Thursday, March 13, 2008

Bio Fuel duty set to rise by 20 per litre?

Alistair Darling gave the budget today, as expected.

His forecasts were somewhat more rosy than most independent commentators, and he did not do that much.

He did put up cigarettes, beer wine and spirits though, so the ferries are going to be busy.

The one thing he did not mention but is hidden away in the red book is the removal of the tax differential on bio fuels, worth something like 20p per litre, effective from 2010 where it will according to chapter 1, page 9, raise £550 million.

According to various other bits of the red book (See pages 7, 89, 95, and 107) this is all to encourage sustainable bio fuels, via the Renewable Transport Fuel Obligation or RTFO. Hooray I hear you say! (Or not as the case may be). However the problem is there is no corresponding account of how much the RTFO will cost the treasury.

In short the government is either taking £550 million by ditching the tax differential on bio fuels, a very un green measure, or it is not accounting for the RTFO in which case the budget has got yet more dodgy figures in it.

Good eh?


Timothy said...

I don't know what the RTFO is, but the use of the word "Obligation" implies that it is something the fuel suppliers have to comply with, rather than something they are encouraged to do by biofuels having a lower duty.

The obvious parallel is with the Renewable Obligation Certificates (ROCs) that the electricity supply companies are obliged to buy a certain amount of from the generators of renewable electricity.

In other words the change sounds like a way of making the market pay, rather than the Government.

Besides, from a green point of view this is all moot, or at best fiddling at the margins, since biofuels are generally not green. Indeed, the latest research suggests they can be responsible for more carbon release than fossil fuels! Quite apart from the problem that they drive up food prices at the expense of the poor worldwide.

Benedict White said...

Timothy, re look at bio fuels, and the effects on food prices.

We do need to class bio fuels as organic, after all there is no point in bio fuels which rely on fossil fuel generated fertaliser.

However they are fundamentally green.

As for the effect on food pricing that is interesting. We have large amounts of land in this country, and across Europe where people are either paid to grow nothing, or paid to grow the wrong thing that could be used for bio fuels.

Furthermore, the increase in the cost of foodstuffs actually helps the poorest, because the grow quite a lot of the food.

Timothy said...

Benedict, they are not "fundamentally green". The land that we are paying farmers to "set aside" is not wasted, it harbours meadow flowers, insects and other wildlife.

We could grow biofuels over all of it. We could encourage the Indonesians to cut down the rest of the Sumatran and Borneo rainforests to grow palm oil for our cars, and the Brazilians soya where the Amazon now stands.

I don't think that's a good idea. It certainly is not green from a biodiversity point of view, and there is mounting evidence that it releases more as much CO2 as ~30 years of growing biofuels on the land. This is a disaster happening right now, and we need to change biofuel policy asap.

Perhaps you'll argue that we would have to use accreditation processes to not accept biofuels grown on recently cleared land. Fine. All that will happen is that rich landowners will drive tenant farmers off their land to grow biofuel plantations on what is now farmland, and the farmers will have to cut down the rainforest to grow food.

The problem with high food prices impact mainly on subsistence farmers and the urban poor. Subsistence farmers will often need to buy food in years when their own crops are not sufficient. It's fair to say they never find that easy, anyway, but high prices will make it more difficult. The urban/slum poor obviously do not grow their own food...

Actually, come to think of it, biofuels are a prime example of why letting the market deal with this problem is a bad idea. The market will just create new problems by maximising profit and disregarding the environmental costs. This is an issue on which the government needs to take a policy lead. Thus far the Government is bottling it.