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Feb-2007

Bioethers impact on the gasoline pool

Benefits of producing bioethers compared to blending bioethanol are examined for the total European gasoline pool. The result of maximising ethanol use in the pool via etherification is evaluated.

Kerry Rock and Maurice Korpelshoek, CDTech
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Article Summary
Global concern about the effect of carbon dioxide on the environment has led to recognition of the need to develop sustainable transportation fuels. Most current efforts are focused on ethanol blending in gasoline or on the production of fatty acid methyl esters (FAME) biodiesel. Unfortunately, ethanol causes a significant increase in gasoline vapour pressure and the refiner is forced to remove a substantial portion of the lighter gasoline components to offset the ethanol effect. In addition, pipeline transportation of the gasoline-ethanol mixture is subject to the ethanol content ‘phasing out’ due to the inevitable contact with a water phase.

A better solution is to react the ethanol with refinery olefins to produce ethers, which not only have high octane but, when added to the gasoline pool, also reduce the vapour pressure of gasoline and allow some direct blending of ethanol. European refiners face challenging targets in the European Union (EU) implementation of biofuels. For gasoline blending, refiners have a choice between blending bioethanol or blending bioethers produced from bioethanol and refinery iso-olefins.

Biofuels market environment

The EU intends to influence environmental objectives, such as meeting climate change commitments, changing to environmentally friendly security of supply and promoting renewable energy sources, which is why the EU promotes biofuels. Directive 2003/30/EC has been established to oblige EU member states to use a certain amount of biofuels, while directive 2003/96/EC gives EU member states the opportunity to allow excise duty reduction, thereby promoting the use of biofuels. The former directive calls for a minimum amount of 2.0% biofuels relative to the amount of gasoline and diesel sold (in 2005), growing to 5.75% biofuels in 2010.

The percentages indicated are based on energy content. For bioethanol, an energy content of 5.75% biofuels corresponds to approximately 8.5 wt% ethanol in gasoline. Similarly, for ethyl-tertiary-butyl-ether (ETBE), an energy content of 5.75% biofuels corresponds to approximately 14 wt% ETBE in gasoline.

Under normal circumstances, the cost of bioether production is higher than the price of comparable fossil fuels such as gasoline. In most European countries, excise tax is a significant portion of the gasoline price, so governments have the option to promote the use of biofuels via tax incentives. Several countries in Europe – Austria, France, Germany, Italy, Spain, Sweden and the United Kingdom – have implemented the directives efficiently and offer either full tax exemption or partial tax exemption on the use of biofuels.

National biofuel initiatives in Europe
In Austria, the EC requirements are met by biodiesel production. After 2006, additional ETBE or ethanol will be required. There was no bioethanol tax incentive available up to October 2006. After October 2006, the excise tax for gasoline amounts to ?445 per 1000 litres, compared to ?412 per 1000 litres for gasoline with a biofuels content of at least 5.0 vol%1. Assuming a blend of 15 vol% ETBE, the tax incentive would be ?220 per 1000 litres ETBE or ?500 per 1000 litres ethanol used to produce ETBE. For a blend of 5.0 vol% bioethanol, the tax incentive would be ?230 per 1000 litres bioethanol.

 As part of the original council decision from March 2002 (2002/266/EEC), a tax incentive of ?502.30 per 1000 litres for bioethanol was established in France. This amount represented 85% of the excise tax charged for gasoline. However, in 2003 this tax incentive was reduced to ?380 per 1000 litres2 of bioethanol in ETBE or ?370 per 1000 litres for direct-blended ethanol. This amount represents 65% of the excise tax charged for gasoline. Bioethanol incorporated in the form of ETBE benefits from this tax exemption with an approved quantity limit of 199,000 mtpy bioethanol. Bioethanol also benefits from the Biofuel Plan launched by the French prime minister, with an additional approval of 320,000 tpy between now and 20073. In perspective, the amount of ethanol consumed in France for ETBE production amounted to 80,887 metric tonnes in 2004, while 102,000 tonnes of ethanol were produced. 

In Germany, biofuels from bioethanol are exempt from excise tax (reference: European Commission State Aid N 685/024). The usual excise tax for fuels is ?654.50 per 1000 litres. No excise tax is applied for pure biofuels such as bioethanol, while for mixtures (ETBE, etc), only the biofuels fraction is exempt from taxes. At the time of the decision (February 2004), the estimated cost of production of bioethanol (as a blending component for gasoline) is shown in Table 1.

The cost of production was equal to the 2003 gasoline price. The cost of gasoline (with excise tax) was thus equal to the bioethanol price without excise tax. As a result, no overcompensation takes place on the basis of 2003 product prices. Unlike some other countries in Europe, Germany has no quota for the use of biofuels.

In Italy, biofuels from bioethanol benefit from a lower excise tax (reference: European Commission State Aid N 717/2002). The usual excise tax for fuels is ?564 per 1000 litres (March 2005). An excise tax of ?281 per 1000 litres is applied for pure bioethanol, and a tax of ?286.73 per 1000 litres is applied for ETBE from bioethanol. This state aid document was issued on 10 December 2003. The measure will be valid until 10 December 2006. The difference in costs between production of bioethanol and gasoline (excluding cost of distribution and, in the case of ETBE, etherification) amounts to ?250 per 1000 litres. Considering the cost of distribution and, in the case of ETBE, etherification, no overcompensation takes place. 

To increase the use of biofuels in Spain, the strategy is to adapt refineries to increase ETBE production and to use tax exemptions. Until 31 December 2012, the excise tax on fuels is fixed at zero Euros per 1000 litres, while the normal excise tax rate on gasoline is ?395.69 per 1000 litres. This special rate applies exclusively to the volume of biofuels, even when it is blended with other products. The amount of ethanol consumed in Spain for ETBE production amounted to 196,000 tonnes in 2004, while 194,000 tonnes of ethanol was produced. 

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