Biofuel production allow Ukraine replace 35% imported diesel and 10% gasoline

23-05-2019

Today, Ukraine meets more than 62% of domestic gasoline and 90% of diesel fuel consumption needs through imports. The biofuel production and use can provide additional tools for the country’s energy independence, in particular in the transport sector. However, instead of domestic production, Ukraine annually exports significant volumes of raw materials. For example, up to 35% of imported diesel could be replaced by rape and soya exported in 2017-2018.

In spite of the declared objectives of the Energy Strategy to increase the share of alternative fuels, the respective Ukraine’s potential is practically not used. For example, motor biofuels meet about 4% of transport energy consumption needs in the world and less than 1% in Ukraine.

The government and business representatives discussed possible mechanisms for stimulating the biofuel industry development during the Roundtable “Regulation of Biofuel Production: a tool to ensure energy independence” on May 21. The event was organized by the BRDO Office with the support of EU4Business/FORBIZ as part of the Public Dialogue #PRODialogue.

BRDO experts conducted a systematic analysis of the market for regulation of the motor biofuel production and concluded that the market development would be impossible without addressing a range of economic and organizational problems. The market regulatory environment consists of 35 acts, 7 of which are outdated and/or are not in compliance with the law. Moreover, competences to monitor the biofuel industry are scattered among different state bodies. At the same time, the State Agency on Energy Efficiency as the body with primary responsibility for the industry development actually has the least amount of tools of influence on the market.

“In view of Ukraine’s significant dependence on petroleum imports, it is extremely important for us to develop our production and increase the share of replacement of petroleum products with biofuel. The country’s potential for biofuel production allows to replace up to 35% of imported diesel and up to 10% of gasoline due to bioethanol production. But this requires financial and economic incentives along with creating a guaranteed demand for motor biofuels,” the BRDO Energy Sector Head Oleksiy Orzhel said.

The Ukraine’s energy strategy implies that the total volume of biomass, biofuel and waste use should be 4.9% in 2020. By the same year, in accordance with the National Renewable Energy Action Plan, the bioethanol use in the transport sector should be 320 thousand TOE and the biodiesel use – 70 thousand TOE. However, the total amount of biofuel consumption by the transport sector amounted to 45 thousand TOE in 2017.

Ruta Baltause, the Energy Expert at Support Group for Ukraine, European Commission, supported Ukraine in the RES implementation: “The Ukraine’s high dependence as well as the European one on imports of petroleum products makes effective energy solutions extremely important. That is why, the EU has been deliberately implementing the Alternative Energy Development Strategy since 2013. Liquid motor fuels are the main components that will allow replacing a significant part of diesel and gasoline in the transport sector. Therefore, it is critically important for Ukraine to focus on its own production instead of exporting raw materials, always in line with sustainable development requirements. We are ready to support you in every possible way”.

According to the BRDO Office, the biofuel industry development requires developing a clear and transparent legislation that provides for, inter alia:

  1. Introducing stimulating financial and economic instruments:
  • the cancellation or significant reduction of excise tax rates for biodiesel and its mixture and motor gasoline containing bioethanol;
  • eliminating the need to submit a tax receipt for bioethanol producers;
  • creating a guaranteed demand for motor biofuels (for example, establishing market quotas and a schedule for increasing the share of biofuels in the total amount of fuels) or providing state support (subsidies) to business entities operating in this area.
  1. Implementing mandatory development sustainability criteria in Ukrainian legislation, the observance of which is currently voluntary. These requirements will allow ensuring the environmental friendliness of motor biofuels and reducing emissions.
  2. Creating an online system to control the circulation of petroleum products, supported by high penalties for violations, and introducing an independent auditor of motor fuel quality, which is currently almost not controlled by the state.
  3. Completing the process of harmonization with the relevant EU standards.
  4. Cancelling exclusive rights to produce gasoline with the addition of bioethanol and/or its components, which hinders the development of competition as well as leads to Ukraine’s loss of potential benefits from duty-free biofuel exports to the EU within relevant quota limits.

The event was also attended by Taras Mykolayenko, Director of the Ukrainian Association of Alternative Transport Fuels Producers, Mykola Cherkhavy, Business Executive of the SE “Ukrspyrt”, representatives of the State Agency on Energy Efficiency and Energy Saving, the State Environmental Inspectorate, the State Fiscal Service, the Ukrainian Oil&Gas Association, the State Regulatory Service as well representatives of business and expert circles.

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