Biofuels

Green Budget Boost for Biofuels?

Hopes are rising that recent intense lobbying may bring success for biofuels in 9 April's Budget.

Green fuels will be a low priority item, with the Chancellor facing an ongoing budget imbalance, exacerbated by the war in Iraq.

But campaigners believe there is still a good chance fuel from crops could get somewhere near the 26-30 pence per litre rebate the industry is seeking.

"The Chancellor may hide a black hole in the nation's finances behind a green statement that gives a boost to biofuels," said chairman of British Association of Biofuels and Oils Peter Clery.

BABFO has sent two reports to the Treasury setting out the case for biofuels and the need for a 30ppl rebate - 10p more than the current biodiesel rebate and the proposed tax break for bioethanol.

Such a move would help government achieve its newly set EU target of 2% biofuel use by 2005, said Mr Clery.

He advocates a polluter pays approach, where a small rise in duty on fossil fuels funds a drop in the duty on green fuels.

Although this would cost the Treasury nothing, tax expert with Grant Thornton Carlton Collister believes it is a measure the Chancellor is unlikely to bring in at this stage.

"Putting up petrol duty while prices are rising anyway would disaffect a very large proportion of the public which the Government currently needs on side.

"But a favoured tactic is to announce one measure to come in immediately and further measures in future years."

So the 20ppl for all biofuels could come in this year, with an intended increase to 23ppl in 2004 and 26ppl in 2005, for example.

"We simply don't know how much he'll be looking at the small things in this Budget," said Mr Collister.

Test marketing of biodiesel at flagship Sainsbury and Tesco is going well, according to go-ahead green fuel marketing company Greenergy.

"Sainsbury is very happy with the success of the fuel so far and may roll it out to other stores across the south-east, whether there is a tax incentive or not," said Greenergy's Tamara Earley.

That alone could generate a demand for up to 70 million litres of the 5% blended fuel.

"But there will be little UK production without a tax incentive," she added.

More significant demand, led by tax cuts, is needed before companies start investing in UK processing.

According to BABFO, total current biofuel production is around 0.02% of current use, all of which is biodiesel.

To meet EU targets, this would have to increase by 100 times, producing around 14 billion litres per year of 5% blended fuel.