EU plans to extend energy crop subsidies to accession states

London, 28 September: The European Commission has put forward plans to extend subsidies paid to energy crop farmers to the eight member states that joined the EU in 2004.

Under the proposals, farmers who grow energy crops for use in bioenergy in the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Poland, and Slovakia would be able to access EU funding of €45 ($57) a hectare from 2007. Other member states have been distributing these subsidies since 2004.

To facilitate this, the limit on the area of land that can be granted funding under the scheme would have to be increased from 1.5 million to 2 million hectares.

In addition, the Commission is calling for member states to be allowed to grant subsidies of up to 50% of the costs of establishing energy crops on new land.

Mariann Fischer Boel, Commissioner for Agriculture and Rural Development, said: "We need to do all we can to encourage the production of the raw materials for biofuels. The energy crop scheme has had a good start. Now it's only fair that we give farmers in all member states the chance to benefit from this support."

Access to cheap, local sources of crops is key to the financing of a biofuel plant, according to speakers at Euromoney's Renewable Energy Finance Forum, held in London this week.

"We worry an awful lot about feedstock [for biofuels], and we worry a lot about crushing capacity," said Ian Temperton, a director in the advisory team at London boutique merchant bank Climate Change Capital.

Stephan Reimelt, director of sales at plant builder Lurgi, said feedstock makes up 80-90% of the total operational costs of a biofuels plant. Local sourcing is essential, he said, as 50km is the longest distance biomass can effectively be transported.

The Commission's proposal has been sent to the Council of Ministers and is expected to be approved by the end of this year.