House of Commons - Environment, Food and Rural Affairs

Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Memorandum submitted by the Department for Environment, Food and Rural Affairs

BACKGROUND

1. Defra supports the development of non-food crops which can provide renewable raw materials for energy and industry. This activity contributes to the Department's aim of sustainable development by promoting environmental improvement and economic prosperity through sustainable farming and the prudent use of natural resources. These crops can help promote a diverse, modern and adaptable farming and create jobs in rural areas and new income opportunities in and linked to farming. Crops for the energy sector contribute to renewable electricity targets and to climate change targets through reductions in greenhouse gas emissions. Energy crops can also contribute to biodiversity.

2. This Memorandum incorporates the views of the Forestry Commission because of the close relationship between the policies of Defra and the Forestry Commission, especially on bioenergy. The Government's England Forestry Strategy[1] recognises forestry's role in the wider countryside. It focuses on both the role of new woodlands and on how existing woodlands can be managed to deliver more benefits to local communities and the economy through creating jobs and improving the local environment. One of the Strategies four programmes (Forestry for Rural Development) includes a commitment to increasing the use of woodfuel and short rotation coppice as renewable sources of energy. The Forestry Commission's response to the 2002 review of the management of existing woodlands[2] recognised the opportunity for the use of wood as a fuel.

3. Following the inquiry into non-food crops by the House of Lords Select Committee on Science and Technology in 1999 the Government/Industry Forum on the Non-Food Uses of Crops was set up to provide strategic advice on the development of the sector. The Sustainable Farming and Food Strategy recognises the need for farming to reconnect with the market and underlines the Government's commitment to extending the competitive non-food uses of crops through a long-term strategy for creating and exploiting opportunities for these crops. Non-food, including biomass, crops are seen as one way in which rural communities can adapt and develop new opportunities through diversification within farming.

EXTENT OF CULTIVATION IN UK

4. The following table shows data on UK crops grown in 2002. The data are not comprehensive. Non-food crops grown on set-aside land can be readily identified but not those grown on other land types.

Crop Area (ha.)

Oilseed rape (1) 50,180

High erucic acid oilseed rape (2) 13,585

Linseed 730

Short rotation coppice and miscanthus 1,795

Forest material (3) 2,803,000.

Flax and hemp 4,039

Other non-food crops (4) 2,954

Essential oils and herbs (5) 809

Notes:

(1) Figures show oilseeds grown on set-aside land only.

(2) Grown to produce erucamide, a slip agent in plastic films, lubricants and industrial oils.

(3) Can be used in conjunction with short rotation coppice.

(4) Primarily crambe 1,170ha., oat 493 ha., triticale 476 ha., papaver somniferum 466 ha. and chamomile 297 ha.

(5) Crops receive no support payments.

5. Mainstream crops such as wheat and oilseed rape used for non-food applications will compete directly with food crops. Substituting 5% of transport fuels with biofuels could utilise 800,000—1m ha. of land. The Energy Crops Scheme has funding to plant around 20,000 ha. of crops. Speciality crops are inevitably higher value and would be well placed to displace mainstream crops although these applications are inevitably market driven. Their high value makes them vulnerable to a boom and bust approach and to changing trends in end uses.

6. Figures for woodlands in Great Britain are:

Conifers Broadleaved species Total

Forestry Commission

England 156,000 50,000 206,000

GB 708,000 86,000 794,000

Other

England 215,000 682,000 898,000

GB 882,000 1,040,000 1,922,000

All woodland

England 371,000 733,000 1,104,000

GB 1,591,000 1,126,000 2,716,000

Source: Forestry Facts and Figures 2002.

The amount becoming available to replace fossil fuels is dependent on growth rates, local environmental constraints and market prices in traditional markets. A joint study (funded by DTI, Scottish Enterprise, Welsh Development Agency, the Forestry Commission, and the forest industry) to quantify the potential woodfuel resource should be completed by the end of May.

CAP SUPPORT AND MTR PROPOSALS

7. At present, non-food and energy crops can be grown on set-aside land and growers receive area payments. Key elements of the CAP reform proposals are the decoupling of subsidies from production through a single income payment and reinforcement of the emphasis on rural development. These proposals link well to the themes of the Sustainable Farming and Food Strategy and are a positive step in the reform process.

8. Proposals from the European Commission include an obligation on producers to set-aside 10% of land for 10 years to deliver environmental benefit. Land would be uncropped, non-rotational and without the existing derogation for non-food crops. Set-aside was originally introduced as a supply control measure but as markets are brought into better balance and with a decoupled single income payment the case for such a mechanism is weakened. The proposals have significant implications for non-food crops. These crops would qualify for aid under the single income payment system.

9. Returns to farmers will need to be sufficient to compete with the established food and animal feed markets which currently offer higher prices. The Commission has proposed a new carbon credit aid to provide an additional financial incentive for energy crops but there are no proposals for additional support for the other non-food crops. The energy crops payment would be limited to 15mha. across the Community. We have a number of detailed concerns about the treatment of energy crops such as the need for transitional arrangement for pioneering growers who have short rotation coppice and miscanthus planted on set-aside land.

BENEFITS FROM EXPANSION

10. New economic activity from the expansion of non-food crops will protect and create jobs in farming and in the industries associated with farming. There will be linked industrial development and employment. Examples include the supply of planting material for energy crops, the production of energy and fuel and the transportation of fuel. In the hemp sector fibre extracted in the UK is transported for use in the car industry in Germany.

11. Benefits of forest expansion for alternative end uses are similar to the economic, social and environmental benefits for forestry in general. However, growth rates on land suited to forestry as opposed to more productive crops are likely to be slow and benefits accrue in the medium to long term rather than in the short term. Expansion contributes to the broad objectives of the England Forestry Strategy which are prudent use of natural resources, economic growth and employment. The development of biomass energy could also utilise forest residues, thinnings and small roundwood produced from existing woodlands and help deliver the Government's forestry objectives set out in the England Forestry Strategy. The development of the woodfuel market would support and improve woodland management and deliver biodiversity, landscape and economic benefits to rural areas.

12. The potential of non-food crops to deliver sustainable development benefits is significant. Providing a better quality life now and for generations to come can be aided through the substitution of fossil-based fuels and raw materials with renewable materials from agriculture and forestry. The delivery of environmental benefit can help achieve current Kyoto targets for emission reductions, the Energy White Paper goal to reduce carbon dioxide emissions by 60% by about 2050 and the aspiration to deliver 20% of electricity from renewable sources by 2020. New commercial opportunities help create economic prosperity and the use of non-food crops as feedstocks for industry and energy will increasingly meet the requirements of consumers demanding more environmentally sustainable products. There are opportunities for innovation where the Government wishes to play a leading role. Genomics and GM technology offer new opportunities to use plants as factories to make products for public benefit. The UK has made a significant investment in both these technologies and is a world leader. New non-food crops developed by GM technology are not expected in the short or medium term. However GM varieties of oilseed rape, beet and potatoes which may offer farmers economic advantages over conventional varieties when grown for non-food uses are currently under consideration for approval for the European market. The Government is currently sponsoring a GM public dialogue to explore the full range of issues surrounding the possible use of this technology. Any proposed trial or commercial use of a GM non-food crop will have to be considered in line with the EU Directive on the release of GMOs. This specifies a pre-release statutory approval process, based on an assessment of the potential risks to human health or the environment.

13. Non-food crops can have environmental impacts. For biomass, the Energy Crops Scheme incorporates a rigorous assessment of impacts and consultation with environmental organisations and others for each application for establishment grant. Landscape, soil erosion and water demand are amongst the issues considered. Short rotation coppice and miscanthus are low input crops which deliver biodiversity benefits. Inappropriate woodland expansion and poor management can cause environmental problems but grant support to the private sector (where most new planting occurs) is subject to the Government's UK Forestry Standard[3] and its associated guidelines that promote good practice.

14. Biofuels (biodiesel and bioethanol) can deliver greenhouse gas and economic benefits. Rape oil can also be used to produce biodegradable lubricants and hydraulic fluids for use in sensitive environments. There could be concerns about the visual impact of a significant expansion of oilseed rape. The claimed adverse effects of oilseed rape cultivation on human health were reviewed by the Medical Research Council in 1998. General allergy to rape pollen is uncommon, even in areas of intense production, and is more commonly associated with individuals with multiple sensitivities.

15. In considering the development of this sector the Non-Food Crops Forum looked at sustainable development and concluded that economic viability is a fundamental essential. Products must also reduce or remove adverse environmental impact and confer benefits on society and benefit the technologies in use. In order to address the issue of sustainability the Forum defined the economic, environmental and social issues which need to be considered when alternative, non-food, options are being considered. The Forum made the underlying assumption that renewable resources are produced in a way which is environmentally sustainable but recognised that this would need to be fully assessed in any comparative environmental evaluation of the alternatives.

ENCOURAGEMENT OF PRODUCTION

16. The Government is keen to support agricultural diversification and the development of new market opportunities which can deliver environmental, social and economic benefit. For biofuels, the duty rate on biodiesel was reduced by 20p/litre compared to ultra-low sulphur diesel in Budget 2002 and about 100 forecourts are now retailing biodiesel (about 400,000 litres/month) produced from waste oil. The Pre-Budget Report in November 2002 announced the intention to introduce a 20p/litre cut in duty on bioethanol compared to ultra-low sulphur petrol. Support to develop lignocellulosic bioethanol is being considered, given the potential to deliver environmental benefit at lower cost. Emerging lessons from the Canadian bioethanol pilot plant using softwood will be taken into account.

17. Environmental benefits, including those delivered through the Climate Change Programme, have to be considered in relation to the cost to the taxpayer of achieving them. The use of fiscal incentives depends on sound evidence of environmental benefits. In the Powering Future Vehicles Strategy the Government explained that transport taxation will be kept under review and that it will look at taxation policy options to incentivise further the use and development of both low carbon vehicles and fuels. We expect the EU Biofuels Directive to require Member States to set indicative targets, 2% by 2005 and 5.75% by 2010, for the introduction of biofuels. Member States will be expected to justify any departure from these targets.

18. The Energy White Paper identified the potential for biofuels to provide up to 5% of total fuel use by 2020. The White Paper looks beyond present biofuel production technologies, to the prospective new methods of producing liquid and gas fuels from woody and waste biomass materials, using lignocellulosic digestion or gasification technologies. The input materials for these processes could be grown on a wider range of land types. Research carried out for the Government[4] as a contribution to the White Paper explored these future possibilities, and by way of illustration, assessed that an area equal to 25% of the UK agricultural land, planted with indigenous wood crops could in the long term supply "most or even all" UK road transport fuel demand—subject to continued technology progress.

19. The Energy White Paper, looking ahead to the long-term options for shifting to "zero-carbon transportation", identified both the possibility of hydrogen used to power fuel cell vehicles, and also the possibility of large-scale production and use of biomass-based fuels. The Paper noted that both would have major implications for the demand and supply of the input material for the respective fuels, and for fuel production. And the Government is, over the next year, to carry out an assessment of these scenarios.

20. Biomass (energy crops and forest material) and biomass-derived waste can be used in electricity, heat, combined heat and power applications and potentially in the production of biofuels. Support for energy crops was initially thorough the Woodland Grant Scheme but the Energy Crops Scheme (ECS), part of the England Rural Development Programme, was introduced in October 2000 with funding of £29 million. The Scheme provides establishment grants for short-rotation coppice and miscanthus and support for the establishment of producer groups for short-rotation coppice growers. It is expected that end users will have a diverse fuel supply incorporating purpose grown energy crops, forestry woodfuel, sawmill co-products and wastes. Existing woodfuel can be secured in long-term contracts and can fill the supply gap whilst energy crops are developed. Energy crops can be sited closer to end uses, enhancing environmental benefit. The use of forestry woodfuel also helps to meet the Government's objectives set out in the England Forestry Strategy to improve the management, biodiversity and landscape value of England's woodlands.

21. To date there has been limited uptake of the ECS. Development of projects under the Non-Fossil Fuel Obligation has been patchy. Market factors linked to the New Electricity Trading Arrangements and the Renewables Obligation have made it difficult for biomass to compete. Co-firing of biomass with coal has not developed and rules in respect of the proportion of energy crops to be utilised are to be reviewed. CAP reform has introduced uncertainty for plantings this year. Over the last decade total woodland planting funded by the Woodland Grant Scheme, through which the Forestry Commission provides grant aid for new woodland creation and the management of existing woodlands, and the Farm Woodland Premium Scheme in Great Britain has averaged 19,000 ha. per annum; in England 5,000 ha. per annum have been in the private sector and about 500 ha. in the public sector. Further expansion is hindered by low timber prices over the last five-seven years (due to the strong currency and cheap imports), insufficient evidence of the development of non-timber markets, and incentives to reuse or recycle wood products.

30. Polylactic acid (PLA), marketed under the trademark name of NatureWorks PLA, is a polymer derived from the carbon in plant starches, predominantly maize, which can be manufactured into a variety of plastics used to form everyday products such as food packaging and clothing. It is claimed that the product requires 50% less fossil resources and generates 15-60% less greenhouse gases than traditional petroleum-based plastics. PLA products are biodegradable. NatureWorks PLA has been developed to commercial production by Cargill Dow LLC, a joint venture between Cargill Incorporated and The Dow Chemical Company.

31. While the technology to create PLA was widely known the unique approach here was to perfect the polymer to enable it to compete commercially with traditional materials, both on cost and on performance, thereby ensuring the market viability of their product. Research and development efforts are continuing to perfect the commercial grades of the polymer to meet specific applications and industry needs. A world-scale manufacturing plant was opened in April 2002 to satisfy expected demand. A recent $2.4 million grant from US Department of Energy is being used for continued research and development of the fermentation process. The aim is to widen the range of plants from which the polymer can be produced so that the technology can be adapted to regional variations in crop production to enable manufacture around the world using, for example, sugar beet in the UK.

32. Non-food uses of starch include use in paper, textile, pharmaceutical and packaging industries. It can also be fermented into ethanol. Starch is mainly derived from cereals and potato and the EU produced 8.4 million tonnes in 2000, of which 4.5 million tonnes went to non-food uses. Quota arrangements which have, to date, excluded the UK would change under CAP reform proposals. This may open up markets for UK farmers to exploit at a time when new products, biodegradable starch-based packaging for food products, are developing.

33. Willow coppice has been grown in Sweden since the mid 1970s and around 15,000 ha. go to energy uses. District heating systems make the conversion of boiler systems to woodfuel relatively easy. Organisation of fuel supply is undertaken by the Federation of Swedish Farmers Co-operatives which guarantees long-term stability for woodfuel delivery to processors and utility operators. Short rotation coppice is available from December to March. Co-operation with forestry companies ensures the availability of alternative fuel supplies at other times of the year.

34. In Denmark wood provides around 28% of the total production of renewable energy. Approximately 33% of the total wood harvested is used for direct energy production. This is a result of government regulation and incentives since 1976 but particularly in the last decade. As with Sweden, district heating is common and 60% of all homes are connected to such systems.

35. Austria began to develop a biodiesel industry following the fuel supply crisis of the 1970s. This was based on oilseed rape and sunflower oil and later extended to the utilisation of waste oils. Development aimed to increase security of supply and reduce the environmental impact of transport fuels and health risks. Current production capacity is around 70,000 tonnes with further capacity of 100,000 tonnes in prospect. Zero duty rates are applied to make biodiesel competitive. The Austrian Biofuels Institute acts as a focus for development, engine testing, market analysis and standard setting to underpin consumer confidence.

36. German car manufacturers pioneered the use of reinforced composites based on natural fibres and vehicles use up to 5kg of fibre with the potential to double that figure. Natural fibres are now used by Mercedes, BMW, VW, Fiat, Ford, Opel, Peugeot, Renault and Volvo. These fibres give equal or better performance than traditional glass fibres. They reduce final product weight by 15%, increase fuel economy and remove the risk of skin irritation and respiratory problems for workers. Manufacturing energy consumption is reduced. 28,000 tonnes of flax and hemp fibre are used annually, primarily flax fibre, with most of the hemp being sourced from the UK. There is potential to increase this to over 175,000 tonnes. Fibre crops can diversify UK agriculture and both hemp and flax have multiple uses, hemp, for example, in cosmetics, clothing and horse bedding. EU aid, which currently favours the production of fibre for traditional industries at the expense of the short fibre preferred by the new technical fibre markets, will be reviewed in 2005-06.

March 2003

1 England Forestry Strategy. A New Focus for England's Woodlands. Strategic Priorities and Programmes. Forestry Commission, 1998. Back

2 Sustaining England's Woodlands Response of the Forestry Commission to the Steering Group's Report. Forestry Commission, 2001. Back

3 The UK Forestry Standard. Forestry Commission. 1998. Back

4 "Fuelling Road Transport-Implications for Energy Policy", November 2002, Nick Eyre, Malcolm Fergusson, Richard Mills.

22. The Government has committed £66 million to market development for energy crops and biomass through the Bio-energy Capital Grants Scheme, £10 million through a scheme aimed at communities and households and £3.5 million to develop fuel supply infrastructure. Developments linked to the Countryside Agency's Community Renewables Initiative demonstrate that the biomass heat sector is now viable. The Energy White Paper shows that biomass could be one of the most significant contributors to the renewables generation mix in 2020.

23. The Government-Industry Forum on Non-Food Uses of Crops was set up in March 2001 to provide strategic advice to Government and industry on how to promote development in the UK of the other non-food crops. The Forum is tasked to keep under review technological developments and market opportunities for non-food uses of crops and to make recommendation on policy and R&D priorities. The Forum identified and developed a number of key areas as case studies including biopackaging, natural fibres in composite materials, secondary wheat products, biosolvents in the printing industry, speciality chemicals, essential oils, plant oil lubricants for chainsaws, outboard motors and hydraulic operations, natural dyes, biofuels for the transport industry (biodiesel, bioethanol) and adding value to wool.

24. The Forum has looked at generic issues such as the long-term sustainability of the use of renewable resources. It has also considered the potential role that bioscience can play in the development of non-food crops, the compatibility of renewable resources with current drives to recycle and the influence of existing marketing arrangements such as the Common Agricultural Policy, on adoption by industry of plant-based raw materials. The Forum has also jointly funded a review of the potential primary and secondary extractives from the main tree species in Britain.

25. In line with the Sustainable Farming and Food Strategy and the Foresight report on unlocking the potential of non-food crops, a new Non-Food Crops Centre is being established with Government support to bring fresh impetus and to drive forward innovation in this area. The new Centre represents a merger of existing activities of the Alternative Crops Technology Interaction Network (ACTIN) and the Plant Protein Club (University of York). The Centre will work with Defra's Central Science Laboratory and University of York's Centre for Novel Agricultural Products.

26. The Centre will facilitate technology transfer of R&D in the non-food area with the aim of increasing use of renewable raw materials by industry. It will create effective networks linking academic, government, commercial and industrial non-food activities in UK and will facilitate and advise on collaborations for research and demonstration activities. It will manage a central database of contacts and activities in UK in the non-food area and operate information and promotion services.

27. A demonstration projects scheme for non-food crops applications is being considered by Defra and DTI, building on commissioned strategic and applied research. There are pressures on industry to develop environmentally sustainable practices, for example as an alternative to the use of volatile organic compounds. Demonstration projects could address risk, show potential and help provide an incentive to change. Projects would integrate the whole supply chain from producer to end-user, demonstrate the effectiveness of the technology and encourage uptake. The Non-Food Forum has identified examples where there is a need to demonstrate the capability of plant-based raw materials in specific applications, for example the use of bio-based cleaning materials across the printing industry.

28. Defra spends up to £2m per annum on pre-competitive research and development and LINK programmes underpinning the non-food crops sector. In the bioenergy sector work concentrates on short rotation coppice and perennial grasses. The emphasis is on crop improvement, crop establishment, soil management and the development of integrated crop protection strategies. Renewable raw materials work is market-led and has an emphasis on delivering materials which support sustainable production and consumption. This has included the development of fibre crops in relation to industry requirements, biological pesticides and extraction technologies for plant-derived dyes. A number of other pieces of work have been commissioned for the Forum including a study of the agronomic potential of the UK for production of non-food crops, an analysis of government policies, public research programmes and private sector strategies to support non-food use of crops, and opportunities for sustainable substitution of non-renewable materials with materials derived from agricultural crops.