UK biofuel rethink draws criticism

By Fiona Harvey, Environment Correspondent
Published: July 7 2008 22:14

A government rethink over biofuels regulation, less than three months after its introduction, alienated both the fledgling biofuels industry and green campaigners on Monday.
In his long-awaited review of the sector, Ed Gallagher concluded that biofuels should not be abandoned but that the rate of adoption proposed by the government should slow.

Biofuels companies and farmers attacked ministers for changing their minds so soon; the renewable transport fuel obligation (RTFO), which mandates that 2.5 per cent of the UK’s transport fuels must come from biofuels this year, rising to 5 per cent by 2010, came into force in mid-April after three years of consultation. Green campaigners, however, castigated the review for not going far enough.
If Prof Gallagher’s proposals are accepted by the government – and the signs are that they will be – the 5 per cent target will not come into force until 2013-14, and it will be made dependent on the industry proving its green credentials.
His review also recommended that a separate target be set for “second generation” biofuels, made from waste products such as straw.
Graham Hilton, of the Environmental Industries Commission, a trade body, said changes to the RTFO would create uncertainty when long-term investment in the sector was needed.
The review found that biofuels would contribute about 15 per cent to rises in the cost of grain in Europe by 2020, compared with 2006 prices, if current biofuels targets were followed through. The US would suffer similar price rises, although developing countries would see a smaller increase and the price of other staple crops such as rice would be unaffected.
Only about 1 per cent of the world’s crop land is given over to biofuel production at present, and the review found it was probable there was enough agricultural land available in the world to grow food and fuels at least until 2020.
The review also found, however, that the price of vegetable oils and oilseed was vulnerable to competition from biofuels, and would rise by as much as 70 per cent in the US by 2020, compared with 2006 prices, if biofuels targets were met.
Additional reporting by Sanjay Odedra
Copyright The Financial Times Limited 2008