Supplementary memorandum from the British
Association of Biofuels and Oils (BABFO)
We hope the following points may be helpful
to members in discussions with John Healey MP on Wednesday 17
September.
1. The EU has set a guideline of 2% road
transport to be biofuelled by December 2005 and 5.75% by December
2010. It is mandatory that each member state sets their own target
and submits this to the EU by July 2004. ( In writing to Rt Hon
Gillian Shephard MP on 5 August, John Healey mistakenly said the
submission date was July 2005).
2. The UK uses about 35 million tonnes of
petrol and diesel annually. 2% of this is 700,000 tonnes. A 30p/litre
fuel duty rebate on this tonnage would cost only about 0.75p/litre
on the remaining fossil fuel on the principle that the polluter
should pay. (Note however that not all fuel is subject to full
fuel duty).
3. Present UK production of biodiesel is
less than 10,000 tonnes pa. There is no bioethanol production
for road use (only potable alcohol mainly for gin and whisky).
4. Germany, France, Spain and Italy are
the main EU biofuels producers with production last year well
in excess of one million tonnes and capacity coming on stream
to greatly increase this. German capacity alone is now close to
one million tonnes of biodiesel.
At 2% incorporation, the EU biofuels market
will be about 10 million tonnes annually for existing members.
5. For the UK not to appear laggard and
incompetent, there will have to be a major investment in processing
plant and a shift in cropping patterns. (Talk of ligno-cellulose
ie wood and grass biomass as a bioethanol source is currently
economically impractical. There is no known way of getting alcohol
from wood other than at high cost. Road fuel from wood is likely
to involve not just a 100% fuel duty rebate but a subsidy as well.
The IOGEN process uses enzymes on by-product straw, of which there
are about five million tonnes annually, but this is not yet proven
commercially and unlikely to be on stream in quantity for some
years).
6. Curtailing wheat exports and utilising
land currently set aside could result in feedstock for close to
two million tonnes of biofuels (half biodiesel and half bioethanol).
7. Existing crops and technology are, at
present, the only practical possibility. For crops to be harvested
in time for processing by the end of 2005, they must be planted
in Autumn 2004 and planned well before that.
8. The fossil road gas fuels LPG & CNG
have a rebate of about 40p/litre. These fuels are generally environmentally
inferior to the biofuels but have twice the rebate.
9. The Treasury have been loath to explain
how the 40ppl rebate for gas has been arrived at. One example
was Mr Healey's total failure to answer the actual question put
by Bob Blizzard MP (Hansard Written Answers 8 September)
10. If gas is worth a 40ppl rebate, then
biofuels must be worth the same as they save more CO2, create
energy, give diversity of supply and on balance reduce tailpipe
emissions, thus giving better value for the taxpayer.
11. For the UK to avoid a charge of indolence
in relation to the EU biofuels target, it will be essential for
the Chancellor to indicate his policy on duty rebates for these
fuels in the Autumn Statement. Although a 40ppl rebate for biofuels
is fully justified against the gas fuels, major manufacturers
appear willing to invest if the rebate of the order of only some
30ppl (and/or an increased rebate from the existing 20ppl and
capital grants) provided the rebate was in place for say seven
years to allow a reasonable write-off period.
12. Further financial encouragement should
be given to the combustion of by-product straw crop for power
generation. This together with minimal tillage husbandry can give
positive energy values in excess of five ie each unit of oil energy
into the biodiesel life cycle process can produce five units out
through the utilisation of the energy of the sun in the crop production.
13. Fossil fuels are finite and therefore
likely to rise in price relative to biofuels. This trend will
reduce, over time, the rebate required to make biofuels competitive
at the pumps. At present biofuels cost perhaps twice as much as
fossil fuels pre-duty and VAT.
14. An increased duty rebate and appropriate
capital grants would allow a domestic biofuels industry to get
under way. A 2% target for December 2005 is unlikely to be met
as the DfT and Treasury have left it too late. However, agriculturally
it is perfectly possible to work towards this figure for 2006
and achieve the 5.75% in 2010 using existing or improved varieties
of existing crops.
15 September 2003.
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