Global biofuel production is big business. Last week the Malaysian government approved 75 biodiesel projects with a total planned capital investment of almost 1.5bn.

Also last week, Finnish refiner Neste Oil said it intends to spend an additional 100m to build a second biorefinery and aims to become the world's biggest biodiesel producer. Within the next 10 years it plans to invest 2bn in new biodiesel facilities and associated research and development.

When Minister for Finance Brian Cowen revealed his budget last Wednesday, many in what is still a nascent Irish industry were waiting for additional incentives that would provide a real fillip to production and to investment in the sector. They wanted confirmation that the government is serious about decreasing dependency on oil and gas.

They didn't get it.

Dozens of new companies have sprung up in the past 18 months hoping to stake their claim in the biofuel sector, but many found little to impress them.

Cowen set aside an additional 270m to buy carbon credits up to 2013 and deepened the pool of money available to home owners to install 'green' measures such as solar panels and biomass fuel burners. Additional grants of 80 per hectare were given to growers of willow and miscanthus, commonly known as elephant grass. The EU already offers 45 per hectare.

But ultimately, say external observers and those in the industry, the government has missed a big opportunity.

"There were some helpful developments, but it really displayed a lack of vision, " said PJ Henehan, a tax partner with Ernst & Young with expertise in renewable and green energy.

"Cowen made a small amount of progress but there's a lot more he could do."

Others agree. Two umbrella groups . . .the Irish Bioenergy Association and the Green Energy Growers' Association . . .both expressed dismay last week at the failure to initiate longer-term solutions to an intensifying global energy problem.

Cowen made reference more than once during his speech to the 205m excise derogation for biofuels.

While it was presented as a new initiative, that derogation was actually allocated earlier in the year. Many companies that didn't receive a derogation allocation are unable to proceed with production as it's financially unviable to do so unless tax breaks are in place.

Meanwhile, ethanol as well as wood pellets to fuel grant-aided domestic burners, continue to be imported.

"The government has upped its target for using biofuels, but the target is being met by importing the fuel, " claims Vicky Heslop, president of the Irish Bioenergy Association, and who also operates a biogas production facility on her farm in Waterford.

"It's been a very disappointing Budget from our perspective. We wanted to see a long term vision, but there doesn't seem to be an understanding of what's needed to help an indigenous biofuel supply chain grow in Ireland."

The sentiments are echoed by Kilkenny Cereals founder Michael Prendergast. The company will produce about 600,000 litres of plant oil this year, while it has the capacity to manufacture double that. He won't though, because it only received an excise derogation for 600,000 litres.

"The whole thing is a mess. The left hand doesn't seem to know what the right hand is doing, " said Prendergast, who called for a separate department to be established to deal with renewable energy. He claimed that there is not currently enough capacity to crush all the rape seed being produced, as some projects that had hoped for excise derogation and didn't receive it, have not come on line.

"I don't think the government is in touch with reality, " added Prendergast, who claimed there is a significant number of farmers trying to get involved in the biofuel industry, but that the necessary incentives and support structure still doesn't exist.

But the budget is about more than addressing the needs of biofuel producers. The government is also beginning a public consultation on how both vehicle registration tax and motor tax can be altered to reflect engine size, but also a vehicle's CO2 emissions.

It is also mindful that both taxes bring in significant revenue . . . motor tax will account for an estimated 870m this year; VRT, 1.15bn in 2005, and as such wants any new proposals to be revenue neutral for the state's coffers.

The VRT rates for electrically powered vehicles will be reduced by 50% on a one-year pilot basis. Apart from perhaps promoting a comeback in electric milk floats, that particular scheme is unlikely to have any real impact.

A new mandatory labelling system will also be introduced to highlight a vehicle's carbon emission levels.

Ann Kehoe, national director of the Green Energy Growers' Association, accused the government of not having thought through its plans. She claimed that her organisation receives numerous and regular calls from households that have installed wood pellet boilers under the government's grant scheme, but that they now find it difficult to source the pellets. Kehoe said that's because no thought has been given by the government to creating an appropriate supply chain.

"If the government continues to do what it's doing, without looking at the whole picture, people are going to get turned off, " said Kehoe.

"There's so much more the government could be doing instead of just spending money on carbon credits. If that 270m was invested in the biofuel and renewable sector, it would have a far greater long-term benefit and be far better value for money."

The cost of engaging in renewable energy projects such as wind farms has also soared. It's been some time since it has been a cottage industry in Ireland and the significant capital investment required makes it a daunting prospect for new entrants, despite tax relief that's available.

But another example of oversight: relief is available for solar, wind, biomass and hydro projects. Not a mention of tidal energy, for example.

It seems the renewable sector will have to wait another year to see if the government can come up with some innovative thinking to address what in voters' minds is becoming an a major issue.

BIOFUEL BUDGET: WHAT WAS ANNOUNCED AND WHAT IT MEANS

BIOFUELS Announced Status 205m excise duty derogation for biofuels Had been introduced and allocated earlier in the year 80 per hectare grant for willow and miscanthus Adds to 45 per hectare grant available from EU DOMESTIC 50% reduction in VRT for electric cars 50% reduction for some hyrbrid cars already in place A review of VRT to be carbon-focused Changes must be revenue-neutral, in short-term at least Review of motor tax to be carbon-focused Changes must also be revenue-neutral Additional 20m for green home scheme to 2009 10,000 grant applications already received CORPORATE 3m allocated to help SMEs assess energy usage 4m additional spend on commercial biofuel scheme Will now include entities such as community centres Corporate tax relief for renewable extended to 2011 Introduced in 1998 GLOBAL 270m spend on carbon credits to 2013 20m set aside in last budget