Italy Biodiesel Sector Blocked by Regulatory Delay

MILAN - Regulatory delays have blocked sales of biodiesel fuel in Italy, which risks missing a 2012 target for biofuels use that was set as part of the EU fight against climate change, a senior industry official said.

Italy is late with a decree, needed before the start of this year, to implement EU rules setting sustainability criteria for biofuels to be sold on the internal market, Maria Rosaria Di Somma, director general of biofuel industry body Assocostieri, told Reuters on Monday.

"The decree is ready on the technical level but not signed yet, and the delay is blocking sales of biofuels on the national market. Our country for now is disregarding the national and the EU laws," Di Somma said.

Without the sustainability criteria in place, oil refiners and product distributors, which are obliged to add a quota of biofuels to the car fuels they sell to consumers under EU and national laws, refuse for now to sign supply contracts with biofuel producers and importers, she said.

That has paralysed the entire national production chain, with makers of biofuels and of feedstock halting operations, and has also hit importers, Di Somma said.

Once the decree is signed, biodiesel producers would have a few months to adjust to the new requirements, meaning further possible delays for the market, she said.

The delay in the sustainability decree has made it impossible for now to forecast national biodiesel output and imports for 2012 or say whether the country will meet its 2012 target for biofuels in car fuel, Di Somma said.

Those targets are set at 4.5 percent for 2012 and will rise to 5.0 percent by 2014. Biodiesel accounts for the lion's share of biofuel use in Italy.

Italy's biodiesel industry depends heavily on imported raw materials including palm oil and rapeseed due to the scarce supply of local feedstock. The industry has been hit hard in the past few years by cheap biodiesel imports, which sometimes cost less than the raw materials.

Biodiesel output in Italy dropped sharply last year due to the cheap imports, which are set to rise again this year, Di Somma said, adding it was too early to give more precise estimates.

In November, she had estimated that Italy's biodiesel output would fall to 500,000 tonnes at best in 2011, a 32 percent drop from 2010.

In 2010 Italy produced 731,844 tonnes of biodiesel and imported 639,684 tonnes to meet a demand of about 1.3 million tonnes, according to data on the Assocostieri website. (www.assocostieri.it).

Italy's biodiesel capacity, including plants under construction and idled plants, is about 2.4 million tonnes a year, the Assocostieri data showed.

Di Somma said the capacity figure was "only theoretical" because new projects have been put on hold while many existing plans have been stopped and workers sent home temporarily. Capacity use estimates will be available in a few weeks, she added. (Reporting by Svetlana Kovalyova, editing by Jane Baird)

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