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The Government intends to raise duty on biofuels by 20 pence per litre (ppl) next spring. This will make the tax 53 ppl and will be the death of the UK recycled biodiesel industry.
The support mechanisms put in place to encourage biofuel growth have failed leaving business owners facing ruin despite the governments stated intention to grow UK sustainable energy production. Recycled biodiesel made from used cooking oil is, according to the governments own figures, the most sustainable form of fossil diesel replacement fuel.
As a vegetable oil supply company we sell oil and pay tax. After the customer has used our product we collect it and recycle it into fuel. So doing we are forced to pay 53ppl additional tax on the same oil for recycling the waste into biodiesel. This is double taxation of the oil and a heavy penalty to pay for being a contentious supplier acting in a sustainable manner. How can double taxation of such environmental responsibility be akin to government support for biofuels?
If more manufacturers and suppliers were concerned about the fate of the products they sold, the environment would be much less polluted than it is.
This tax increase will spell the end of low smoke, low particulate, low carbon biodiesel sold to thousands of vehicles across London every day and will reverse the excellent positive impact on air quality and CO2 reduction that they have produced through their biofuel.
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See
the opinion of leading business consultants Grant Thornton here |
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As a result of this legislation, air quality in London will fall. |
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The Legislation |
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The Government introduced the Renewable Transport Fuel Obligation (RTFO) in 2007 to encourage businesses and especially petroleum companies to expand use of biofuels by adding it to the fossil fuel products. It also transferred the cost of the 20p per litre biofuel duty relief to the petroleum companies who bought extra carbon credits from biofuel makers. These credits (RTFCs) are supposed to be the new support mechanism.
Initially this looked like the start of a growth period for biofuels and many large players expanded the market with virgin biodiesel made from oil crops grown in the developing world. At the same time a home grown UK industry quickly developed, this one based on recycling used cooking oil from our cities. It is these UK fuel producers that are not served by the RTFO carbon trading system. |
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The current legislation threatens recycled biodiesel manufacturers for several reasons. |
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- The system specifically excludes recycled biodiesel from the benefits but not the taxation which rises massively next springs.
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- Petroleum companies do not want UK made recycled biodiesel. They want Indonesian growth Palm biodiesel and other intensively grown cash crop fuels. This is because of their desire to standardise all of their fuel.
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- Also, the de facto minimum trading volume for the carbon credits is 1million or more. This is beyond the production capacity of many recycling companies as they are new and still growing. This volume threshold was set by default through purchasing behavior of the petroleum industry.
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- Due to concerns about the environmental damage virgin biodiesel causes in the developing world , as published in the Gallagher Review, the amount of biofuel petroleum companies have to add to fossil fuel was halved from 5% to 2.5%. This removed the need for credits making them instantly valueless. In 2008 RTFC were worthless. In 2009 they are worthless - there is no support in the RTFO
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- The RTFO is fundamentally flawed. The UK biofuels industry requires long term government support, but as the obligated companies expand their virgin oil biodiesel production, their obligations will be met and the value of the credits will fall. This directly penalises recycled biofuel companies, despite recycled biodiesel being a different product, made for a different market, and is essentially nothing to do with virgin biodiesel or fossil fuels. Why should london lose its biodiesel companies because Texaco has put 2.5% bio in its fossil fuel??
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- Finally, the effect of raising the duty by 20p per litre on cashflow is going to be a killer blow for many recycled biodiesel companies. The duty will have to be paid at the point the fuel is made, but earnings from selling fuel credits come much later because of the 1 million threshold. This sudden increase in operating costs will cripple most biofuel firms.
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This legislation was designed for very large industrial producers making biodiesel from virgin vegetable oil, not for local companies recycling used cooking oil. As a result, and as a function of this difference in scale, recycled biodiesel producers such as Uptown Oil have been excluded from the benefits of the RTFO, and instead are penalised by it. |
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The RTFO is designed to offset the loss of the current duty relief on biofuels (currently 20p per litre) which will be removed in the 2010 Chancellors budget, however as it does not benefit recycled biodiesel producers, there will be no offset and recycled biodiesel producers will lose all benefits and support from the government. |
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Yes, you did hear that right, the RTFO, the law designed to promote use of biofuels will be responsible for killing the UK's recycled biodiesel industry. This is an unforeseen impact of the legislation and is intuitively counter-productive. |
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We propose that recycled biodiesel should be exempted from fuel duty
and the RTFO scheme to support its growth.
Instead of being heavily taxed, twice, recycled biodiesel should be encouraged like other recyclables - glass, metal, paper and plastics
Recycled Biodiesel is the lowest carbon, most sustainable form of city diesel fuel.
Its environmental advantage should be harnessed for the city of London to lower air pollution and carbon dioxide emissions |
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Want to help? - see our open letter to MP's here, you can find your own MP here. |
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Recycled biodiesel is the cleanest, most efficient form of biodiesel |
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The used cooking oil we recycle is sourced, made into biodiesel and sold locally. Fossil fuel diesel is imported from thousands of miles away. The CO2 emissions from transporting fossil fuel adds massively to the CO2 produced by the fossil fuel itself. |
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| Please take a look at this data from the Department of Transport |
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| Summary |
Recycled Biodiesel is the cleanest, most efficient form of biodiesel. It can deliver significant positive impact to London’s air quality. The RTFO is inappropriate for smaller recycled biodiesel manufacturers as they are excluded from the benefits it offers. Exempting recycled biodiesel from the Road Transport Fuel scheme would resolve this situation, encourage biofuel development and create new jobs. |
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How long do we have to procrastinate about fuel policy? |
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