Japan: Preferential tax eyed for biofuel

The Economy, Trade and Industry Ministry said Saturday it plans to introduce a new preferential tax system in fiscal 2008 aimed at promoting a wider use of biofuel, which could help curtail greenhouse gas emissions.

Under the envisaged plan, biofuel that has been mixed with gasoline will be exempt from the gasoline tax–currently 53.8 yen per liter–in proportion to the amount of biofuel included. If blended with diesel oil, biofuel will be free from the diesel oil delivery tax, currently 32.1 yen per liter.
For example, gasoline that contains 3 percent of bioethanol would be taxed 1.61 yen–3 percent of 53.8 yen–less than the per-liter price of pure gasoline. Currently, there is no tax break for gasoline mixed with biofuel, regardless of the ratios involved.

The price of bioethanol is slightly higher than that of gasoline. Working under the assumption that gasoline is 145 yen per liter and the import price of bioethanol is 10 percent higher than that, the price for a liter of fuel containing 3 percent biofuel would be 0.43 yen more expensive than 100 percent gasoline.

However, if the amount of biofuel mixed into gasoline is nontaxable, the price of the composite fuel in this case would be 1.18 yen cheaper.

At present, the amount of biofuel that can be mixed into gasoline and diesel oils domestically has an upper limit of 3 percent. However, future technological innovations that would enable a higher quantity of biofuel to be mixed with fossil fuels likely would reduce the price of composite fuels.

Daily Yomiuri