Economic effects of the production of biodiesel as automotive fuel

In no other country of the EU has the production and consumption of fatty acid methyl ester grown as strongly as in Germany. Policy decisions are the major factors behind the success of biodiesel, mainly produced from rape seed, with energy- and environmental-policy aspects gaining in importance alongside agricultural-policy considerations. In 2003 the EU issued a Directive with the goal of achieving a 5.75 percent share for biofuels in overall fuel consumption by 2010. In Germany, the tax benefits for bio automotive fuel and bio heating fuel have played an important role. The Ifo Institute, using an input/output analysis, examined the macroeconomic effects to be expected from the increasing use of biodiesel, also under the conditions of a gradual reduction of tax benefits. Scenarios for 2007 and 2009 were developed as to how the value added chain of biodiesel from rape-seed production up to the diesel pump has a direct effect on production, employment and the government budget. The result of the calculations is that the biodiesel value-added chain is responsible for the creation or preservation (agriculture) of 22,400 jobs already in the base year 2005. The (direct and indirect) job-creation effect should be more than 55,000 jobs by 2009. As a result of the new energy tax law, the burden to the public budget will lose significance in future. For 2009 the Ifo Institute has calculated a positive (net) effect of €1.74 billion.