Zubkov Backs Plan for 30 Biofuel Plants

The government will back the construction of 30 new plants to produce biofuels, Prime Minister Viktor Zubkov told a timber industry conference Wednesday.

A government program to develop biofuel production will start this year, Zubkov said. It stipulates the construction of 30 new plants to make ethanol, as well as upgrades of existing facilities, he said.

"We're working very actively on this subject," Zubkov told participants at the conference, according to a transcript of his speech on the Cabinet's web site.

Russia will eventually produce 2 million tons of ethanol per year if that program is successful, Zubkov said, without specifying when the government hoped to reach this target.

Zubkov's comments came a day after President Vladimir Putin called for Russia to carve out a place among the world's top producers of biofuels.

U.S. President George W. Bush, in his State of the Union address last year, called for the United States to produce 35 billion gallons, or 98 million tons, of the fuels by 2017.

The production of biofuels has dramatically increased globally in recent years, prompted by environmentalists' calls for more non-fossil fuels and rising oil prices. One unintended effect of the switch toward crop-based biofuels has been to push up the prices of food staples worldwide, hitting the poor and causing inflation to rise.

The fact that Zubkov was addressing the timber industry probably means that at least some of the plants will produce ethanol from timber waste such as sawdust, said Alexei Ablayev, director of the National Biofuel Association.

Researchers are close to developing a technology to make fuel out of timber waste that will be as efficient as the current conversion of crops into fuel, Ablayev said.

About 30 Russian plants that made ethanol from non-crop raw materials went bankrupt with the collapse of the Soviet Union because their technology made the fuel too expensive, he said.

Russian businesses are also eager to produce ethanol from such crops as wheat, Ablayev said.

Former Gazprom deputy chief executive Alexander Ryazanov is planning to build an ethanol plant in the Tambov region to produce 250,000 tons of the fuel, mostly from wheat, Vedomosti reported Wednesday.

Plans to divert some of the country's crop harvests to make fuel should not send bread prices soaring because there is room to grow larger harvests, Ablayev said. Russia has some 40 million hectares of unused arable lands, he said. Agriculture Minister Alexei Gordeyev put the number at 20 million hectares in October.

In addition, there is the potential to raise farming productivity, which is half of that in Europe at best, Ablayev said.

If ethanol production does take off in Russia, it will target the export market, at least for now, Ablayev said. The government charges an excise duty of at least 26 rubles ($1.10) to sell 1 liter of ethanol, the same as for other types of spirits, he said. The tax alone is more than the cost of 1 liter of gasoline.

"This kills the business," he said, referring to sales on the domestic market.