Select Committee on Environmental Audit Appendices to the Minutes of Evidence


Memorandum from Cargill Plc


  Cargill welcomes the opportunity to submit evidence to the Environmental Audit Committee's inquiry into the Performance and Innovation Unit's Energy Review. As one of the largest potential producers of biodiesel in the UK, we believe that the UK agricultural industry can quickly produce enough oilseed rape to supply some 2 per cent of the UK's total diesel requirement, by using suitable set aside land, and, more importantly, land currently used to grow wheat not needed for the domestic market. The Energy Review's final report is somewhat sceptical about the potential of the UK biodiesel industry to supply road transport fuel. We consider that the PIU has not fully understood the issues and therefore has reached the wrong conclusions. We address these failings in this submission.


  Cargill welcomes the delayed publication of the Performance and Innovation Unit's Energy Review, but are disappointed that more attention has not been paid to biodiesel and other road transport fuels in the report. The road transport sector already accounts for a sizeable proportion of UK energy use, and, as the most recent edition of DTI Energy Trends shows, indigenous production of primary fuels continues to fall whilst our demand for road transport fuels continues to rise. The draft government strategy for "Powering Future Vehicles" states that "road transport is the third largest source of greenhouse gas emissions in the UK and currently accounts for about 22 per cent of total emissions of carbon dioxide. Emissions from the transport sector as a whole are forecast to continue rising in the future" (DTLR, DTI, DEFRA, HMT: Powering Future Vehicles, December 2001: p 12).

  A proper analysis of the UK's current and future road transport needs is, therefore, essential to any future energy policy that may emerge. The general environmental case for biodiesel is strong, and we believe it has a vital role to play in satisfying the UK's future transport energy needs. Many stakeholders have joined us in this call, including the European Commission with its recent proposal to increase the use of biodiesel throughout the European Union.

  The PIU's criticisms of biodiesel can ultimately be reduced to two points:

    —  the report argues that the UK will be unable to produce sufficient biodisel domestically on account of the absence of an appropriate industrial structure. Therefore, the report concludes, the UK would be forced to import the fuel in the medium term. To quote the report's authors;

    "liquid biofuels may have a role in achieving significant CO2 emissions . . . but international efforts are needed to develop these technologies. (In the UK) biofuel might be available from indigenous sources, but only in significant amounts if the manufacture of ethanol from woody fuels is successfully developed. Even then domestic supply is likely to meet only a fraction of likely demand, and the development of a large biofuel import market would be required."

    —  not enough land is available in the UK for the growing of energy crops. Even if there was industrial capacity for biodiesel production, the UK would be forced to import the crops to produce it. The report states;

    "In the short term, the use of biofuels in transport is constrained by the availability of suitable agricultural land, crop yield and the demand for biomass for other uses. From UK production, biofuels could provide niche markets and contribute to wider markets, but are unlikely to supply most UK road transport fuel."

  We do not believe either of these points to be accurate, and refute them in turn below:

The UK will be able to produce sufficient biodiesel from domestic sources

  Cargill have stressed on a number of occasions that a strong UK biodiesel industry would quickly develop if the tax regime improved. We have constantly argued and can demonstrate that a further reduction in the duty rate for biodiesel would enable a domestic, UK-based industry to develop. The fact that a company like Cargill is willing to consider biodiesel production in the UK—if the excise duty regime becomes more conducive—shows that we believe that a domestic biodiesel industry could flourish in the UK in the short-term. We agree with David Jamieson MP that the UK should be "a world leader in biofuel technologies", but underline that this will only happen if a lower duty rate is introduced. Many other countries have very successful biodiesel industries and the fuel has been taken up strongly. Strong biodiesel industries already exist in Germany, Austria and Italy, all of which provide appropriate tax incentives for environmental reasons. Germany and Austria have no tax and no quotas on biodiesel production, whilst Italy does not apply tax, but imposes quotas on production.

  Biodiesel requires no expensive conversion costs (fuel cells and gas-based fuels require extensive vehicle modification and refuelling infrastructure provision—the fact that the Government heralds each new LPG plant is indicative of this, especially when existing petrol stations could be used for biodiesel). Immediate action needs to be taken both the guarantee security of energy supply and reduce carbon emissions. A UK biodiesel industry would allow us to work towards these ends now, rather than at some point in the distant future. As the European Commission stated in its communication on alternative road transport fuels, "Biofuels are for the short and medium term the only option, therefore launching the appropriate policy instruments to promote the introduction of biofuels will give a clear signal that the Community is serious about developing alternatives to petroleum products in transportation" (European Commission Communication on alternative fuels for road transportation 2001: p 13).

Enough farmland is available in the UK for the energy crops needed to produce biodiesel

  The recent report published by Sir Donald Curry's Policy Commission on Food and Farming reached a different conclusion than the Energy Review on farmland available for biodiesel production. The report notes that alternative corps offer "a very important potential new market for farmers" (Policy Commission on Food and Farming report: p 54). The Policy Commission is convinced that the problem does not lie in the lack of available farmland, but in the current duty rate levied on the fuel: "We are concerned that there are still potential blockages. We therefore recommend that the Government should reduce duty on biofuels to that charged on other clean fuels. We believe this will help convince processors to drive the market forward" (Policy Commission on Food and Farming: p 55).

  A number of other organisations have also stated that energy crops for biodiesel could provide a much-needed boost to the beleaguered UK agricultural industry, still struggling to recover from the Foot and Mouth Disease crisis. The National Farmer's Union remains a strong supporter of the UK biodiesel sector, and has urged the Government to reduce the duty rate charged on the fuel further.

  Cargill has undertaken thorough research into the potential size of the UK oilseed rape sector, and intend to produce our biodiesel from domestically grown oilseed rape crops. Our tight production schedule reflects this. Commercial decisions are based on the commissioning of the necessary crops this year to allow the biodiesel to be produced next year. Indeed, we have written to ministers in the past stressing that we need an early indication of the Government's intention to reduce the duty rate on biodiesel to enable us to make these necessary commercial decisions.

  Furthermore, a domestic biodiesel industry could provide a significant economic opportunity for the UK. The development of a UK biodiesel industry would provide extra employment in the biodiesel-processing sector, and would have a significant knock-on effect in many feeder industries.


  Cargill believes that the biodiesel industry presents the Government with a significant opportunity to provide a much-needed boost to agriculture, industry and the environment. We urge the Chancellor to provide an early indication in his next Budget of his intention to reduce the duty rate for biodiesel further, ideally by 15p to 10p per litre. This would allow a commercially viable UK biodiesel industry to develop.

March 2002

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