CHICAGO, 8/2/2001 (Financial Times, London) - Large areas of the EuropeanUnion's farmland could be turned over to the production of alternativefuels, whose use would become compulsory by 2005, under plans being drawnup by the European Commission.The proposals, scheduled for adoption in September, would force EUcountries to ensure that by 2005 at least 2 per cent of fuel used fortransport came from biofuels - produced from crops such as sugar beet andoilseeds as well as waste.This figure would rise by 0.75 percentage points every year until at least2009, when a compulsory target would be introduced for blending smallquantities of biofuels into conventional diesel and petrol. The goal isfor bio-fuels and other substitute fuels, including hydrogen, to make up20 per cent of fuel use in transport by 2020.Biofuels are manufactured from a range of agricultural products and evenwaste. Bioethanol, which can be used as an automotive fuel by itself ormixed with conventional fuels, can be produced from sugar beet, cereals ormaize. Biodiesel, the most commonly used bio-fuel, is usually producedfrom rapeseed oil.The initiative mirrors similar efforts in the US with fuel additiveethanol, primarily made from maize, begun in the 1970s under PresidentCarter. US bio-ethanol production will reach an estimated 10.5m tonnes in2003. The EU produced 968,000 tonnes of bio-fuels last year.The European draft law forms part of the Commission's drive to become lessdependent on imported fossil fuels and to cut emissions of gases that areblamed for global warming. It also tallies with the Commission's attemptsto shift the emphasis of EU farm policy further away from maximising foodoutput to supporting other rural activities and severing the link betweensubsidies and production."There is no doubt that the promotion of the use of biofuels in the EU isdesired at political level for the reasons of sustainable development, COreduction, security of supply and the additional positive influence onrural development and agriculture policy," the Commission says in a draftof the proposals.The Commission hopes that farmers will grow the raw materials for thesefuels on land taken out of commercial food use under the EU's compulsory"set-aside" programme. It predicts that up to 20m tonnes of biofuels couldbe produced on set-aside land, 7 per cent of EU petroleum productsconsumption.The main drawback is the cost. The Commission calculates the additionalcost of biodiesel over conventional oil-based diesel at about Euros 250(Pounds 154) per 1,000 litres with an oil price of Dollars 25 a barrel.To bridge this gap the Commission is proposing giving EU states the optionof reducing excise duties on fuel containing biofuels. Previous attemptsto grant this tax exemption have failed to win the backing of EUgovernments.Europia, the group representing most of the big oil companies in Europe,said biofuels could play a role as a complement to conventional fuels butwarned against forcing the technology through before wider research wasdone into the environmental, technological and economic implications."In principle we're not opposed, but we must go cautiously and do some R&Dbefore we start prescribing this sort of thing," said John Price, Europiaexecutive director.Environmental groups have also reacted cautiously to the plans, suggestingthey were largely being driven by farming interests and domestic politicsin certain EU states. They said they could detract from measures on thestatute books to reduce harmful emissions from fuels."All the studies show that the emissions profile of bio-fuels is not asgood as some of the cleaner fuels we've legislated for," said FrazerGoodwin of the European Federation for Transport and Environment.Some EU countries have already attempted to boost the biofuels sector,particularly Austria. Additional reporting by Chris Bowe in Chicago