When Government announced in December 2009 that it would extend the tax differential for bio-diesel produced from used cooking oil until April 2012, bio-diesel producers across the UK breathed a huge sigh of relief. This was a stay of execution for cutting edge fuel producers and their customers, who were committed to using high-blend bio-diesel in their vehicle fleets.
Removal of the tax differential, which the Government planned to replace with certificate trading under the Renewable Transport Fuel Obligation, would have resulted in an increase in the cost of bio-diesel of up to 20 per cent, with the inevitable decision by fleet operators to discontinue their use of high-blend bio-diesel and a return to cheaper fossil-based fuels.
The decision was taken by the Government after an intensive campaign, led by the UK Sustainable Bio-diesel Alliance (UKSBA) - a group of some 30 UK bio-diesel producers who use only sustainable feedstock, such as used cooking oil, to make their bio-fuels. They argued that whilst the Government might be wary of the differential subsidising producers who used unsustainable sources, causing land-use change or driving up the price of food, targeting the differential to bio-fuels produced only from waste provided a number of advantages.
Waste cooking oil would otherwise be poured down the drain at some £15m p.a. cost to the utility companies or sent to landfill, adding to greenhouse gas emissions. Instead, by encouraging its use in bio-diesel, the Government would be contributing to better waste management and would continue to allow the fleets' vital contribution to the UK's challenging carbon reduction targets. In addition, cutting edge green skills within the bio-fuel production sector would be encouraged to develop, delivering vital jobs and nurturing the low carbon economy.
When we look back at the decision and how it has affected the sustainable bio-diesel industry in the UK, it is clear that a number of our arguments have played out.
The relative stability in the production base means that we continue to develop the green skills vital to the low carbon economy. We are now developing those skills to tackle other waste to energy projects, such as food waste in anaerobic digestion and second generation bio-fuels.
Our customer base has grown as more vehicle fleet managers become confident to use bio-diesel blends in their fleet and high profile fleets such as the Environment Agency and Stagecoach buses come on board.
Because there is now a market for waste, the retrieval of waste products such as used cooking oil has increased markedly in the private sector and some local authorities are now offering domestic waste oil collection facilities at their recycling centres - all of which means less waste to landfill and lower utility costs.
The only downside has been the increase in imports of used cooking oil to feed the bio-diesel industry, which has not only driven up the cost of feedstock, but raises concerns over the environmental impact through the supply chain, so this is something we will need to address going forward.
And going forward is what the UKSBA now needs to do. The clock is ticking for the tax differential again, with its planned withdrawal in April 2012. The Renewable Transport Fuel Obligation (RTFO) is still under consultation given the implementation of the Renewable Energy Directive from Europe and further reviews are planned before 2014. This means that certificates trading under the scheme remain volatile in value and do not currently offer a stable income alternative for bio-diesel producers.
The UKSBA is in discussions with the new Government to argue our case that the tax differential must continue beyond 2012, until the RTFO is fully implemented and has had time to prove it can work to adequately support the industry.
The UK is currently 25th out of 27 countries in the EU in its use of renewable energy, lagging behind at 2.2 per cent against a target of 15 per cent by 2020, 10 per cent from transport alone. Transport emissions are actually rising and so the Government can't afford to cut off at the knees an industry that is already making a positive contribution to the reduction of carbon emissions.
For a very modest cost in terms of the subsidy, the Government has the opportunity to increase waste recovered, reduce waste to landfill, generate green jobs, encourage regional development and the low carbon economy, secure inward investment and assist energy security - a no brainer.
The UKSBA will continue its campaign for joined-up thinking in Government to develop a clear sighted green policy for the transport sector. Only then will bio-fuel producers and their customers have the long term stability for effective business planning and investment.
Mark Sneesby is chair of the UKSBA and director of Convert2Green Ltd