Biofuels policy 'muddled and unfocused', MPs say

The Committee looked into the Government's policy for supporting biofuels. This began with a cut in fuel duty on biodiesel of 20p/l in 2002, while bioethanol will enjoy the same differential from January 2005.

The duty cut has helped biodiesel sales, but not production from UK crops. Monthly biodiesel sales are now running at around two million litres, but half of this is made from recycled vegetable oil and most of the remainder is imported biodiesel made from rapeseed oil.

"The Government's biofuels policy, to the extent that it has one, appears muddled and unfocused," the report says. "Until it is clear what the primary aim...is, it is difficult to judge how effective are the instruments by which it intends to achieve that policy.

"If the main purpose of encouraging the use of biofuels is to reduce carbon dioxide emissions, it would make sense to use the fuels that can be produced most cheaply and efficiently, even if these are imported," the report says. "If, on the other hand, the Government wishes to maximise the other benefits offered by biofuels, it will need to promote a UK-based industry."

The MPs say that the Environment Department should set out how it weighs environmental, economic and social factors in its biofuels policy. At present, the Government is "still testing the waters" and the current level of support "reflects this ambivalent attitude".

One reason for the slow progress is that five Departments share responsibility for biofuels policy - the Environment, Transport and Industry Departments, the Treasury, and Customs and Excise. "We deplore the fact that the Government has not nominated any one Department to lead on biofuels," the report says.

One driver of biofuels policy is an EU Directive which sets indicative targets for 2% of petrol and diesel to be substituted with biofuels by the end of 2005, rising to 5.75% in 2010 (ENDS Report 340, p 57 ). However, Treasury Minister John Healey told the Committee that he would be happy for the UK to set targets below these "reference values" (ENDS Report 345, pp 38-39 ).

The Government plans to consult on implementing the Directive in the first half of 2004. The MPs say that this will leave too little time "for farmers to plant and harvest their crops and for any extra processing capability to be brought on line...This leads us to suspect that the Government is unlikely to set itself very ambitious targets, at least for the first deadline."

The MPs agree with the Treasury that a greater duty differential for biofuels would be more likely to encourage biofuel imports than development of domestic production. Other instruments, such as capital grants, may be necessary to foster rural development, although the report suggests that these would be less effective for bioethanol than biodiesel (ENDS Report 342, pp 38-39 ).

The viability of a domestic biofuels industry is "still open to question," the report suggests. If carefully planned, some crops could deliver landscape and biodiversity benefits - but others could present a threat to biodiversity in the UK or abroad.

The report quotes English Nature's view that oilseed rape is a "relatively beneficial crop for biodiversity", although best sown in spring rather than autumn. In contrast, winter wheat "is generally a poor crop for biodiversity", and expanding its cultivation could prejudice the achievement of targets in the UK biodiversity action plan.

The report also cites the RSPB's concern that the expansion of energy crop cultivation on set-aside land without a strategic impact assessment could cause "considerable damage" to biodiversity, exacerbating the population declines of skylarks, lapwings, finches and buntings.

The Committee urges DEFRA to work closely with the statutory conservation agencies to find ways of maximising the wildlife benefits of biofuels.

WWF has also raised concerns that expansion of palm oil cultivation is contributing to rainforest destruction (ENDS Report 341, p 32 ). Petroplus is currently producing biodiesel from palm oils in its Teesside plant (ENDS Report 343, p 11 ). The report urges DEFRA to develop ways of auditing the environmental impact of biofuels in their source countries if imports contribute a significant proportion of UK consumption.

The Committee concludes that if the Treasury is not prepared to subsidise biofuels, it should consider obliging fuel suppliers to blend a minimum percentage of biofuels "while making the price attractive to consumers".