Being green is not necessarily inexpensive. The Norwegian Government has proposed to remove a tax exemption on biodiesel for the safety of people rather than the health of the environment.
The Government argues that costs related to road accidents, congestion, noise and road wear and tear are the same whether cars are run on fossil fuels or renewable fuels.
Norway has also introduced a sales obligation that guaranties 2.5% biofuel in 2009. This obligation will be achieved by low blends of biodiesel in all ordinary diesel.
`Tax exemption for biodiesel reduces the price of all diesel, which gives incentives to increase diesel consumption. Increased diesel consumption contributes even more to the negative consequences of road traffic mentioned above. The sales obligation will be mandatory when it comes to the total sale of biofuels in Norway. The tax exemption for biodiesel is therefore redundant, and also leads to reduced revenue for the state,' the Government states.
Biodiesel will in the future still be taxed less than fossil fuel, because biofuels are still exempted from the carbon dioxide tax. The CO2-tax amounts to 214 NOK per ton CO2, whereas the carbon price in the European emission market lately has been about 100-150 NOK. Up till today biodiesel has not been subject to the road tax on diesel. The exemption from the road tax will be halved in 2010, and phased-out completely from 2011.
The European trend is to reduce or abolish tax exemptions for biofuels and instead use biofuel sale obligation.
Germany, the main European producer of biodiesel, introduced a tax on biodiesel already in 2007. At the same time a biofuel sale obligation was introduced. The Swedish government has also stated that the tax exemption on biofuels should be abolished no later than 2014. They have stated that a biofuel sale obligation can be introduced.