Chancellor drops biofuels to save £500m

Alistair Darling’s first budget has pushed the pause button on the Government’s all-out support of biofuels. The Chancellor has abolished the UK government’s financial support of biofuels – the biofuels duty differential – in favour of the Renewable Transport Fuel Obligation (RTFO). The move should save the Government more than half a billion pounds by 2010.While acknowledging that “biofuels have the potential to make a significant contribution towards reducing emissions in the transport sector,” he also referred to incentivising “only the most sustainable biofuels, by shifting support away from the duty differential to the Renewable Transport Fuel Obligation in future years”. The RTFO forces fuel suppliers to ensure that 5 per cent of the fuels they provide is biofuel. The removal of the subsidy means that motorists will end up paying more for the same amount of fuel.This change of tack is the result of the King Review, authored by Julia King, vice-chancellor of Aston University, which was commissioned by the government and published today. She believes that factors such as change in land usage, nitrous oxide emissions from fertiliser use, processing methods and transport can significantly reduce the savings in greenhouse gas emission from using biofuels.So although the Chancellor claimed that “the Government believes that it is important that policy supports sustainable biofuels,” his announcement that Ed Gallagher, chairman of the RenewableFuels Agency, would lead a study of the wider economic and environmental impacts of biofuel production, including the impacts on food prices, speaks volumes of the new direction and the future price at the pump.

Ed Keohane