Memorandum submitted by the National Farmers'
Union of England and Wales (U20)
1. The NFU welcomes the above enquiry, and
is grateful for the opportunity to give evidence to the Committee.
2. The Committee's enquiry comes against
the background of both the Policy Commission on the Future of
Food and Farming and the DEFRA Strategy for Sustainable Farming
and Food, both of which agreed upon the need for a long-term strategy
for creating and exploiting opportunities in non-food crop uses
as part of a sustainable agriculture. Since then, the Energy White
Paper has also emphasised the potential contribution of crops
as a source of power and transport fuels.
3. Crops have a wide variety of non-food
applications. Crops can replace fossil oils as a source of heat,
transport fuels and electricity. They can also replace fossil
oils as feedstocks for plastics, pharmaceuticals, surfactants,
lubricants and a variety of other industrial materials. This diversity
allows agriculture to access a variety of new markets, and to
reduce its dependence upon the food commodity markets.
4. These various new uses involve crops
as diverse as short rotation coppice (SRC), oilseed rape and botanicals,
and bring with them a wide range of environmental benefits, from
CO2 abatement to end of life disposal. Such diversity should be
reflected in policy decisions. Different applications require
very different policies to encourage them, and attempts to compare
different crops and different uses in order to draw them into
a single cost-benefit analysis have not always proved helpful.
5. This briefing will outline the range
of new uses and the extent to which they are currently used within
the UK. It will outline the benefits of new uses of crops, and
the policy measures needed to promote them. In accordance with
the terms of this enquiry it will particularly emphasise the various
forms of biofuels, although it will refer to other industrial
uses as appropriate. We would be pleased to give further evidence
orally if requested to do so.
CURRENT PRODUCTION
6. Current levels of production of crops
for non-food uses are difficult to estimate, as statistics are
not collated for all crops.
The largest sector at present is industrial
oilseed rape grown for industrial applications, primarily for
biodiesel in continental Europe but also for applications such
as lubricants and slip agents. In 2002 the UK produced around
79,000 ha of industrial oilseed rape. There are also now small
quantities of cereals being exported for bioethanol. A number
of botanicals and herbaceous crops are grown for specialist uses
such as pharmaceuticals, and significant quantities of Crambe
are now being planted for industrial uses[12]It
is thought that there is a total of 1,800 ha of biomass energy
crops (mainly short rotation coppice and miscanthus) currently
planted in the UK, and we understand that there are over 2,000
ha of hemp currently planted in the UK. There are smaller quantities
of crops such as Borage, Camelina and Echium being grown for industrial
uses (perhaps a few hundred hectares of each).
7. What is clear is that there is potential
for a considerable increase in the use of non-food crops if local
markets were stimulated. To produce the equivalent of 2% of the
UK's road transport fuels from biofuels would require something
in the region of 180,000 ha of cereals for bioethanol, and 270,000
ha of rape for biodiesel. The reference target set by the EC biofuels
Directive is 5.75% of all transport fuels by 2010. Whilst imported
fuels and recycled oils could account for some of this requirement,
farm crops remain necessary to meet such a substantial target
(see §20 below), and such a substantial strengthening of
the UK market would be very welcome to the struggling farming
industry.
Industrial, non-energy uses of crops may also
constitute a very large market within 10 years. The European Climate
Change Programme estimates that with appropriate policy measures
the EU's use of biobased polymers might increase 40 times by 2010;
the use of crop derived lubricant could increase 17 times, with
significant increases also in surfactants and solvents. With the
potential for flax and hemp for composite fibres included, this
equates to a potential EU land use of around 2.5 million hectares.
BENEFITS FROM
EXPANDED PRODUCTION
OF CROPS
FOR ALTERNATIVE
USES
8. Biofuels contribute to a number of national
goals at once: they are an effective means of reducing carbon
emissions; they contribute to a more secure supply of fuels; they
provide a support to the troubled rural economy and to UK manufacturing
industry. These benefits also apply to many crop-derived industrial
raw materials, which may also reduce emissions of other climate
changing greenhouse gasses, or reduce the pressure on landfill.
Carbon Dioxide
9. Crops sequester carbon as they grow,
and recycle carbon when used as fuels rather than introducing
new atmospheric carbon from fossil fuels. Biodiesel is known to
make CO2 savings of between 72% and 86%[13]
hen used as a substitute for fossil diesel, with the degree of
savings depending upon the means of production. Bioethanol can
achieve over 60% CO2 savings from conventional feedstocks when
combined heat and power (CHP) is used in its production. Biofuels
therefore offer the only quick and deliverable method of tackling
CO2 emissions in the transport sector.
10. Producing heat and electricity from
biomass has the potential to make still further CO2 savings. Efficient
gasification of woodchip can make CO2 savings of 84% when used
in place of fossil derived electricity, although an excessive
emphasis upon gasification may cause problems for the overall
development of the industry (see §§16, 18 and 20). Small-scale
heat units are inherently efficient, and are more easily deployable
(see §§15-16). Industrial raw materials may also save
carbon in a number of ways. For example, hemp fibres used within
the motor industry require much less energy in their manufacture,
and form a lighter and therefore more fuel-efficient component
of the finished vehicle.
Fuel Security
11. UK can not expect to continue to enjoy
the benefits of sourcing such a large proportion of its fuels
and raw materials from domestic supplies of fossil oils and gasses.
The UK uses 37 million tonnes of fossil fuels for road transport
per year, which use of biofuels can reduce. Furthermore, some
8% -9% of the fossil oils used in the EU are used as feedstocks
for industrial materials, which crop-derived lubricants, plastics
and surfactants can replace.
The Rural Economy
12. Converting an industry to crop-derived
fuels or raw materials benefits the rural economy, by increasing
demand for crops, bringing in new capital revenue, and providing
ongoing employment. Although the precise financial benefits for
the rural economy are difficult to assess, it has been estimated
that for every pound forgone in tax revenues or spent in enabling
grants the rural economy benefits by just over £1.67 for
liquid biofuels and £2.05 for solid biofuels[14]It
is worth pointing out that benefits to the rural economy also
provide an automatic compensation for the exchequer, for example
in higher tax takes elsewhere. A recent German study found that
"summing up the tax return flows and additional social insurance
income, the "compensating performance" of the rape biodiesel
production chain amounts to 73% and 83% respectively of government
revenue shortfalls."[15]
Other Environmental Benefits
13. The UK faces a substantial challenge
in meeting the requirements of the European Waste Directive. Crop-derived
raw materials can make a major contribution in this area. For
instance, the first annual report of the Government/Industry Forum
on Non-Food Uses of Crops makes a number of recommendations on
ways of increasing the use of biodegradable plastic bags manufactured
from domestic from vegetable starch.[16]
WHAT SHOULD
BE DONE
TO ENCOURAGE
PRODUCTION?
14. Fossil fuels have been relatively cheaply
available over recent years, and their supply chains are well
established. Biomass alternatives therefore require appropriate
policy measures to enable them to compete and to gain a foothold
in the market. Perhaps the most immediate question at present
is the assistance that liquid biofuels require, particularly in
the light of the forthcoming EC Biofuels Directive and the recommendations
of the Policy Commission on the Future of Food and Farming. However,
care must be taken to distinguish the different markets that crops
can meet and the different policies required, and we shall first
make some remarks concerning other equally important biofuels
and alternative crop uses.
Support for Heat
15. The Energy White Paper is encouraging
in suggesting that biomass energy is one of the more promising
and potentially cost efficient methods of limiting carbon emissions
in the longer term[17]However,
the paper is marked by a familiar emphasis on electricity, to
the detriment of heat only applications, and this feeds into Government
policy on biomass energy.
16. To date, far greater assistance has
been given to larger, technologically complicated electricity
projects, ahead of smaller, simpler heat or CHP projects. Small-scale
heat projects are inherently efficient, technically simpler and
typically encounter less planning difficulties than larger projects.
Small, dispersed projects may well combine to provide a very significant
proportion of the country's renewable energy if properly encouraged.
Some grant money has now been directed towards smaller heat projects
through the Clear Skies and Bioenergy Capital Grant schemes, although
much less than for larger projects. It is important that more
funding is forthcoming when these grants have been successfully
taken up.
The Renewables Obligation
17. We believe that the loss of confidence
within the biomass electricity sector, and the difficulties of
making biomass electricity economic in the short term, require
radical solutions. We favour a banding of the Renewables Obligation.
Under the Renewables Obligation electricity suppliers must source
10% of their power from renewable sources, or pay a "buyout"
price. However, within the Obligation forms of renewable energy
are left to compete with each other on price. This strongly favours
established and well-funded renewables such as on-shore wind,
and will not sufficiently support the development of other renewable
technologies. A banded Obligation would require suppliers to source
a proportion of their renewable electricity specifically from
biomass and other new renewables, perhaps coupled with a higher
buyout price. Such a measure would give this promising technology
a share of the market and allow for its future development. At
present, developers tell us that they cannot finance new biomass
electricity ventures, and would require additional payments to
offset the cost of buying their fuel.
Co-firing
18. We welcome the decision of the DTI to
consult on the operation of the co-firing regulations within the
Renewables Obligation.
At present, with larger power stations faltering,
there is no ready market for energy crops, and fuel chains are
hard to establish. This creates a "chicken and egg"
situation, as energy crops remain unfamiliar and relatively expensive
and this, coupled with underdeveloped fuel supply chains, makes
new power stations more difficult to finance and operate.
We agree with the principle of providing an
incentive for the co-firing of energy crops with coal, in order
to stimulate the development of energy crops and bring them closer
to the market. Such a development of the crops and the supply
chains they require would then help to address the economic difficulties
referred to above.
However, the timescales and conditions attached
to the co-firing measures in the Renewables Obligation are unrealistic,
and ignore basic facts about the agronomy of energy crops and
the timescale needed to propagate, grow and harvest a profitable
crop. As a result, the co-firing provisions within the Renewable
Obligation have not worked. The Renewables Obligation must be
amended as soon as possible to correct these errors: without change,
co-firing will not be viable at all and a valuable opportunity
will be lost.
Industrial materials
19. A significant obstacle to the development
of crop-derived raw materials is communication along the supply
chain. The NFU and the Alternative Crops Technology Interaction
Network (ACTIN), the University of York, and the DEFRA Central
Science Laboratory are currently working together with DEFRA and
DTI to establish a new non-food crop centre to address this need.
The new body will seek to ensure that manufacturing industry is
aware of the products which are available to it, and that research
and development is in turn guided by the needs of industry. DEFRA
support has been central to this process, and continued backing
is essential. It is a source of some frustration that the development
of this project has taken far too long in gestation, during which
time we have seen other EU countries make advances that have not
been open to the UK.
Liquid biofuels for Transport
20. We are pleased that the Energy White
Paper considers liquid biofuels to be a promising route to a zero
carbon transport system[18]Liquid
biofuels are an effective means of reducing carbon emissions when
used in place of fossil fuels (see §9 above). They can be
used in blends in the existing fleet and represent the fastest
way to substantially reduce CO2 emissions from transport. It is
for this reason that the EU proposes to set all member states
targets for the use of biofuels, up to 5.75% of road transport
fuels by 2010.
Biofuels can be manufactured from a variety
of familiar crops such as cereals, oilseeds and sugar, or from
wastes and tallows. In addition, technology to allow commercial
conversion of lignocellulosic materials such as straw and miscanthus
to bioethanol is under development. All of these materials have
a place, and careful attention should be given to the respective
roles of these various forms of biofuel, and the ways in which
they can compliment each other.
Using wastes and animal tallows can produce
biodiesel whilst reducing disposal costs, and may well be of benefit
to the livestock industry. Such fuels are coming on stream now,
although in limited quantities. In order to safeguard public confidence
in biofuels it is imperative that these fuels meet the highest
standards, and if this is the case they will serve a useful function,
not least in making customers familiar with biofuels. However,
in order to scale-up production, as the EU directive on the promotion
of biofuels requires, substantial production of biofuels from
farm crops will be essential. The technology for producing biofuels
from farm crops is widely available and forms the mainstay of
the large biofuels industries in continental Europe.
In time, biofuels from lignocellulosic crops
will also be available. Such fuels will significantly increase
the ability of the UK to manufacture the required volumes of biofuels
from domestic resources. They will also offer farmers the opportunity
to diversify into biomass crops or to get full value from their
crops by utilising straw[19]We
believe that this technology should be encouraged. However, it
would be a serious mistake to view lignocellulosic technology
as an alternative to conventional technology, and to make progress
on biofuels conditional upon using this particular technology.
This would be to repeat the policy mistakes which have bedevilled
the biomass sector, where developers were forced by the DTI to
adopt new technology at the same time as establishing new supply
chains and developing new markets. This requirement to do several
things at once has made the development of biomass a much more
difficult and faltering process than necessary. Issues of market
development and supply chain management can be addressed immediately,
with conventional, proven technology. With these obstacles overcome
lignocellulosic materials will be readily adopted as the technology
reaches maturity.
With this in mind it is unfortunate that the
Energy White Paper blurs the distinction between these different
fuels. The paper is misleading when, having detailed the 20ppl
duty reductions available for biodiesel and bioethanol, it continues:
"Biofuels are currently made from food crops". Although
this is true of many European and American countries, at the current
duty rates the majority of the UK's biodiesel production is from
recycled cooking oil[20]and
represents a tiny fraction of the UK's transport fuels[21]Further
duty cuts or other financial assistance, such as capital grant
aids as available in some other EU countries, is needed if a substantial
domestic biofuels industry from food crops and lignocellulosic
materials is to be viable. The UK must give industry a strong
signal that it will provide such assistance, and must do so soon,
or it will export a valuable potential industry.
4 March 2003
12 Springdale Crop Synergies, one of the largest exponents
of Crambe, will contract around 20-30 thousand hectares in 2003. Back
13
Evaluation of the comparative energy, global warming and socio-economic
costs and benefits of biodiesel (final report). Resources
Research Unit, Sheffield Hallam University, 2003. Back
14
Evaluation of the comparative energy, global warming and socio-economic
costs and benefits of biodiesel (final report). Resources
Research Unit, Sheffield Hallam University, 2003. The figure for
biodiesel would be higher if area payments were not included as
costs. The continuing move towards decoupled area payments undermines
the validity of including such costs, and suggests that this should
be taken as a very conservative estimate. Back
15
Marcoeconomic evaluation of rape cultivation for biodiesel
production in Germany (preliminary report). Institut fur
Wirtschaftsforschung, Munch 2002. Back
16
Annual report of the Government/Industry Forum on Non-Food
Uses of Crops, DEFRA 2002. Back
17
Energy White Paper, 2003, page 46. Back
18
Energy White Paper, 2003, page 69. Back
19
Conventional biofuels technology also allows for the use of straw
where this is used to provide heat and power for the manufacturing
process. Such use of straw substantially improves the carbon balance
of the fuel. Back
20
See Micheal Meacher's statement in the House of Commons 24 February
2003 (Hansard p 81w). Back
21
The Chancellor's Pre-budget statement 2002 suggested that around
300,000 litres of biodiesel were sold in October 2002, which accounts
for less than 0.01% of the UK's road transport requirements. EU
targets are 2% by 2005 and 5.75% by 2010. Back
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