Industry experts, retailers, a minister and his opposite number discuss the way forward for biofuel. At a glance
With debate on biofuels hitting the national press, central London was the setting as politicians and industry experts joined fleet managers to examine the future of biofuels in the UK.
Organised by the Environmental Industries Commission (EIC), Fuelling The Future focused on the Renewable Transport Fuels Obligation (RTFO), the government’s plan to conform with EU targets for the introduction of biofuel.
A range of speakers were lined up to examine the proposed government policy, and how the RTFO will work in practice. Sustainability issues were also looked at, as was the longer-term future of biofuels beyond 2010.
THE POLITICAL OUTLOOK
Dr Stephen Ladyman outlined the government’s plans for the RTFO, the draft of which is currently out for consultation.
It proposes that by 2010/11, 5% of all fuel sold in the UK must be biofuel. Fuel producers intend to achieve this by blending 5% biofuel with all regular fuel sold.
“Biofuels are without doubt going to play a significant role in meeting our long-term energy needs,” Dr Ladyman said. “I, and the government want to make sure Britain plays its part in transforming momentum into reality.”
Once reaction to the consultation is received, a revised draft of the RTFO will go before parliament in the autumn and could be in place by April 2008. Dr Ladyman said the measures could save a million tonnes of CO2 each year in the UK.
But he said the RTFO did not include huge incentives for fleets to adopt biofuel-powered vehicles or use higher-percentage blends.
“If we were sticking to voluntary agreements for the take-up of biofuels we would have to do a lot more to incentivise,” he said.
“We have taken the view that we won’t be able to move this industry as far and as fast as we would like it based on the voluntary agreement, which is why we’ve made the mandatory agreement. If the obligation we put in place can deliver a volume of renewable fuel delivered by 2010, there’s no point in putting in any measures that will take us beyond 5% because of sustainability issues.”
Dr Ladyman said that if it becomes clear that more than 5% biofuel can be sold sustainably then further measures could be considered.
“Whether they are incentives for fleets, that’s something we’ll have to look at,” he said.
SHADOW SECRETARY OF STATE FOR TRANSPORT
Dr Ladyman’s opposite number welcomed the concept of the RTFO but raised concerns about Britain’s progress towards EU biofuels targets.
The 2005 EU biofuels target of 2% was not adopted by Britain. Instead, the government aimed for 0.3% but didn’t even manage to hit that.
“Twelve of the EU25 managed to reach the EU’s target and the UK was not one of them,” Mr Grayling said. “We have had much talk from this government but in the area of biofuels it seems we have fallen behind.
“The RTFO will be a significant step forward – I hope its introduction signals the beginning of a serious, challenging biofuels programme that will in time bring us back in line with European targets.”
The key issue, Mr Grayling said, was sustainability.
“All targets, however tough, are pointless unless we can ensure that we are getting biofuels from sustainable sources,” he said. “We must ensure that the RTFO doesn’t, in attempting to solve one environmental problem, create another potentially just as damaging one. We need to look hard at what crops our biofuels will come from.”
Second-generation biofuels –more efficient fuels made from non-food sources like straw and waste lumber, which are currently in development – are vital in the longer term, Mr Grayling continued.
“I would like to see strong government support for the development of second generation biofuels. My concern is that Britain will be on the sidelines,” he said.
EUROPEAN COMMISSION DEPUTY HEAD OF UK REPRESENTATION
In January 2007, the European Commission’s Strategic Energy Review proposed a 20% target for renewable energy by 2010, with a minimum of 10% biofuel in each national action plan.
An incentive system to discourage poor performing biofuels and encourage second-generation technologies was also proposed.
“We have a mandate to do more about climate change and energy security,” explained Sarah Lambert, who represents the UK at the European Commission.
“Biofuels are available now and on a significant scale. They offer the potential prospect for large-scale savings in the transport sector in the medium term.
Ms Lambert said the 2010 target was unlikely to be achieved without significant action. “Only Germany and Sweden hit the 2005 EU targets of 2%,” she said.
“Carmakers and industry need to make the necessary investments and to get serious about developing alternatives.”
She also touched on the sustainability issue.
“We wish to discourage negative impacts on land use and on biodiversity,” she said. “We don’t think there should be an import ban but we do want to encourage sustainable domestic production.”
MAKING THE RTFO WORK
BP BIOFUEL POLICY CONSULTANT
“Different biofuels have different time scales,” according to Bob Saunders, BP’s biofuels policy consultant.
He gave delegates an indication of how the fuel industry was working towards the RTFO.
“Refiners will have to understand how the RTFO will work,” he said. “The devil is in the detail and it will be different in the UK to other European markets.
“The likely outcome by 2008/2009 is that all diesel will contain 5% biodiesel, assuming it’s allowed to move along the pipelines. By 2009/2010, all diesel will already be at 5% and suppliers will start blending in ethanol in around September 2009. By 2010/11, all petrol and diesel will contain 5% biofuel.”
But Mr Saunders said things could change if all manufacturers agreed to produce engines that could take 10% biofuel mixes, known as E10 (bioethanol) and B10 (biodiesel).
“Then we have an option of where we put the biofuel, which depends on the price of biodiesel and bioethanol,” he said. “Biodiesel has fewer technical issues but it hasn’t been of the best quality in the UK, historically. It can be blended at refineries, which is much cheaper. High-quality biodiesel is critical to launching it into the market.
“Bioethanol is of a higher quality but is limited in its availability and is also more expensive.”
Mr Saunders admitted there were a huge number of options.
“We’re trying to juggle them to come up with the best way forward,” he said.
RISK V REWARD – SUSTAINABILITY
PROJECT MANAGER FOR LOW CARBON VEHICLE PARTNERSHIP
Biofuels can help the environment, but are no good if they damage it during their production, explained Jessica Chalmers, of the Low Carbon Vehicle Partnership (Low CVP).
“There are social and environmental risks to biofuels,” she said. “There is competition with food crops, although demand for biofuels has also reduced the dumping of excess foodstock.
“There are concerns over labour, but biofuels can also establish jobs. Effective negative impact management is needed.”
Ms Chalmers said the responsibilities rested with both companies and authorities in the regions where biofuel crops were grown.
“Companies have responsibilities for some issues but national governments must take responsibility for others such as social well-being and competition for food and other materials,” she said. “The key message really is that environmental assurance schemes are not a substitute for good governance and regulation of natural resources.”
Ms Chalmers said UK proposals under the RTFO represented a pragmatic initial approach.
“Annual company reports are sent to RTFO administrators and performances measured by existing schemes,” she said. “The reports measure conservation of carbon, biodiversity, sustainable wood use and air quality, and cover contractors and subcontractors.
“Carbon is measured on a well-to-wheel approach using conservative default amounts where exact data is not available.”
To really be effective, however, the proposed scheme needed to grow and expand, she said. “Robust assurance schemes, supported by cost-effective verification, are an initial part of maintaining public confidence in biofuels,” Ms Chalmers added. “The RTFO scheme must evolve over time to take account of sustainable issues.”
THE FUTURE BEYOND 2010
MANAGING DIRECTOR, OILSEEDS AND BIODIESEL, BUNGE
“The 2010 targets are all very well, but a question mark hangs over whether enough can be produced. That’s the $100 million question,” said Bernd Koelln, of agricultural giant Bunge.
“Between 2002 and 2009, we need to increase our production of major oils by 45% and that’s impossible. To achieve the hoped-for 10% biofuels by 2015, you need about 24,000 million tonnes of biodiesel and 20,000 million tonnes of ethanol. The money should be available but the question is raw material.”
Mr Koelln believes such a target is ambitious.
“We would need an extra 16 million tonnes of grain above the level expected by 2015. Where will it come from?” he asked.
“Biofuels are almost double the price of petrol or diesel. Somebody has to pay for it. We’ll never be in the position to produce biofuel to international petrol prices unless oil prices hit $80-90 a barrel.”
There was also the question of increasing competition with food crops.
“In bad crop years, biofuel production will have to be cut in order to ensure food supply,” he said. “We believe future growth of biofuels raw material is not so much in Western Europe but in Eastern Europe.
“There’s very little potential yield increase in the original EU15.”
Even that may not be enough for longer-term domestic supply in Europe.
“There’s likely to be a shortfall of 4.66 million tonnes of oils by 2020 and it’s almost impossible to hit targets using European land,” Mr Koelln said.
But Koelln added that second-generation biofuels, producing higher yields, had huge potential for the future.