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Financial crisis seen slowing EU biofuels growth

The sharp drop in crude oil prices and the global financial crisis is set to disrupt the development of biofuels in the European Union, a top European Commission official said Jan. 6.

“The path will be a bit chaotic. I don’t see a taking off in biofuels in 2009, 2010 but probably later because we know that oil prices will (eventually) increase again,” said Jean Luc Demarty, the European Commission’s director general for agricultural and rural development.

However, he said, he was confident of the long-term future of biofuels with the EU setting a goal for 10 per cent of motor fuel to come from renewable sources by 2020.

Demarty, speaking after making a presentation at the annual Oxford Farming Conference, said biodiesel production in the EU required a crude oil price of about US$60 a barrel and bioethanol an even higher price of around US$90 a barrel.

Crude oil was trading around US$48.50 a barrel on Jan. 6. Last year saw record-high prices in July above US$147 a barrel but the market tumbled to a year low of US$32.40 in mid-December.

Wayne Jones, head of the agriculture and development division of the Organization for Economic Co-operation and Development (OECD), said the global economic downturn could also slow the development of so-called second-generation biofuels, adding there was little current appetite for high-risk investments.

Second-generation biofuels may eventually be produced from non-food crops and even municipal waste and are seen as a possible solution to fears that the expansion of biofuels has boosted prices for food crops such as maize, which is used extensively in the U. S. to produce ethanol.

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