News
30.06.2009
The President of Ukraine signed into law provisions giving significant tax benefits for a biofuel industry in Ukraine.
The President of Ukraine signed into law provisions giving significant tax benefits for a biofuel industry in Ukraine.
The law is aimed at stimulating biofuel production and consumption in Ukraine, intending to increase the share of energy produced from alternative (renewable) sources up to 20 per cent by 2020.
The law is aimed at stimulating biofuel production and consumption in Ukraine, intending to increase the share of energy produced from alternative (renewable) sources up to 20 per cent by 2020.
The law if implemented may create favourable conditions for the development of biofuel industry in Ukraine and help to increase domestic biofuel production and consumption in Ukraine, which remain marginal despite large domestic production and exports of products that may be used as a source of bio-energy, according to a report by the USDA Foreign Agricultural Service.
Lack of tax benefits and unclear state (including technical) regulation of biofuel market were considered the major problems for biofuel industry growth in Ukraine in recent years, and the new legislation was elaborated to address these issues.
According to the new legislation, biofuel has to be certified if it is produced for selling. Biofuel producers may consume it without certifying.
All entities (companies, individuals) that are involved in production, storage and selling liquid biofuel and biogas have to be included into the state registry of biofuel producers.
The procedure for creation and maintenance of the registry is to be developed by the Government of Ukraine.
All biofuel producers are bound to introduce accounting of produced biofuel and bio-components based on the procedure to be set in the legislation.
Moreover, all companies that produce, store and sale liquid biofuel (bioethanol, biodiesel) or biogas have to get a license to do it.
Based on recently adopted legislation, the Government of Ukraine is to adopt national standards for bioethanol and other types of biofuel in six months. Previously only state companies were allowed to produce both ethanol and bioethanol in Ukraine.
Currently, bioethanol production will be allowed to private companies that received a license. It is prohibited in the law to produce ethanol by enterprises that specialise in bioethanol production.
It is also prohibited to store and transport bioethanol without its denaturation with one to 10 per cent of gasoline.
If bioethanol is produced for exportation, denaturation has to be done based on export contracts. According to the Ministry of Agrarian Policy, six state plants are planed for reconstruction to produce bioethanol in 2009, and four state plants have already been reconstructed and are able to produce bioethanol with total capacity estimated at 36,000 tonnes annually.
Moreover, 10 state ethanol-producing plants are to be equipped for biogas production in 2009-2010.
As of now, only one of such state plants has biogas producing equipment, which helped to decrease natural gas consumption by this plant by 32 per cent.
Ukraine is a large producer and net exporter of grains and oilseeds, including rapeseed, which is a main source of biodiesel production in the EU, according to the USDA report. However, most of rapeseed produced in Ukraine is exported to EU states for further processing and consumption as biofuel.
In 2006, the Government of Ukraine adopted state program on the development of biodiesel industry. According to this programme, biofuel production should increase to 520,000 tons in 2010, but some assumptions of the program seem to be not very well based. For example, according to the programme, Ukraine should increase rapeseed production to 6.6 million tons in 2009 and to 7.5 million tons in 2010, compared to a record high of 2.9 million tons of rapeseed produced in 2008.
The programme envisaged very general and vague mechanisms to attain stated goals and did not provide any tangible benefits (e.g. subsidies, tax exemption) for biodiesel producers.
Thus, its adoption and implementation had only a little if any impact on biofuel industry. The new law is different compared to the state program, as it is concentrated on the issues that may and should have impact on business environment in Ukraine’s biofuel industry.
It is still not clear how the new law will be implemented and if private businesses are able to be fully competitive with tax benefits provided, but the legislation changes may potentially have some impact on trade in both biofuel and agricultural commodities in the region.
