TALLINN, 8 May 2006 - The audit of the NAO shows that Estonia has not been able to achieve the objective according to which the bio-fuel (bio-diesel and bio-ethanol) forms 2 percent of the total amount of fuel sold in the area of transport by the end of 2005. Last year, bio-fuel was not sold in any of the chains of petrol stations.

It is not clear whether and how will be achieved the objective according to which bio-fuel will form 5.75 percent of the total motor vehicle fuel by 2010. Increase of the share of bio-fuel is one of the priorities of the European Union because the new type of fuel shall increase the security of supply, in addition to economic and environmental effects.

In its audit report recently sent to the Parliament, the NAO finds that the main reason for failure are the decisions made without a detailed analysis of the needs of the state, requests and possibilities of undertakings. It is not clear which is the most profitable bio-fuel to be used in the conditions prevailing in Estonia, whether bio-diesel produced from rape, bio-ethanol produced from other crops etc. Until today there is no analysis about the effect of biological additives which are added in different volume to diesel fuel used in motor vehicles, taking into account Estonian climatic conditions, age of vehicles etc.

The Government had no obligation to set an objective of 2 percent, as it was only an indicative rate defined by the European Union, and Denmark, for example, set the objective of 0 percent and Finland of 0.1 percent.

Neither is decided responsibility issue. No ministry (the Ministry of Economic Affairs and Communications, the Ministry of Environment, the Ministry of Agriculture) which has showed its desire to take the responsibility for achieving the objective. They rather explained why the ministry in question should not manage the process.

Lack of clear objectives and other weak aspects in the state management were also reflected in the most important project of AS Werol Tehased connected with rape. The keywords characterizing the activities of the factory were aggressive widening of market share and taking of great risks, whereas a clear priority in producing a profit was missing. Opinions of the Ministry of Agriculture concerning expansion plans of AS Werol Tehased were contradictory.

In accounting year 2004/2005, AS Werol Tehased stored two times more primary products than the production capacity could allow reprocessing. In many contracts, purchase price of rape seed exceeded the world market price. The factory did not get the expected profit from processing and resale of excessive stock of seed and the accounting year 2004/2005 was finished with a loss that amounted to EEK 42 million. The NAO finds that the responsibility for the situation lies primarily on the supervisory board of Werol which did not decide upon extension plans of the factory and did not lead the activities of the management board.

Toomas Mattson
Communication Manager of National Audit Office
Telephone: 6400 777
Mob: 51 34900
E-mail: [email protected]

Additional information

The NAO carried out the audit on activities of state authorities concerning increase of the share of bio-fuel in motor vehicles, promoting production of local bio-fuels and cultivation of rape for production of bio-diesel. Bio-fuels used in motor vehicles are mainly liquid and gas fuels produced of biomass, including bio-diesel and bio-ethanol. The audit covered the period 2004-2005, partially have been used the data of earlier periods.

Rape has become an important crop in agriculture and industry. In the recent years, rape has been grown approximately on one tenth of the land under cultivation. Until today, the main products produced of rape seed are edible oil, oil-cake suitable as animal feed, and crude oil for export. AS Werol Tehased which shares are owned mainly by state is currently the main processor of rape.

The Parliament has charged the Government with implementation of necessary measures in order to substantially increase use of bio-fuel in Estonia. To achieve desirable objectives arising from the Long-term Public Fuel and Energy Sector Development Plan, approved in 2004, and environmental strategy, approved in October 2005.

• Posted: 5/8/2006 12:00 AM
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