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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