables such as wood, wind and biodiesel must comprise 5.75 percent of total energy consumption. In the diesel-fuel market alone, biodiesel's share could reach up to 5 percent, thanks to lower wholesale prices, business experts said.
Consumer prices, however, will likely remain the same.
The manufacturing of fuel components from rape, a Eurasian plant cultivated as a forage crop, and other cultures is not feasible in Estonia, as biodiesel costs exceed regular diesel. Still, various estimates show that six to 10 Estonian companies are interested in seizing a share of the biodiesel market. The Customs and Tax Board has already received one application for a biodiesel production license.
Even Lindal says his company is ready to start production as soon as the necessary legislation comes to force. But until then, such efforts are frozen due to the absence of a legal environment. For now, WBT will remain focused on manufacturing cold-pressed rape oil. The company's production technology utilizes rape methyl ester, or RME, mixed with regular diesel fuel to enhance lubrication and allow for a decomposition period of 20 days.
Biodiesel, a combination of RME and regular diesel, does not require engine modernization. On top of this, RME byproducts can be sold to tobacco and cosmetics industries for further use.
According to Lindal, about 400,000 tons of diesel fuel are consumed in Estonia every year, of which 20,000 tons will be biodiesel once it becomes legal. "If a major, export-oriented biodiesel plant is built in Estonia, it will obviously need to purchase raw [rape] material from abroad, because the local rape output would be insufficient," said Lindal.
Rape cultivation requires about 50,000 hectares of land in Estonia, or about 10 percent of total agriculture. One hectare provides about 1.7 tons of rapeseed per year but is usually sowed once every four years to ensure quality.
Wester Start, an Estonian company that has long sought investors for a major biodiesel plant in cooperation with DaimlerChrysler Services, hopes to launch the manufacturing process in 18 's 24 months. Boardmember Asko Vester says that construction talks are being held with several Estonian ports looking to host the export-oriented plant. Possible locations include Tallinn and Paldiski.
"We are aiming at about 60,000 tons of biodiesel per year. Most will go to the Scandinavian markets, and some 20,000 tons will be sold to major fuel companies in Estonia," says Vester, emphasizing that costs are not yet known.
Not only will the plant be able to press the necessary amount of rape, but it will buy as much raw material 's mostly rape oil's as possible from local farmers, although this will be imported due to mass production, said Vester. German partners pin the plant's break-even period at about five years, and the manufacturing process will most likely be based on Austrian or German technology.
Last year Wester Start backed out of a project with Werol Tehased, the struggling state-owned rape-production giant, that foresaw a large biodiesel plant in Jogeva county.
Today Werol Tehased could be the most powerful player in the biodiesel market, as it produces about 22,600 tons of refined rape oil per year. Its main article of production is a protein fodder called rape cake, which contributes to 53 percent of the company's production. Werol Tehased consumes about 68,000 tons of rapeseed every year.
