Memorandum submitted by the Wood Panel
Industries Federation
I am submitting evidence to the Inquiry in my
capacity as Director-General of the Wood Panel Industries Federation
(WPIF). The WPIF represents all UK manufacturers of wood-based
panels—MDF (Medium Density Fibreboard), OSB (Oriented Strand
Board) and Chipboard—used in furniture production and construction
applications. The industry employs over 6,000 people directly
and indirectly, occupies 8 UK manufacturing sites, and generates
an annual turnover in excess of £650 million.
We welcome the Committee's inquiry and support
the development of a biofuel strategy. The evidence provided is
of particular relevance to two of the Inquiry's questions:
a) the wider economic, social and environmental
impacts of biofuels;
b) and reviewing the policy arrangements
for biofuels.
The wood panel industry has expressed its serious
concerns about the Government's indirect subsidies for biofuels
in the Reform of the Renewables Obligation Consultation that DBERR
held this year. The use of wood-based biomass in co-firing is
a significant threat to the survival of the wood panel industry,
as it has increased the price of UK wood products. This is particularly
salient because of revised forecasts of UK wood availability,
which suggest that demand for some wood types will outstrip supply
within a year. The Government's Renewables Obligation (RO) calculations
continue to be based on outdated estimates that are overly optimistic
in terms of softwood availability. The WPIF acknowledges the important
role biofuels can play in reducing carbon emissions. However,
we would encourage greater government support for energy crops
for co-firing and we welcome the proposed system of banding for
Renewables Obligation Certificates (ROCs) proposed in the Energy
White Paper. Beyond co-firing, the wood panel industry is concerned
by the potential cumulative effect of increased demand for biomass
that would come from the likely proliferation of dedicated biomass
plants and small-scale wood boilers. Therefore, a forward-looking
strategy needs to be sought that will address future sources of
biomass and not just the sustainability of existing sources.
BIOFUELS
In discussing the sustainability and impacts
of biofuels, it is essential to distinguish not only between solid
and liquid biofuels but also to differentiate amongst solid biomass
fuels. Support for energy crops and for wood fibre as co-firing
materials will have different impacts on other industries and
on the environment. We would encourage the Committee to explore
the relative merits of different solid biomass fuels and to note
that there is significant evidence that wood-based biomass is
not a sustainable fuel within the UK, on account of the imminent
tightening of UK wood supply and its use in other green industries.
THE RENEWABLES
OBLIGATION (RO)
The Wood Panel Industry is not opposed to co-firing
per se and indeed recognises the contribution that it could make
towards reducing CO2 emissions, but believes that the primary
feedstock for co-firing should be limited to purpose-grown energy
crops and waste products not currently used by other industries.
Thanks to the subsidy awarded to co-fired generators, there is
great potential for them to outbid existing users of wood-based
biomass material. According to a DTI study, "evidence from
a number of co-firing generators suggests that at present they
are paying less than their willingness to pay" for this raw
material.[17]
Co-firers are also taking advantage of established supply routes
to source this material. The Government has clearly stated its
intention to "incentivise the development of purpose-grown
energy crops."[18]
The WPIF supports proposals to introduce fractional Renewables
Obligation Certificates (ROCs) to provide more targeted support
for new technologies. However, co-firing has significant potential
to distort raw material markets upon which existing industries
rely. Despite positive proposed changes in the latest DBERR consultation
("Renewable Energy—Consultation on the Reform of the
Renewables Obligation"), unfair competition would remain.
The RO aside, co-firing can offset fuel costs with allowances
from the EU emission trading scheme.[19]
Thus co-firers retain disproportionate buying power in the wood
market.
It is true that woody biomass is currently not
the largest biomass product used by UK co-firers. However, the
wood-using industries are extremely concerned about the cumulative
effect of an increase in power generation from biomass. These
industries are already affected by increased consumption of wood
products by dedicated biomass plants and numerous small-scale
wood boilers. The RO and the Large Combustion Plant Directive
(coming into force in 2008) will most likely cause a proliferation
of these plants and the conversion of co-fired power stations
to 100% biomass. There must, therefore, be a forward-looking strategy
to address future sources of biomass. If wood is to become a major
source of renewable fuel in the UK, the Government must plan ahead
through planting grants and an expansion of forested areas.
WOOD AVAILABILITY
In November 2006 the Forestry Commission published
revised forecasts for softwood availability for the period 2007-26,
improving on a previous forecast made in 2000.[20]
This revision of the Forestry Commission's forecasts reveals that
previous forecasts were inaccurate and over-estimated. Compared
with the 2000 forecast, the most recent figures indicate an overall
decrease in timber availability in the period 2007-11 of as much
as 11% for some wood types. In some parts of the country, this
is as much as 27%. Whereas the 2000 forecast estimated an increase
in softwood availability over the next 20 years, peaking at 15.5
million m3 over the period 2017-21, the 2006 forecast shows a
peak value of just over 14 million m3 for the same period, with
the total volume continuing to decrease.
Strengthening this case, a second report published
in November 2006 demonstrates that the demand for wood fibre is
forecast to exceed potential availability from as early as next
year.[21]
This independent study, commissioned by 21 leading wood processors
and woodland management companies, with input from the Forestry
Commission, the Confederation of Forest Industries and the WPIF,
outlines figures for Scotland and Northern England, which account
for 71% of the UK's wood supply. This report is based upon a comprehensive
survey of processors, current usage and expansion plans without
taking into account the effects of increased co-firing. Therefore,
given that the Government plans to increase levels of co-firing
as part of the Renewables Obligation, and further increasing demand
on wood fibre, this will lead to a significant deficit in UK softwood
availability.
The issues raised by the UK Wood Panel Industry
are echoed in Europe, as wood processing industries report similar
trends in mainland Europe—disproportionate subsidies leading
to rising prices, distorted access conditions and shortages of
raw materials. This means that the solution to wood shortages
cannot lie in importing wood fibre from abroad. Furthermore, given
that European renewable energy targets are as ambitious as UK
targets, this is an issue that threatens to have a serious negative
impact on wood availability right across the EU.
ENERGY CROPS
The planting of new sources of biomass is growing
at a slower rate than needed to meet the rapidly accelerating
interest in wood fibre from existing and new wood processors and
from the renewable energy sector. It is necessary for the Government
to provide more incentives for the planting of energy crops such
as short rotation coppice or miscanthus, so as not to compete
directly with already established industries. Co-firers cannot
currently commit to the long-term contracts needed for the sustainable
development of dedicated energy crops, in contrast to the type
of energy supply contracts within the coal industry. The Government
needs to provide greater incentives to establish and build confidence
in this market.[22]
IMPACT ON
A GREENER
INDUSTRY
Continued incentives for wood-based co-firing,
combined with a squeeze in UK wood supply, will inevitably reduce
the already small margins in the established wood panel industry.
In terms of the Government's mission to reduce carbon emissions,
this is self defeating. The wood panel industry supports the "Waste
Hierarchy" model, reducing and re-using wood, thus capturing
carbon, before its final disposal. Encouraging the first use and
recycling of woody biomass into products is clearly the most environmentally
friendly option rather than seeing high-grade wood incinerated
by energy providers. All of the virgin roundwood used by the industry
is softwood sourced from domestic forests certified by the Forest
Stewardship Council as being sustainable. The wood panel industry
is the largest processor of reclaimed wood, processing 80% of
the available post-consumer and post-industrial reclaimed wood,
which would otherwise go to landfill (approx. 1.1m tonnes). Some
of the industry's products have a recycled wood content of nearly
100%. Even this is under threat from the energy sector where some
plants are seeking to burn reclaimed wood. In spite of the recycling
efforts of the wood panel industry, there are still between 7m
and 10m tonnes of wood waste going to landfill each year. Much
of this material is not suitable for recycling, but could provide
a significant carbon-neutral fuel source for appropriate combustion
plant or for processing into liquid biofuels. After the DTI's
original consultation on the Renewables Obligation in December
2005, the purity definition of biomass was reduced from 98% to
90%, since a substantial amount of waste wood and some other contaminated
biomass streams had lower biomass purity. As a consequence, more
waste materials can be brought into the scope of the RO, thus
reducing the need to incinerate wood that can still be used for
other purposes such as wood panelling.
CONCLUSION
The reform of the Renewables Obligation has
already confirmed the negative economic and environmental consequences
of blanket support for biofuels in co-firing and proposed changes
will hopefully address some of the concerns of other, often greener,
industries. However, we believe that continuing to provide indirect
subsidies to co-firing that uses wood products dilutes any incentive
to burn materials that the Government has been seeking to promote,
namely energy crops. Co-firing should be considered a long-term
component of a sustainable biofuel strategy but this should be
on the basis of stimulating growth in dedicated energy crops,
wastes or currently uneconomic biomass types, such as brash recovery.
The cumulative effects of co-firing and 100% biomass power generation
need to be assessed, especially in terms of future sources of
biomass. Environmental and energy policies must take into account
both EU incentives and the impact they might have on the carbon-reduction
capabilities of other sectors.
1 October 2007
17 "An Independent Study of the Impact of The
Renewables Obligation on The Wood-Based Panels Industry",
Jaakko Pöyry Consulting, September 2005. Back
18
"The Government's Response to the Biomass Task Force Report",
DTI/DEFRA, April 2006. p. 19. Back
19
"The EU Emissions Trading Scheme: Lessons for the Future",
Environmental Audit Committee, Second Report of Session 2006-07,
Ev39. Evidence from the Association of Electricity Producers. Back
20
"United Kingdom: New Forecast of Softwood Availability",
Halsall et al, The Forestry Commission, 2006. This is a
revised version of the report "Great Britain: New Forecast
of Softwood Availability", Smith et al, The Forestry Commission,
published in 2000. Back
21
"Forecast wood fibre availability and demand in Scotland
& Northern England to 2016", John Clegg Consulting,
November 2006. Back
22
"Evaluating the Sustainability of Co-firing in the UK",
Themba Technology Ltd, September 2006, p.2. A report commissioned
by the DTI and produced in collaboration with the Edinburgh Centre
for Carbon Management. Back
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