By Nigel Hunt and Michael Hogan - Analysis
LONDON/HAMBURG (Reuters) - The outlook for the European Union's bioethanol industry looks brighter in 2010 after a bleak couple of years but biodiesel remains dogged by overcapacity and producers face a grim struggle to stay afloat.
The European Union has been expanding the use of the two major biofuels as it seeks to cut emissions of the greenhouse gases which contribute to climate change.
But a political backlash, driven partly by accusations the growth of biofuels had helped to drive up food prices, has led some member states to scale-back support.
Industry sources said, however, the political mood has started to become more favorable again, demand is expected to grow in 2010 and two massive bioethanol refineries are due to come on line in the first half of the year.
"I think we've had the worst," said Rob Vierhout, secretary general of the European Bioethanol Fuel Association.
"I think we are seeing now a change in the tide and it will slowly come back to the old idea that we need biofuels to achieve our targets for 2020," he added.
Bioethanol, which is produced mainly from sugar and grain crops, is a substitute for petroleum. Vegetable oil, tallow and recycled cooking oil are used as produce diesel substitute biodiesel.
In north-east England, Ensus is bringing on line Europe's largest biorefinery which will use 1.1 million tonnes of wheat to produce 400-450 million liters of bioethanol.
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