House of Commons - Environmental Audit

Select Committee on Environmental Audit First Report

1 Introduction

4. We launched our Inquiry, Are biofuels sustainable?, on 25 July 2007 and decided that the Inquiry should:

examine the role biofuels might play in reducing greenhouse gas emissions and improving fuel security;
explore the wider economic, social and environmental impacts of biofuels;
explore whether safeguards are in place to minimise any negative social and environmental impacts of biofuels; and
review the policy arrangements for biofuels.

5. During the course of our inquiry several organisations have published reports raising concerns about the environmental impacts of transport biofuels and also the rationale for their use in reducing greenhouse gas emissions.[1] In response to these concerns we decided to focus on transport biofuels derived from agricultural commodities, rather than those derived from other sources such as waste. We have not therefore looked in great detail at other technologies, such as biomass, although we necessarily touch on these in places.

6. We received evidence from a range of sources including individuals, trade associations, academics, non-governmental organisations (NGOs) and the Department for Transport. We are grateful to all those who contributed to this Inquiry.[2]

What are biofuels?

7. Biofuels are liquid fuels produced from organic matter rather than from fossil fuels, which are a finite and non-renewable resource. Most biofuels are currently produced from food and fodder crops. Known as first generation biofuels, they are found in two different forms depending upon their source material. Biodiesel is produced through from oils such as rendered animal fats, rapeseed and palm oil. Bioethanol is produced from the fermentation of any feedstock that contains a high content of sugar or starch; typical feedstocks include sugarcane, sugar beet, maize, and starchy cereals such as wheat and barley.[3] Biomass is solid organic matter, such as wood or straw, which is burned to provide either heat or electricity or both. Biomass, biofuels and other non-fossil organic fuels are collectively known as bioenergy.

8. Second generation biofuels are produced from the whole of the plant, not just the sugar or oil-rich parts.[4] They can be produced from biomass. These biofuel technologies are not yet commercially viable, and might be some 5 to 10 years or more from reaching the market. They could have benefits over conventional first generation biofuels because they might:

have greater greenhouse gas savings;
be grown on land not suitable for conventional agriculture;
have lower input requirements than conventional crops; and
be higher yielding per hectare than conventional crops.[5]

Are biofuels 'carbon neutral'?

9. A common misconception of biofuels is that they are 'carbon neutral', i.e. that they absorb as much carbon in their growing as they release when they are burned as fuel. However, a range of additional emissions have to be considered when calculating the actual amount of carbon they might save, including:

emissions from agriculture such as from machinery usage and soil disturbance (which can release large volumes of carbon).

nitrous oxide (a potent greenhouse gas) emissions from fertiliser application

emissions from the energy used to convert the feedstock into a liquid fuel; and

transport of either the feedstock, or the biofuel, to its point of use.

10. There may also be indirect emissions associated with a biofuel, especially if non-agricultural land is used to grow the feedstock For example, if forest is cut down to grow biofuels it would take between 50 and 100 years for the biofuels to compensate for the initial release of carbon.[6]

11. The GHG savings associated with a biofuel vary greatly depending on the way that it was grown, where it was grown and how it was converted from the feedstock into the biofuel. When all these emissions are added together the final biofuel can actually lead to more GHG being emitted than if petrol or diesel was used, which is the case in some bioethanol produced in the US. Nevertheless many biofuels can result in some reduction of emissions and some can lead to significant reductions.[7]

Biofuel policies and support mechanisms

12. Published by DEFRA in May 2007, the UK Biomass Strategy[8] sets out the Government's plans for the sustainable development of a biomass industry in the UK out to 2020. It sought to evaluate the role biomass (including liquid biofuels) might play in meeting future sustainable energy needs. The Strategy argued that biofuels have a 'significant potential' to reduce carbon emissions from transport 'in a sector where other renewable sources such as wind, solar and tidal power are not practical'.[9] It outlined how the Renewable Transport Fuel Obligation (RTFO, see below) would be one of the main policy instruments in the transport sector to reduce GHG in order to meet international agreements such as the Kyoto Protocol and EU Biofuels Directive.

13. The Strategy accepted that there could be problems associated with biofuels. In particular it acknowledged that air quality could be affected if the fuels are not properly handled and that there might be environmental impacts associated with their use. Due to these concerns the Strategy stated that the RTFO would only be increased beyond its current level if there was 'confidence that biofuels will be produced in a sustainable way, so that they deliver the maximum practicable carbon savings with the minimum practicable adverse environmental impacts'.[10] The Government also said that the RTFO would not be raised until it was satisfied that biofuels represented an effective use of biomass resources, both in terms of cost effectiveness in reducing carbon emissions and in its impact on other industries that use biomass resources; increasing demand might force these industries to obtain biomass from less sustainable sources.

14. The Strategy set out a range of support mechanisms for biofuels in addition to the RTFO:

fuel duty incentives (20 pence per litre on both biodiesel and bioethanol to 2010);
Government Grant Programmes to provide grants towards the cost of installing a range of alternative fuel refuelling points;
Regional Selective Assistance (RSA) or Selective Finance for Investment grants (an RSA grant helped fund the UK's first major biofuel plant);
an assessment of what further support could be given through the tax system to encourage the direct refining of vegetable oils at oil refineries; and
support for pilot projects.[11]

THE RENEWABLE TRANSPORT FUEL OBLIGATION

15. Alongside fuel duty incentives, the RTFO is the 'main policy in the transport sector to reduce GHG emissions and to increase use of renewable fuels'.[12] The Order imposes an obligation on fuel suppliers to supply 5% of their UK road fuel sales from renewable fuels by 2010. The Order provides for a Renewable Fuels Agency (RFA) to manage the scheme and to issue tradeable certificates to those who supply renewable fuels. Those suppliers that fail to reach the minimum target are able to buy out of the scheme. These fees are then redistributed to all fuel suppliers 'according to the number of certificates that they redeem or surrender'.[13] The RFA will require fuel suppliers to report on the net GHG savings and sustainability of the biofuels that they supply in order to receive certificates. Large suppliers (claiming more than 450,000 certificates) are also required to produce an annual independently verified report.

16. Although they will not be mandatory, the Government has proposed GHG saving and sustainability targets that fuel suppliers should aim to meet. In June 2007 the Transport Secretary, Douglas Alexander MP, said that these would relate to 'the level of [GHG] savings we expect to see from biofuels used to meet the RTFO, the proportion of biofuels from feedstock grown to recognised sustainability standards and the amount of information we expect to be included in sustainability reports'.[14]

Table 1: Proposed sustainability and carbon targets

Proposed annual supplier targets 2008-2009 2009-2010 2010-2011

Percentage of feedstock meeting standards - 50% 80%

Annual GHG saving of fuel supplied 40% 50% 60%

Amount of information in sustainability reports 35% 65% 80%

Source: Department for Transport, Carbon and Sustainability Reporting Within the Renewable Transport Fuel Obligation, Requirements and Guidance, Draft Government Recommendation to RTFO Administrator, June 2007

17. From April 2010 the Government proposes that certificates will be awarded on the basis of the GHG emissions that they save. This should help to stimulate the use of those biofuels that lead to the greatest reductions in GHG. From April 2011 the Government also proposes that certificates will only be granted to biofuels if they meet the required sustainability standards.[15]

AGRICULTURAL SUBSIDIES

18. There are a range of subsidies that directly or indirectly support the production of biofuel feedstocks. Indirect subsidies include the Single Farm Payment and the Entry Level Environmental Stewardship Scheme that pay farmers per hectare of land. Direct subsidies include the Energy Aid Payments Scheme, for which farmers can receive €45 per hectare for growing biofuels on non set-aside land. Farmers can also grow biofuels on set-aside land and still receive set-aside payments.[16]

19. In October 2007 the Global Subsidies Initiative (GSI) published its report Biofuels - at what cost? Government support for ethanol and biodiesel in the European Union. It found that in 2006, the EU and individual Member States subsidised biofuels by around €3.7 billion taking into account (as far as possible) all support mechanisms such as excise tax exemptions, capital grants and R&D. Where a subsidy could not be directly tied to biofuels, but which would nevertheless still subsidise biofuel production, such as agricultural support through the Single Farm Payment, the subsidy was not counted and therefore the figure given is likely to be an underestimate. Added together this is the equivalent of €1.1 per litre of ethanol, and €0.55 per litre of biodiesel. This puts the cost of obtaining a reduction of one tonne of CO₂ equivalent, using ethanol from sugar beet, at between €575 and €800 (approximately £403 - £570) and over €600 (£428) for biodiesel made from rapeseed. Table 2 gives the cost per tonne of CO₂ equivalent under a range of different feedstocks and production processes.

Table 2: Greenhouse gas emissions reduced through the use of ethanol and biodiesel in selected OECD countries (£ per metric tonne of CO₂-equivalent)

OECD Economy Ethanol Biodiesel

EU¹ 344-2705 127-492

United States >221² 123-295

Australia 123-836 78-295

Canada 123-934 123-221

Switzerland 162-187 123-861

Source: Global Subsidies Initiative, Biofuels - At What Cost?, September 2007

1: Ranges are given due to the differences in emissions between different feedstocks and production processes. In the EU the bioethanol range is due to the difference between sugar beet and rye, and the biodiesel range is due to the difference between used cooking oil and rape seed.

2: Negative figures are not shown. Some estimates of the lifecycle emissions indicate an overall increase in emissions of GHG.

20. Due to these costs GSI concludes that far more emission reductions could be achieved for the same amount of public funds simply by purchasing reductions in the marketplace:

The cost per tonne of reductions achieved through public support for biofuels made from crops in the EU could purchase more than 20 tonnes of CO₂-equivalent offsets on the European Climate Exchange, for example.[17]

21. GSI also cautions that as most support is tied to production, consumption, or blending targets, support across the EU 'could treble if the current rates of subsidisation are not modified'.[18] These subsidies are cause for concern. We argued in a recent report that large agricultural subsidies are not consistent with sustainable development.[19] The EU's failure to remove subsidies has a negative impact on our credibility in arguing for better consideration of the environment in international trade negotiations, and subsidies directly contribute to environmental degradation. In addition subsidies can create market distortions that undermine domestic markets in developing countries, thereby contributing to poverty. Poverty is one of the main drivers of environmental degradation.

1 United Nations, Sustainable bioenergy: A Framework for Decision Makers, May 2007, www.un.org/esa/; Richard Doornbosch & Ronald Steenblik, OECD Round Table on Sustainable Development, Biofuels: Is the cure worse than the disease?, 11-12 September 2007, www.oecd.org Back

2 See submitted written and oral evidence at the end of this report Back

3 Richard Doornbosch & Ronald Steenblik, OECD Round Table on Sustainable Development, Biofuels: Is the cure worse than the disease?, 11-12 September 2007, www.oecd.org Back

4 Transport Biofuels , POSTnote 293, Parliamentary Office of Science and Technology, August 2007, www.parliament.uk Back

5 ibid Back

6 'Forget biofuels - burn oil and plant forests instead', New Scientist, 16 August 2007 Back

7 Ev 76 Back

8 Department for Environment, Food and Rural Affairs, UK Biomass Strategy, May 2007 Back

9 ibid Back

10 ibid Back

11 ibid, p33 Back

12 Explanatory memorandum to The Renewable Transport Fuel Obligations Order (SI 2007/3072) Back