Biofuels as an alternative to motor fuel

In Ukraine, recent weeks have been marked by fuel shortages, long queues at gas stations, and difficult supplies of gasoline and petroleum products. Is it possible to use alternative fuels and reduce dependence on foreign gasoline and diesel supplies?

In 2019, BRDO experts analysed the market for the production of liquid motor biofuels and determined that Ukraine has great potential for its own production of biofuels. But more than 62% of Ukraine’s domestic gasoline and 90% of diesel fuel were by imported.

The production and use of biofuels can provide additional tools for the country’s energy independence, including the transport sector, and address the annual problem of lack of fuel for agriculture. However, instead of its own production, Ukraine annually exports significant amounts of raw materials.

Rapeseed, soybean, and technical oil exported by Ukraine are equivalent to 1.6-1.9 tons of biodiesel. In turn, if Ukraine produced this amount of biodiesel from agricultural raw materials that are exported, it could replace up to 30% of imported diesel.

10% of gasoline imports can also be replaced by adding domestically produced bioethanol. Thus, about 1.2-1.9% of the volume of wheat and corn exported in the 2017-2018 marketing year could have been used as raw material for bioethanol production. The share of bioethanol in gasoline can be up to 7-8%, and this mixture is completely safe for modern engines without the need to upgrade them.

According to BRDO, it is necessary to create clear and transparent legislation for the development of the biofuel industry, which provides, in particular:

1. Introduction of stimulating financial and economic instruments:

  • abolition or significant reduction of excise tax rates on biodiesel and its mixtures and gasoline containing bioethanol;
  • elimination of the need to file a tax bill for bioethanol producers;
  • formation of guaranteed demand for motor biofuels (for example, setting market quotas and a schedule for increasing the share of biofuels in total fuels) or providing state support (subsidies) to businesses operating in the field.

2. Implementation in Ukrainian legislation of mandatory sustainability criteria for biofuel production, compliance with which is currently voluntary. These requirements will ensure the environmental friendliness of motor biofuels and reduce emissions.

3. Completion of the process of harmonisation of legislation with the relevant EU norms.

This publication was produced with the financial support of the European Union. Its contents are the sole responsibility of BRDO and do not necessarily reflect the views of the European Union.