The European Commission said Wednesday it has approved an Italian government aid plan to promote biodiesel.
Italy will be allowed to reduce taxes to stimulate the production and use of biodiesel, over a four-year period from 2007 to 2010 with the total budget for reductions estimated at EUR384 million.
Under the plan, an annual quota of 250,000 metric tons of biodiesel would benefit from an 80% discount in excise duties in comparison with regular fuels, the commission said.
Any producer of biodiesel in the E.U. would be able to enroll in the program and be eligible for the excise duty reduction.
The tax-reduced quota would be shared among all producers depending on their actual production, so that only a fraction of each producer's total biodiesel output would benefit from the tax reduction, the commission said.
The plan also introduces a supply obligation for biofuels, forcing all suppliers of petrol and diesel fuel to the Italian market to supply a minimum proportion of biofuels.
"I am happy to approve aid that promotes biodiesel without overcompensating suppliers. Italy is now a step further on its way to implement the E.U. targets on the use of renewable energies for transport," Competition Commissioner Neelie Kroes said.