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Dr Julije Domac is a recognised
international expert with more than
10 years of experience in
renewable energy and energy
efficiency projects. He has been the
National Biomass Programme
co-ordinator and Deputy Head of
Department for Renewable Energy
at the Energy Institute Hrvoje
Pozar in Zagreb, Croatia, an
international expert for the
Tipperary Institute in Ireland, a
project leader for the United
Nations Industrial Development
Organization (UNIDO), a lead expert
for the World Bank, a technical
editor for the Food and Agriculture
Organization, an expert evaluator
for the European Commission and
Task Manager for the International
Energy Agency. Over the last four
years, his main focus has been
biomass energy, especially socio-
economic modelling, biofuels, local
communities and public education.
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Biofuels
Biofuels Industr y About to Star t in Croatia
After almost 15 years of continuous promotion of
the benefits of biofuels and recent and on-going
rapid development of biofuel industries in almost
every European country, biofuels are finally to be
produced in Croatia. The first biofuel produced in
Croatia will be a modest amount of biodiesel, but
new and exciting large-scale biodiesel and bio-
ethanol projects are already under development.
Croatia is a country with limited fossil fuel resources.
Around two-thirds of the country’s consumption has
to be imported. Diesel fuel consumption for the
transport sector has increased to around 1.1 million
tons during 2004, and more growth is expected in
the future.
Like most transition economies, Croatia has gone
through severe changes in the labour market since
the 1990s. The unemployment rate in Croatia
ranges from 15% to 35% depending on the region.
Today, Croatia has promising economic horizons
and is a candidate for joining the enlarged EU.
Croatia experienced a period of significant
economic growth from the mid 1990s, though it
suffered a mild recession in 1998–1999. Revival
started at the beginning of 2000, reaching its peak
in 2002 and remaining constant with a 5.2%
growth rate, with tourism, banking and public
investments leading the way.
Legislative Incentives and Recent
Developments
The production of biofuels is seen as one of the most
promising options for providing an integrated
solution to energy, environmental and socio-
economic concerns. Biodiesel production was part
of the National Energy Programme – Biomass for
Energy (BIOEN) in Croatia – launched by the
Croatian government in February 1997. To this
end, a biodiesel production feasibility study was
undertaken and presented to the Ministry of
Agriculture and Forestry in 2001.
In 2003, the Croatian government asked the United
Nations Industrial Development Organization
a report by
Julije Domac
Energy Institute Hrvoje Pozar, Croatia
(UNIDO) to finance and provide technical
assistance to achieve the aforementioned objectives.
Through the framework of a preparatory assistance
project phase, UNIDO had evaluated the overall
feasibility of introducing a biodiesel industry to
Croatia by the end of 2005. It provided information
and knowledge to enable informed decision-making
on the appropriate production chain and economic
model to adopt in terms of available feedstock,
market segments, distribution channels, promotional
policies and financial mechanisms and
recommended guidelines for regulatory measures to
be put in place to promote biodiesel production and
market development.
The first concrete steps were taken in 2001. The
Energy Act clearly recognises biofuels as a renewable
energy source and gives definitions and classifications
of biofuels – including both liquid and gaseous forms.
In 2003, a subcommittee for biofuels was formed
within technical department 28 of the governmental
Office for Standardisation and Metrology, which
defined the Croatian norms for biodiesel. Practically,
this means acceptance of the EU norm EN 14214.
The subcommittee also made a decision to allow the
mixing of 5% of biodiesel in the standard mineral
diesel fuel without special marking. In 2002, the
Croatian government, based on the proposal of the
Ministry of Environmental Protection and Physical
Planning, adopted the regulation on quality standards
for liquid oil fuels, which was last amended in August
2005. In 2005, the same ministry prepared the
regulation on biofuels quality that regulates all issues
regarding the biofuels quality, but also gives some
indicative targets for national biofuels consumption
in line with Directive 2003/30/EC.
At the end of 2005, a group of interested
entrepreneurs, supported by some related industries
and regional governments, founded the Croatian
Ethanol Board with the aim of facilitating industrial
ethanol production. The next step forward – the
introduction of supportive detaxation mechanisms –
is expected in the near future.
EUROPEAN RENEWABLE ENERGY REVIEW 2006
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EUBIA
The European Biomass Industry Association

Located in the Renewable Energy House in the heart of the European Commission and the EU
Parliament district, the European Biomass Industry Association is the voice of the biomass sector in
Brussels. EUBIA offers 10 years of performance and experience.The activities range from project work
in the fields of biomass research, development and demonstration to promotion campaigns and institu-
tional lobbying for biomass stakeholders.These activities aim to:

• Support the Members in order to achieve their national and European objectives
• Provide the Members with relevant information from the EU
institutions and about European Commission programs
• Discuss with the EU institutions and achieve results on strategic and
policy issues with relevance to the European biomass sector

The overall objectives are to represent European Biomass industry stakeholders and Biomass research
and development centers on the Brussels’ level, to promote their interests and to search for funding for
specific actions as well as for mid- and long-term EU financial resources.

Moreover, EUBIA is directly involved in international co-operation activities with third countries, e.g.
The People’s Republic of China,The Russian Federation, Southern Africa and Latin American countries.

Contact details for EUBIA

European Biomass Industry Association Rue d’Arlon, 63-65 B-1040 Brussels

T : +32 2 400 1020 F : +32 2 400 1021
E : eubia@eubia.org I : www.eubia.org
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Biofuels
Economic Incentives and Removal of
Barriers
The Croatian government is in the process of
formulating a comprehensive renewable energy
policy, which is expected to deal with various policy
issues relevant to development and large-scale
diffusion of renewable energy technologies. Financial
support is recognised as an important and necessary
step in making market penetration possible.
In order to increase national non-food, biofuels-
oriented agricultural production, it is necessary to
expect some intervention from the Croatian
government in the agricultural sector regarding
oilseed and maize production. Such measures
would have to ensure the quantities of feedstock
required for the planned production of biofuels,
increase the yield per hectare and regulate market
channels for produced feedstock. This requires
the formulation of a comprehensive action
plan with synchronised enforcement of existing
The first biofuel produced in Croatia will be a modest
amount of biodiesel, but new and exciting large-scale
biodiesel and bio-ethanol projects are already under
governmental tools and of Croatian agriculture
policy with some adjustment to these new issues.
Therefore, the following recommendations could
be put forward:
• Clear national targets for both food and non-food
agricultural production, including timeframe and
expected dynamics, should be established.
• The incentive for rapeseed and other oilseeds, as
well as for maize production per hectare, should
be determined according to the desired
quantities of overall production in Croatia,
supported by an extension service regarding
cropping techniques improvement.
• Measures to increase the yield, which is currently
below the EU average, should be formulated and
put in place. These include the education of
farmers through the already existing extension
services and other similar governmental and non-
governmental agencies and financial and
economic measures – detaxation, soft loans and
other measures – aimed at the modernisation of
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the technology used for rapeseed production,
including agricultural mechanisation, storage
facilities, etc.
The main factors affecting the competitiveness and
profitability of biofuel production, aside from its final
cost on the market, are the feedstock costs and the
production process yield. Clearly, to decrease the
unit production costs in Croatia, it would be
necessary to either use a lower-cost feedstock or to
increase the effectiveness of production by carefully
choosing the location of biofuel processing plants
that will utilise modern technologies and processes
with higher yields.
On 14 May 2003, the European Commission (EC)
adopted the biofuels promotion directive that sets
the target for member states of what percentage of
petrol and diesel used for motor transport should be
from renewable sources. The percentage will
increase to reach 5.75% in 2010. The EC will
monitor the Member States, which, if they do not
development.
meet the targets, will have to justify why they have
not. This directive is for sales and not production, so
a country could import biofuels rather than produce
its own biofuels to comply with the directive.
However, to entice sales, Croatia may find that it is
not politically expedient to give tax advantages to
imported biofuels rather than developing a domestic
biofuel industry.
The detaxation directive declares that Member States
will be allowed – but not mandated – to give fiscal
resources to promote biofuels. According to the
directive, detaxation should be proportional to biofuel
content. There should not be overcompensation for
biofuels and support levels should take into
consideration the costs of raw materials.
Having in mind the goal to establish sustainable
biodiesel production in Croatia, it will be necessary
to develop and put in place a stable mechanism of
financial incentives, considering the higher cost of
biofuel compared with mineral diesel. This would
include detaxation, which is also elaborated in this
study and is in line with the described EU legislation.
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The current cost structure of mineral diesel in
Croatia includes value added tax (VAT) of 22%, as
well as excise duty tax. The exemption of biodiesel
from these taxes would result in a direct loss of 73
million kuna (HRK) (approximately €10 million) to
the government. However, the economic output of
the rapeseed biodiesel production chain, together
with the necessary investments in production
capacities and logistics, would contribute directly and
indirectly to additional government revenue.
Depending on the price scenario considered, this
additional revenue would amount to 11, 13 or 15
million HRK respectively, which means that the
relative tax refluxes would amount to 15.1%, 17.8%
or 20.5% respectively.
Additionally, the positive environmental and socio-
economic effects of the biodiesel production chain
cannot be disregarded. These include lower
emissions of carbon dioxide, lower local harmful
emissions, increased air quality, employment
creation, rural development and lower dependence
As on-going development already indicates, further projects,
some of them on a regional basis, could be expected soon.
on imports of fossil oil. Even though these benefits
were not monetarised within this analysis, they
nevertheless should be taken into account when
making decisions regarding the support of biodiesel
production and utilisation.
New Projects
Construction works for building a biodiesel
processing plant in Ozalj started in 2005 and are due
to be finished in early 2006. This plant will be owned
by Modibit. The main sales channel for produced
biodiesel will be Cro Petrol, a private company that
distributes and sells vehicle fuels.
In December 2003, Maziva-Zagreb doo, a part of
INA Group, the Croatian national oil company,
issued a letter of intent to the Croatian government
in which it expressed its readiness to start
preparations for the implementation of the biodiesel
production project as a member of a consortium to
be formed for the realisation of this project. The
proposed production facility, on the location site of
Maziva-Zagreb doo, could be realised with
EUROPEAN RENEWABLE ENERGY REVIEW 2006
Biofuels Industr y About to Star t in Croatia
considerable savings, because Maziva-Zagreb doo
has the resources for biodiesel production, such as
the necessary traffic infrastructure, location,
premises, energy infrastructure, sewerage system,
wastewater treatment, tank area, pumping stations,
laboratories, maintenance, protection control and
human resources.
In 2005, a similar letter of intent was issued from
Tvornica ulja C epin – the largest vegetable oil
producer in Croatia – and this intention was widely
announced via different media channels. In 2002,
this oil factory reported a net profit of 1.24 million
HRK, which should be translated into some
successful improvements in the structure and
management of the company. The company is
placed in an area related to rapeseed growing. Its
manager has stated that Tvornica ulja has prepared
for the complete production of biodiesel, but the
exact timeframe is not known as they are waiting
for the government to deliver on mineral oil excise
exemption and subsidies for growing rapeseed.
Another exciting project is taking shape east of
Croatia, where a group of private investors plan to
establish a large-scale ethanol production facility in
Vukovar on the Danube. They intend to produce
ethanol from maize, not only from Croatia but
also from Serbia, Montenegro, Romania and
Hungary. The proximity of the Danube provides
an excellent transportation route, which makes
this a first-class location and reduces the cost of
transport significantly.
The production and utilisation of biofuels meets
most of the demands and targets outlined in the
national strategy of Croatia, which recommends
adopting an integrated approach to development in
the different sectors of agriculture, energy and
environment. Furthermore, within its integration
process into the EU, Croatia will have to comply
with EU regulations related to security in energy
supply and promotion of biofuels utilisation, as well
as to the reductions of greenhouse gas emissions. As
on-going development already indicates, further
projects, some of them on a regional basis, could be
expected soon. ■
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