 Subsidy shake-up to roil biofuel markets
New UK legislation will mean that biofuels must show significantly smaller carbon footprints than their petroleum-based equivalents in order to keep their government subsidies, reports Chemistry & Industry |
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| Biofuels: estimated carbon saving, not including land-use impacts |
Government support for biofuels is nothing less than massive. In 2007, tax credits handed out in the developed world totalled €10bn (£7.67bn). On top of tax relief, governments have required sellers of petrol and diesel to insert a small, but increasing, fraction of ‘renewables’ into the fuel pool. It is this public largesse that has made biofuels markets boom.
But what the government gives, the government can take away. Policy makers are beginning to accept the case that we began making a year ago (C&I, 2007, 8, 22), namely that some biofuels are carbon negative relative to their petrofuel competitors, especially when land-use changes are considered. And they are proposing that future incentives be linked directly to carbon savings.
The UK is leading this change. Its Renewable Transport Fuel Obligation, which will take effect on 15 April 2008, will in due course deny state benefits to biofuels that cannot show carbon footprints 30-40% smaller than those of their petroleum-based cousins. Similar proposals have been tabled in Germany and the EU, and the legal framework is already in place for comparable rules in the Netherlands and the US.
Under these ‘carbon certification’ programmes, producers and distributors of biofuels will rate the carbon content of every shipment they make. This will include the entire chain of custody and then some, including the pre-agricultural land use on through to production of the biofuel. A tax break, and sometimes other incentives, will be granted only to those that can certify carbon savings above the minimum target.
In their current form, these programmes will wreak havoc in the markets. Some biofuels — and their producers — will be winners and others will be losers. This, of course, is the aim of the programmes, and so be it.
However, an unintended, serious consequence is that some biofuels will win in one place and lose in another. Governments disagree significantly about some biofuels’ footprints (even before land-use impacts are included), especially those that are mainly imported to, rather than produced in, Europe (see chart).
Bioethanol from US corn (maize) offers a carbon saving of over 40%, according to Germany’s reckoning, while the UK figures it is more than 20% carbon negative. The US government appears to rate it at a 22% saving. Germany credits soy biodiesel with an
almost 60% saving, while the UK gives it just over 30%. On palm oil bio-diesel, both Germany and the UK give a thumbs up with more than 40%, while the EU rates its carbon savings at less than 20%.
These differences will be problematic for producers. What works in Woking may not in Wermelshausen, and vice versa. Surely there soon will be a scramble of lobbyists to countries that have yet to define their rules.
This also may be problematic for governments. The danger in proposing rules so different is that not just producers, but ultimately the public at large, may become cynical and begin to shy away from its so-far enthusiastic support of measures to combat global warming.
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