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Biofuel breakthrough: New measures to encourage sustainable Biofuels, and scrapping of Biofuel duty for small producers

Transport Secretary Douglas Alexander has launched a consultation on an environmental reporting system for sustainable biofuels and a package of measures to complement the reporting requirement.

The consultation is a key part of work on the Renewable Transport Fuel Obligation (RTFO), which means that by 2010, 5% of all the fuel sold on UK forecourts should come from biofuels. This is expected to save 1 million tones of carbon a year, the equivalent of taking 1 million cars off the road.

Biofuels are fuels made from renewable sources, typically crops such as oilseed rape or wheat. The crops used to grow the fuel are known as feedstocks. They save carbon because the crops absorb carbon dioxide as they grow. There is currently no internationally agreed methodology to measure carbon savings and sustainability and the UK is a leader in this field. The UK is now working with the European Union and other international bodies to develop standards to ensure the sustainable supply of biofuels across the EU.

Areas to be covered in the consultation are:
• The scope and format of monthly and annual reports
• The verification requirements
• The default values to be used to calculate the carbon savings offered by different biofuels when precise data is not available

In addition to the consultation, the Secretary of State announced that:

• from April 2010 the Government aims to reward biofuels under the RTFO according to the amount of carbon they save. This will be subject to compatibility with EU and WTO requirements and future consultation on the environmental and economic impacts;

• from April 2011 the Government aims to reward biofuels under the RTFO only if they meet appropriate sustainability standards. This will be subject to the same provisos as above and subject to the development of such standards for the relevant feedstocks.

• the Government will ask the RTFO Administrator to report every three months on the effectiveness of the RTFO’s environmental reporting system, and on the carbon and sustainability effects of the RTFO;

• the Government intends to set challenging targets for: the level of greenhouse gas savings we expect to see from biofuels used to meet the RTFO, the proportion of biofuels from feedstock grown to recognised sustainability standards and the amount of information we expect to be included in sustainability reports;

• the Government has asked the Low Carbon Vehicle Partnership to explore the feasibility of a voluntary labelling scheme, allowing responsible retailers to show that the biofuels they supply are genuinely sustainable. Any scheme would need to be compatible with WTO rules.

The targets proposed are:
* 50% of biofuel feedstocks should meet a qualifying sustainability standard* in 2009/10, rising to 80% in 2010/11
* The fuel supplied should have an annual greenhouse gas saving of 40% over fossil fuels in 2008/09, 50% in 2009/10 and 60% in 2010/11
* Transport fuel suppliers should be able to complete, with known data, 35% of the relevant data fields within the monthly reports in 2008/09, 65% in 2009/10, and 80% in 2010/11

Douglas Alexander said:

“Biofuels present an opportunity to address the climate change impact of transport. But we must ensure appropriate safeguards are in place. The UK is leading international debate on this issue. We are one of the first countries to develop a detailed methodology to allow transport fuel suppliers to report in detail on the carbon and sustainability impacts of their biofuels. And the comprehensive package of new measures we are proposing today only strengthens this global leadership role, by making clear our determination to put in place a mandatory sustainability framework for biofuels, putting us at the forefront globally of tackling this important issue.”

To receive certificates under the RTFO scheme from April 2008, it is intended that transport fuel suppliers will have to complete a report on the carbon savings offered by their biofuels, as well as on the wider sustainability impacts associated with them. The RTFO Administrator will publish information on the environmental impacts of the RTFO. The consultation sets out the detail of the proposed requirements for these reports.

The consultation closes on 13 September. The RTFO Administrator will publish the final version of the reporting requirements as soon as possible after the RTFO Order has been made.
The approach will be piloted with a number of transport fuel suppliers alongside the public consultation.

The Obligation is expected to start in April 2008. It will be set at 2.5% in 2008/9, then 3.75% in 2009/10, and 5% in 2010/11.

At the same time, new Government regulations are about to come into force which will open up the market for biofuel production in the UK. At present the law requires anyone producing any quantity of a biofuel (mostly biodiesel in the UK) to pay duty of 28.35p on every litre they produce as well as submit returns to HM Revenue & Customs and hold a permit (for a current non producer the duty they pay at retail pumps is 48.35p making the saving to them even greater). As from on the 30th June 2007 the following changes applying to biofuel producers are to be introduced:

– A production threshold of 2,500 litres per annum, below which producers will not need to submit returns or pay duty, and
– A reduction in the frequency of returns for all but the largest producers (defined as those producing over 450,000 litres per annum) from monthly to quarterly.

At the present time there are approximately 1,400 producers of Biofuels in the UK, a large proportion of whom produce for their own personal use.

This landmark change in regulation means that everyone will have the opportunity to produce enough biofuel for their own personal consumption, duty free.

The effectiveness of the 2,500 litre level will be monitored and the Government will consider the scope for raising the threshold a year after its introduction.

The full implications for this legislative change will be discussed and debated in workshops at the Biodiesel-Expo 2007 ( www.biodiesel-expo.co.uk
) that will take place at the Newark Showground in Nottinghamshire on 17th and 18th October. Attendees at the Expo will also be able to meet with over 100 exhibitors a number of whom have solutions for taking advantage of this new legislation.

Geoff Riley, HM Revenue & Customs, who will be at the Expo to take part in the workshops said “This legislative change will reduce the administrative burden on HM Revenue & Customs as
well as small producers and I look forward to explaining it more to attendees at the Biodiesel Expo.”

Richard Price, MD Filtertechnik, a supplier to the biodiesel market and sponsor of the Biodiesel-Expo said “I anticipate this will lead to an explosion of biofuels producers who will create a new “homebrew” market. It is a very exciting time to be in the biofuels business.”

The biodiesel market is one of the fastest growing markets in Europe today. With over 100 exhibitors from both the UK and overseas the Biodiesel-Expo has become the national showcase
for all aspects of biodiesel production and usage.

Biodiesel-Expo is organised by Biofuels Media Ltd ( www.biofuelsmedia.com
), a company established to bring together the biofuel markets.

Roger Flynn of Biofuels media said “This is great news for the industry and consumer alike and shows that the Government is committed to developing a grass roots base for the future of biofuels in the UK.”

Entry to Biodiesel-Expo 2007 is free if visitors pre-register by October 5th. After this date entry will be charged at £50.

For more information on exhibiting or visiting the event as well as obtaining tickets visit the organiser’s website at www.biodiesel-expo.co.uk