Select Committee on Environmental Audit Written Evidence

Memorandum submitted by British Sugar Plc


  1.  British Sugar has been a keen advocate of the greater use in the UK of biofuels, in particular bioethanol, as a way of contributing to carbon savings in the transport sector, improving the UK's fuel security and enhancing the rural economy. The company announced in December 2005 that it would be going ahead with the construction of a small bioethanol plant at its sugar factory at Wissington in Norfolk. This plant, which will be the UK's first commercial scale bioethanol facility, will use sugar beet to produce 70 million litres of bioethanol (55 thousand tonnes) annually from early 2007.

  2.  The UK Government is committed to reducing carbon emissions, and considers climate change to be a central element of its policy framework. In pursuit of this objective, it has taken a lead in tackling climate change across the EU, and has set ambitious medium and long-term targets for reducing carbon emissions in Britain. The most imminent of these targets is to achieve a 12.5% reduction in greenhouse gases to fulfil its Kyoto commitment, and a domestic target to reduce CO2 emissions by 20%. Both these targets cover the period 1990-2010.

  3.  Against this background, efforts have been made to cut emissions in most key sectors. However, in road transport, which accounts for a quarter of total UK carbon emissions, there has been little progress. Far from falling, road transport emissions are projected by the DTI[6] to increase by at least 15% between 1990 and 2010. Even more worrying, there is no sign of this trend being brought under control beyond 2010.

  4.  This will have serious consequences for the UK's overall climate change objectives. Because road transport is about to become the largest single emitting sector, failure to get its emissions under control will inevitably prevent the UK from being able to achieve any of its overall emissions targets, as it will be increasingly untenable for the other sectors to "carry" the transport sector, in addition to meeting their own objectives.

  5.  As stated in the DTI's most recent statistics and commentary,6 introduction of a large-scale biofuels programme is crucial to finding a solution to this intractable issue.


What progress the DfT is making against key carbon reduction targets or forecasts included in the Ten Year Plan (2000), the Climate Change Strategy (2000), the 2004 Transport White Paper, the 2004 PSA, Powering Future Vehicles (2004), and other documents

  6.  British Sugar was disappointed that the DfT's earlier policy documents, for example the Transport Ten Year Plan (2000) and the Powering Future Vehicles Strategy (2002) made little or no mention of biofuels whose carbon reduction benefits did not seem to be recognised. While a fuel duty rebate of 20 pence per litre was introduced in 2002 for biodiesel, this was ostensibly to deliver environmental benefit from producing fuel from waste (used cooking oil). It was not intended to stimulate more than a very small production which could make very little impact on carbon emissions from road transport.

  7.  It seems that the appearance of the European Commission's proposals for and the subsequent adoption of the Biofuels Directive in May 2003 has been the real driver for the UK Government to begin to take the carbon saving and other benefits of biofuels more seriously. The fuel duty rebate of 20 pence per litre was extended to bioethanol from January 2005, but biofuel production remained very small and insufficient to make any material difference to carbon saving. Against an indicative target for 2005 in the Biofuels Directive of 2% (c 800,000 tonnes), the DfT was only able to recommend a UK target of 0.3% (c 120,000 tonnes). None of this has been achieved with domestically produced bioethanol. The carbon saving value of this against the DfT's PSA targets is negligible.

  8.  Perhaps in recognition of the need to make the road transport sector contribute more to the PSA targets, following consultation in 2004, in November 2005 the DfT published a Renewable Transport Fuels Obligation ("RTFO") Feasibility Study and announced the introduction of an RTFO at a 5% rate from 2010. In the Secretary of State's words—"the Renewable Transport Fuels Obligation I am proposing today is predicted to save around 1 million tonnes of carbon dioxide emissions in 2010—the equivalent of taking 1 million cars off the road. Carbon savings could also increase in future years. This will help reduce the impact of transport on climate change, and bring environmental benefits for us all."

  9.  Sadly, carbon reduction from the increased use of biofuels, especially bioethanol, will continue to be very small until 2010 when the RTFO is finally introduced at a significant level. In British Sugar's view this could have been done at a much earlier stage had the Government had the real will to tackle carbon emissions in a sector that will continue to present growing environmental problems.

Whether the DfT's carbon reduction target is underpinned by a coherent strategy stretching across the department's entire range of activities

  10.  British Sugar can offer no opinion on this.

Whether the current balance of expenditure between the DfT's objectives (as revealed in its 2005 departmental report, Annex A) adequately reflects the environmental challenges it faces

  11.  In the field of renewable road transport fuels the DfT have assumed their responsibility as delivering policies which are either paid for directly in revenue foregone by the Treasury (fuel duty rebate, ECAs), or by the consumer (RTFO). As yet the DfT have proposed no policies to promote biofuels that would engage with their own budget. If the RTFO fails to deliver on biofuel use and consequent carbon reduction, this position may have to change with the introduction of more direct policies such as biofuel grants.

What realistically the DfT could achieve by 2010 and 2020 in terms of reducing transport-related carbon emissions, and the role that demand management should play in doing so

Fuel standards

  12.  The DfT have announced that they will introduce an RTFO at a 5% level by volume by 2010. This falls well short of the indicative target set out in the Biofuels Directive, which stands at 5.75% by energy, equating to a target by volume of over 8% by 2010. The ostensible reason for this conservative target is that fuel standards and engine specifications will not allow a mix of more than 5% as a splash blended fuel. In reality there are many other ways of introducing biofuels into the fuel pool, for example dedicated fleets for both biodiesel and bioethanol, greater use of E85 flex fuel vehicles and greater use of biofuels in the UK's bus fleets.

  13.  If the Government will not move beyond 5% before fuel and engine specifications are adjusted upwards, then it must expedite the procedures to permit these adjustments to 10% and beyond. This has been advocated in the European Commission's Biomass Action Plan (December 2005) and their Biofuels Strategy (February 2006). The government should then ensure that the RTFO targets are set to at least 10% by 2015 and 15% by 2020. With sufficient lead time this will allow adequate time for a turn over of the UK vehicle pool without exposing policy to undue complexity.

A long term RTFO

  14.  As has been recognised in the acceptance of the principle of the RTFO, demand management must play a central role in UK biofuels policy for the short to medium term. The Government should commit to retaining the RTFO for at least as long as the Renewables Obligation in the electricity sector (2027). In addition, the willingness of the oil industry to engage and support the introduction of biofuels will be crucial to the success of the programme in the UK.

UK feedstock and land availability

  15.  Today the UK has sufficient crop surplus production of cereals and sugar that could be converted to bioethanol to replace at least 5% of all the petrol used. Beyond this, crop yields are improving giving a larger raw material volume year on year. Technologies are also being developed that will convert lignocellulosic feedstock (woody biomass) into bioethanol to widen the production scope even more. Raw materials include those parts of conventional crops that are not currently used for bioethanol production, wood wastes and energy crops.

  16.  It should also be noted that there is also considerable potential for increased biofuel feedstock production on currently available UK arable land. The DEFRA 2005 census states that the UK has a total of 5.8 million hectares of land under arable production, with an additional 0.6 million hectares under set-aside. If just 10% of this combined total were reserved for energy crops, (a reasonable long-term target) then an additional 640,000 hectares could be made available, generating another 2 million tonnes of bioethanol. This would be equivalent to an additional 10% of UK petrol substitution, over and above the 5% available from exported surplus agricultural production (see above). Imports of either feedstocks or end product would further add to this contribution. There is consequently potential for biofuels to substitute a highly significant proportion of UK transport fuel in both short and medium term with equivalent climate change benefits. For example, a combination of the above measures demonstrates that a bioethanol target of 20% would be realistically achievable by 2020.

What specific steps the department should now take to reduce road transport carbon emissions and congestion over the next decade

  17.  The Government have said that a number of key decisions will be taken in the context of the Budget 2006. These are:

    —  The level of the fuel duty rebate for 2008-09.

    —  The interim targets for the RTFO in 2008-09 and 2009-10, prior to the introduction of the 5% RTFO target for 2010-11.

    —  An implied level of buy-out price (penalty to be paid in the event of non-compliance) for the RTFO.

  18.  In order to stimulate investment in this new industry to bring transport sector emissions under control, the Government must send a strong signal to the industry and must set bold targets. Our recommendations for the targets required for the 2006 Budget are:

    —  Fuel duty rebate of 20 pence per litre for biofuels for 2008-09.

    —  Interim targets for the RTFO of 3% for 2008-09 and 4% for 2009-10.

    —  Confirmation of the 2010-11 target for the RTFO of 5%.

    —  An implied buy-out price for the RTFO of at least 30 pence per litre for a minimum of five years from 2008-09 to 2012-13.

  19.  In addition the Government should:

    —  Introduce Enhanced Capital Allowances for biofuels plants as quickly as possible.

    —  Include flex-fuel vehicles in congestion charge concessions and the ECA scheme.

The role of the oil industry

  20.  The oil industry in the UK as represented by the UKPIA has stated that it will not be in a position to sell bioethanol in the UK before 2009-10. They will not begin the process of converting their terminals to use bioethanol until they have seen the Government's legislation enacted. The DfT tell us this will not be before autumn 2007 at the earliest. British Sugar would like to expand bioethanol production beyond our first small plant to make a volume contribution to biofuels sales. However, without the oil majors as customers this investment will be impossible. The DfT and Government should expedite the real engagement of the major oil companies to ensure that investment in UK bioethanol production can go ahead as soon as possible so that the much needed carbon reduction benefits in the road transport sector can be captured.


  21.  The UK Government has been very slow to recognise the carbon benefits of renewable transport fuels, in particular bioethanol. Other countries, notably Brazil, the USA and, in Europe, Sweden, France, Germany and Spain have made real progress towards the use of biofuels, which are now delivering significant climate change and environmental benefits as well as enhanced fuel security.

  22.  The UK is in danger of failing to achieve its medium or long-term climate change objectives because emissions in the road transport sector are continuing to increase sharply.

  23.  Introduction of a substantial scale biofuels industry would help bring road transport emissions under control thereby enabling the UK to meet its longer-term climate change objectives, and would also make a substantial contribution to the nation's fuel security.

  24.  British Sugar has already demonstrated its determination to take a lead in investing in bioethanol production, and is willing to make additional investments to expand this capability providing an adequate level of commitment and support is confirmed by the Government.

February 2006

6   DTI projections for energy and carbon emissions for the UK, 17 February 2006. Back

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