Production costs

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Alexander Proy realized in a very interesting comparative study of the prices of biofuel:

»Costing of biofuels in France: taking externalities into account and comparing the cost price of diesel and unleaded petrol 95«

Summary report

The depletion of fossil resources has highlighted the development of the biofuel industry to that of electricity and fuel cell. Although the last two have the potential for significant penetration in the long term, biofuels are distinguished by their ease short-term access to the transport sector which depends 98% of the oil.

Indeed, incorporation can be done without changing engines. While Europe decides to implement means of incentives to develop the biofuel sector, in order to respect the share of 12% renewable energy in 2010, it appears that differences exist between countries. Indeed differences in tax exemption do not put all countries on the same footing, causing competitive distortions in the image of Germany who chose totally défiscaliser the biodiesel industry.

In order to know the development potential of this industry, this research paper has attempted to estimate the cost of renewable and fossil fuels and to compare between respective counterparts (gasoline and ethanol, diesel and biodiesel). Given the challenges brought by biofuel production on our territory, it was attempted to incorporate external costs in the fuel cost.

Indeed, fuel use generates externalities that affect the entire population, hence the need to calculate the social cost of fuels. Several types of externalities have been taken into account.

First, the nature of environmental externalities that take into account the emission of greenhouse gases and related pollutants such as toxicity on humans or damage to buildings. These have revealed a clear advantage for biofuels which must in part to lower greenhouse gas emissions.

Then the externalities associated with energy independence were included in the scope of investigation. The risk to our vis-à-vis oil dependence is strengthened by the rising price of it; so we can enhance the incorporation of biofuel which allows the reduction of this risk.

Finally, economic externalities are taken into consideration, since biofuel production on our territory would allow job creation, higher tax revenues as well as independence for animal feed.

However the latter issue is not included in the calculation because it does not concern the entire population. The condition for the integration of these externalities is a production in the country, otherwise these gains would be transferred to the producer countries.

All these externalities brings a valuation of € 0,20 per liter of biodiesel and 0,09 € per liter of ethanol.

The calculation of land needed for energy crops demonstrated that the objective of 2010 happens to be quite achievable but still represent more than 2 million hectares, 11,5% of the total arable land.

The benefit for farmers is to produce crops on fallow energy with which they can expect before extracting more value out fallow or where they will appreciate the premium € 45 hectare. The influence of agriculture on the price of agricultural resources is not significant since prices are set by the market following the law of supply and demand.

After determining the factors affecting the cost price of each fuel, it was estimated and compared to the case of biofuels, with the United States. across the Atlantic productions reveal a lower cost for ethanol, unlike biodiesel.

In France, the cost of biofuels exceeds that of their fossil counterparts, while the price of oil is experiencing record highs. Indeed, a biodiesel oil equivalent liter would cost € 0,67 0,34 against € for diesel, while a liter of ethanol oil equivalent would cost € 0,61 0,29 against € 95 for gasoline without lead (data calculated from the table 3.3.1 ).

This economic dominance of fossil fuels does not promote the emancipation of the biofuel sector, blocked by the monopoly and the lobby of the oil companies.

This advantage disappears when it integrates own externalities each fuel, even on a base energy value. Per liter, the cost price of biofuels is even lower than those of petroleum products. So it will be in the order of € 0,37 per liter of biodiesel cons of € 0,40 for diesel, and ethanol for € 0,32 0,42 against € for petrol.

However, at present, the income from the domestic consumption tax (formerly TIPP) are relatively consistent. And if we compare the "costs" externalities between fuels, considering that ICT is an external cost, the benefit returns for fossil fuels.

But with variations of Brent accompanied by the risk of decline in the euro against the dollar, the cost of fossil fuels could undergo further increases, which would boost the will to develop a parallel industry. The development of biofuels should however be structured and do not leave out the chain of Pure Vegetable Oils, which allows the reverse dies ndustrial greater distribution of value added in agriculture and an effective fight against rural depopulation.

This study is available at full download on this page: study on the price of biofuels


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