On Tuesday, 14 June, when approving amendments to Cabinet of Ministers requirements on fuel and diesel fuel compliance evaluation, the government decided to make biofuel mixing voluntary for a period of one and a half years – from 1 July 2022 until 31 December 2023.
This means fuel retailers and wholesale traders will be able to decide on their own if it is necessary to apply biofuel mixing or not, as BNN was informed by Latvian Ministry of Economics.
«The fuel price increase observed over the course of the past months has a negative effect on households and businesses, especially among transport companies. Considering the role of the transport sector in other sectors’ intermediate consumption. This is why different options to help reduce fuel prices were considered as part of the both the Energy Security Work Group and other formats. Currently we have agreed that the cancellation of biofuel mixing requirement until the end of 2023 would be the quickest and most effective solution,» said Minister of Economics Ilze Indriksone.
The proposal to temporarily cancel the mandatory mixing of biofuel for petrol and diesel fuel was proposed by the ministry in order to reduce the retail price of fuel in a situation when energy prices are on a rise (65%-70% growth since the start of 2020) and ensure a political agreement without affecting the tax conditions for fuel.
According to provisional estimates, in the current situation the fuel price drop is expected to be approximately ten cents.
As it is known, in an attempt to reduce fuel prices and increase available agricultural land for food cultivation and thereby expand food production volumes in Latvia, parties of the ruling coalition decided during a meeting on 2 May to support the proposal from the Ministry of Economics to temporarily cancel the requirement of biofuel mixing.
The retail fuel price consists of five components. The biggest portion comes from the fuel price, which also includes biomixing costs. The second important position is the excise tax and the third position is VAT. Fuel prices are affected less by petrol station maintenance costs and petrol security reserves.
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The European Parliament’s and European Council’s 11 December 2018 directives on promotion of the use of renewable energy resources state that each member state is to present fuel suppliers with a duty to ensure the percentage of renewable energy resources for end consumption in the transport sector is to be at least 14% by 2030. Respectively, Latvian Cabinet of Ministers requirements Nr. 332 on petrol and diesel fuel compliance evaluation of 26 September 2000 state that diesel fuel in Latvia is permitted to be sold only if the percentage of biofuel is no less than 6.5% of the total volume of the mixture. Petrol (E95) is permitted to be sold only if the percentage of bioethanol is not below 9.5% of the total volume of the mixture. All Baltic States have a requirement for biofuel mixing.
BNN previously reported that, according to European Latvian Anti-Poverty Network (EAPN-Latvia) «one half of politicians promise miracle solutions without explaining if the state and residents can even afford them. The other half wants to present as major accomplishments decisions that are generally considered by residents as ‘empty promises’.»
«One such example is he government’s discussed decision to reduce fuel price by cancelling biofuel mixing. The media reported data-based information, claiming prices would drop by 3-4 centts, which is exactly nothing when considering fuel prices are close to EUR 2. This would be blatant misleading of the public. Experts of the Foreign Investors Council are also critical of this decision, who say that dropping biofuel mixing would not help reduce fuel prices, because consumers will be forced to pay penalties for contracts signed by fuel traders last year. Experts are also concerned about whether the decisions of the Latvian government are made based on data,» explains EAPN-Latvia.
«Other EU member states have adopted more effective solutions, including VAT and excise tax reductions. Poland, for example, has made the decision to extend the reduced excise tax period for electricity for households and multiple types of fuel until the end of July. In Germany residents receive subsidies when using public transports. This is why we invite the government to perform calculations before making any decisions on reduction of consequences from inflation. In the context of the Ukrainian crisis it seems completely unacceptable to not use local biofuel, rather than increase demand of fossil fuel part of which is likely still imported from the criminal Russian regime,» stressed the organisation.