Select Committee on Environment, Food and Rural Affairs Written Evidence


Memorandum submitted by the Environmental Industries Commission (EIC) (Bio 19)

  1.  EIC was launched in 1995 to give the UK's environmental technology and services industry a strong and effective voice with Government.

  2.  With over 290 Member companies EIC has grown to be the largest trade association in Europe for the environmental technology and services (ETS) industry. It enjoys the support of leading politicians from all three major parties, as well as industrialists, trade union leaders, environmentalists and academics.

  3.  EIC's Renewable Transport Fuels Working Group includes over 40 companies involved in providing biofuels for transport. Our responses below are, therefore, restricted to a transport biofuels perspective.

Q.1  What is the real scope for biomass and biofuels to contribute to tackling climate change? What proportion of the UK's energy and transport fuel needs could they provide?

Q.2  How cost-effective are biomass and biofuels in comparison with other sources of renewable energy?

Q.3  How do biofuels compare to other renewables, and with conventional fossil-fuels, in terms of carbon savings over their full life-cycle?

  4.  The transport sector is responsible for one quarter of the UK's carbon emissions and this is growing rapidly, threatening to derail Government targets to reduce carbon emissions.

  5.  The technology to produce biofuels is still developing and different feedstocks, both from crops and waste materials/by products, are being developed and used. However, there is ample evidence from Government and independent studies to demonstrate that biofuels are a promising technology for tackling carbon emissions from the transport sector. For example, the report published by DfT in July 2004 "Liquid Biofuels and Renewable Hydrogen to 2050" concludes that "It would be possible, by 2050, to reduce total carbon emissions from road transport to very low levels, through significant use of renewable hydrogen or biofuels. This could help the UK to achieve its goal to reduce CO2 emissions by 60% by 2050".

  6.  Whilst it is too early, therefore, to come to a final conclusion on the real potential of biofuels to tackle climate change, or the medium term carbon savings compared to other renewables, it would be a huge mistake to fail to support the development of a promising technology that is already achieving significant market share in many countries.

  7.  The question of the cost-effectiveness of biofuels depends on a wide variety of factors including: the price of fossil fuels; whether environmental costs are integrated into the costs of fuels; and the efficiency savings to be gained as we move into mass production. However, EIC Members in the biofuels sector are successfully convincing investors that they have the potential to compete on cost with alternatives, including fossil fuels, once well established.

Q.4  Not all biomass is equal—potential carbon savings depend on, for instance, farming practice. What can be done to ensure energy crops are sustainably produced?

  8.  There are a range of feedstocks and process for biofuels which have different carbon saving and overall sustainability benefits. EIC believes that Government should give greater support to those biofuels which have the greatest benefits. In assessing these benefits it is important that the Government gives due weight to wider sustainability considerations as well as carbon savings. Otherwise the Government may promote fuels which are produced in such a way as to run contrary to its environmental policy objectives in areas such as biodiversity (for example through encouraging deforestation).

  9.  EIC, therefore, supports a sustainability certification system being introduced as part of the Renewable Transport Fuels Obligation (RTFO). This system should:

    —  Be simple, so that the costs are not disproportionate.

    —  Recognise the whole supply chain, and not, therefore, disadvantage UK production where more stringent standards may be applied than in the case of some imports.

    —  Initially be in the form of compulsory reporting, but quickly lead to a banded system, directly tied to obligation compliance.

  10.  Such a scheme will be much more effective if the standards it sets can be applied across the EU.

Q.5  What impact will UK Government and EU actions have in increasing demand for, and production of, biomass and biofuels?

Q.6  What level of financial and policy support do bioenergy technologies require in order to achieve the Government's targets for renewable energy?

  11.  EU policy through the Biofuels Directive does not set mandatory levels for biofuel use and, is therefore, of limited effectiveness as driver. It has, however, set out a framework and ensured the UK Government looks seriously at measures to increase use of biofuels.

  12.  The principal policy measures to increase demand for biofuels lie in the hands of the UK Government.

  13.  The duty differential of 20p per litre introduced for biofuels has had some impact in stimulating the production and use of biofuels. However, this is not sufficient for biofuels to become a significant part of the fuel supplied at the pump. EIC has, therefore, supported the introduction of a RTFO and continues to discuss regularly with DfT, Defra and Treasury the details of such a scheme. EIC has put forward the following as key features of the scheme it believes are necessary to support biofuels:

    —  RTFO targets of 3/4/5% for 2008/9/10.

    —  RTFO targets to rise consistently beyond 2010 subject EU fuel specifications.

    —  A buy out price of 30ppl.

    —  Duty derogation of 20ppl from April 2008 to April 2009.

    —  A significant overlap between the duty derogation and obligation regimes.

    —  No implied increase in duty contribution from Treasury beyond 2008.

  14.  EIC has also consistently called for the RTFO to be introduced earlier than 2008 if it is to make a real contribution to meeting the UK's target for reducing CO2 emissions by 20% by 2010.

  15.  We would be happy to supply the Committee with a more detailed paper on the RTFO.

  16.  The other key area for EU and UK policy is addressing the restriction on using more than 5% biofuel in regular fuel supplied at the pump. It is vital that the EU moves quickly to ensure the relevant standards allow a higher level of inclusion.

Q.7  What impact might an increase in energy crops in the UK and the rest of the EU have on biodiversity, production of food crops and land use and the environment more generally?

  17.  Growing energy crops for biofuels has the potential to have numerous local environmental, social and economic impacts. Energy crops, for example have the potential to provide an incentive to keep land in productive use following the changes to the Common Agricultural Policy to de-link subsidy from production.

  18.  It is, therefore, vital that the Government uses the policy mechanisms at its disposal to ensure energy crops have a positive impact. In particular the sustainability criteria integrated into the RTFO will be central to ensuring energy crops have beneficial impacts.

Q.8  Does bioenergy production constitute the best use of UK land for non-food crops? Should UK and EU policy focus on increasing domestic production of energy crops and biomass, or are there merits in importing biomass for energy production, or raw feedstock or refined biofuel, from outside the EU?

  19.  In a global market it is not possible for the UK or EU to ban imports of biofuels or the feedstock for their production.

  20.  However, in a rapidly developing area with potential for supply shortages, significant domestic production is going to be essential to ensure security of supply. UK and EU policy should, therefore, focus both on encouraging demand for all biofuels that are demonstrated to contribute to sustainability and on encouraging domestic capacity as part of the supply of those biofuels.

Q.9  What more can be done to make more efficient use, as an energy source, of the by-products of agriculture and forestry (eg wood waste and other organic waste)?

  21.  There are promising technologies for using by products/waste from agriculture, forestry and general biodegradable wastes for producing biofuels. Indeed, the principal feedstocks for biodiesel currently produced in the UK are used cooking oil and tallow.

  22.  Waste and by product feedstocks will score highly on carbon savings and sustainability considerations and the key to encouraging them will be providing greater levels of incentive through the RTFO for fuels that score highly in these areas.

  23.  Government will also need to address the regulatory hurdles that can result in by products being considered waste and therefore subject to the rigours of a waste management licensing system principally designed for those running landfills. EIC is pressing at both EU and UK level for action to tackle the problems caused by the wide application of the definition of waste—whilst ensuring that the potential environmental impacts are properly controlled.

Q.10  What lessons can be learned from other countries' experience in the production and use of bioenergy?

  24.  EIC has experience of the policy framework required to promote environmental technologies across a wide range of areas and countries.

  25.  The key feature that emerges from this is the need for policy to stimulate demand by correcting the market failures that allow for more polluting technologies to dominate. This then allows the market to respond and to deliver innovative and effective solutions. These are invariably more effective than supply side measures.

  26.  The main risk seen by investors to developing environmental technologies to respond to Government policy is that of "Government failure" ie that the policy framework will not be kept in place for sufficient time or that policy will change.

  27.  It is, therefore, vital that the policy framework is consistent and long term as investors require clarity that measures to stimulate demand will remain in place for a sufficient period to allow them to have the possibility of making a return on their investment.

The Environmental Industries Commission (EIC)

February 2006





 
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