Farm level and budgetary calculations on production of turnip rapeseed oil-methyl-ester (RME) for fuel of diesel engines

Abstract

This paper calculates the production costs of turnip rapeseed oil-methyl-ester (RME) as a substitute for diesel fuel. Theoretical farm models, which assume that compulsory fallowing area might be used for cultivating turnip rapeseed, provide the estimated short term production costs. The necessary government support for producing RME is calculated based on the difference between the production costs of RME against the taxfree wholesale price for diesel oil. In 1990 prices, a producer price of 1.70FIM/kg for turnip rapeseed means production costs of RME are approximately 4.28 FIM/1, or five and a half times higher than the taxfree wholesale price of diesel oil. When the realized producer price in 1990 of 4.12 FIM/kg is used, the RME production costs are 9.98 FIM/1. Thus, there is no economic basis for RME production in Finland.