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Disagreement On Carbon-Based Tax Breaks For Biofuels

New UK legislation coming into effect on 15 April 2008 – the Renewable Transport Fuel Obligation – will mean that biofuels must show significantly smaller carbon footprints than their petroleum-based cousins in order to keep their government subsidies.

But governments of the UK, the EU, Germany and the US disagree seriously about biofuel footprints, and this could lead to confusion in the fuel markets, says Eric Johnson, editor of Environmental Impact Assessment Review, in an article published in the Society of Chemical Industry’s magazine, Chemistry & Industry (C&I).

For example, bioethanol made from US corn offers a carbon saving of over 40%, according to German proposals. The US government, by contrast, reckons a 22% saving while the UK rates it at 20% carbon negative. “Bioethanol from US corn will win in Germany, barely pass muster under US rules and lose in the UK,” he says.

“These differences will be problematic for producers. What works in Woking may not in Wermelshausen, and vice versa. Surely there soon will be a scramble of lobbyists to countries that have yet to define their rules. This also may be problematic for governments. The danger in proposing rules so different is that not just producers, but ultimately the public at large, may become cynical and begin to shy away from its so-far enthusiastic support of measures to combat global warming.”

Large sums of money are at stake. In 2007, tax credits handed out to biofuels in the developed world added up to €10 billion. But increasingly, the Government is looking to reward those biofuels that deliver higher carbon savings which will mean that future incentives will be linked directly to carbon savings, hence the new legislation in the UK, plus similar proposals have been tabled in Germany and the EU, and the legal framework is already in place for comparable rules in the Netherlands and the US.

Meral Nugent | alfa
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