Towards a UK Strategy for Biofuels - Public Consultation

9. Options for UK targets

9.1 2005 Target

The UK has already taken a number of steps to promote uptake of biofuels which has stimulated a rapidly expanding market. With these measures in place, and the additional incentives announced in Budget 2004, we estimate that the UK could achieve as much as 12 million litres a month in 2005. This would represent a six-fold increase over today's levels of biofuel sales and a significant expansion of the UK's biofuels industry. Because most biodiesel is used in a blend of up to 5 percent, this would also mean that as much as 10 percent of all diesel being used in the UK included an element of biofuel.

In comparison with the EU's reference values, setting such a figure as a target may seem unambitious. However, given the UK's low starting point; the considerable growth this target implies; and the limited time between now and the target period, we feel it represents a realistic target for the UK.

The Government therefore proposes that the biofuels target for 2005 should be based on our best projections of biofuels sales by the end of 2005, based on Government support announced in the recent Budget.

Q16. Do you agree that the basis of our biofuels target for 2005 should be our best estimate of biofuels sales given current levels of support?

Q17. Do you agree with our projections of 12 million litres a month biofuel sales by the end of 2005?

9.2 2010 and Beyond

As this paper has illustrated, there is no question that biofuels could start delivering significant carbon savings by 2010. The UK biofuels sector is confident that, given sufficient support, it could readily produce enough biofuel to achieve a 5 percent sales target by 2010. This in turn could mean carbon savings of close to 1MtC a year, which equates to some 3 percent of total road transport emissions. There would be other benefits too, to the rural economy and in terms of increased fuel security and diversity of supply.

But there are a number of factors which also need to be considered. Achieving the EU's reference values would not be straightforward given that many motor manufacturers do not warrant their vehicles to run on biofuel blends higher than 5%.

And the costs of achieving this level of biofuel sales would be significant. As set out in the EWP, the costs of carbon reductions in the transport sector tend to be higher than the costs of delivering similar carbon savings in other sectors, and the cost of biofuels reflects this. With the exception of biodiesel from WVO, our analysis suggests that the costs of saving a tonne of carbon from biofuels in 2010 would be between £350 and £750. By contrast, the cost of carbon saving from offshore wind, for example, is estimated at between £240 and £380. Energy crops for power generation is estimated at between £220 and £480. This means that there are opportunity costs associated with Government support for biofuels - similar investment in carbon-saving options in other sectors could yield greater results, but there may be limitations to achieving sufficient carbon savings by the use of cheaper options alone.

There are other considerations too. The carbon savings of biofuels can vary considerably according to the processes and feedstocks used, as can the impact on biodiversity. Imports could come from unsustainable sources. And future technologies offer the prospect of far greater carbon savings than today's - if the technology can be developed.

The Government's Alternative Fuels Framework set out in PBR 2003 stated that policy must be environmentally, economically and socially sustainable, and it must be affordable and provide value for money. Today's biofuels are expensive, and they are likely to remain so to at least 2010. But we cannot ignore the long-term potential of biofuels to deliver significant carbon savings. Our longer-term climate change objectives are likely to require a shift to renewably produced fuels, and investment in today's biofuel industries could be a stepping stone to the development of tomorrow's very low carbon biofuels technologies.

The questions are how much investment is appropriate now and how best we target that investment to deliver the maximum benefit.

The Government intends therefore to focus on developing a framework of policy measures to deliver benefits over the long term.

This document has outlined the main options under consideration, but we also welcome thoughts on other possibilities. We are particularly keen to hear views on the idea of a renewable transport fuels obligation, and the long term prospects such a mechanism might present not only for biofuels, but also for delivering other low carbon fuels - such as hydrogen. Given the range of carbon savings possible from biofuels, we are also keen to hear views on how we might best maximise the carbon benefits over the long term.

The EU Directive does not require Member States to set targets for 2010 until July 2007. Given current levels of uncertainty - for example about the prospects for policy tools such as an obligation and new 'input taxation' methods, we do not intend setting a firm 2010 target at this time. We intend to consult again on our indicative 2010 target in due course.

However, despite the fact that we are not at this stage proposing to set a formal 2010 target, we are clear that our aspiration for 2010 should be to get the UK on a path towards at least the levels of biofuels sales envisaged in the EWP for 2020. This would imply biofuels contributing at least 2 and possibly as much as 5 percent of road fuel sales by 2010. We would very much welcome an early indication from consultees on where, within this range, we ought to be aiming, given the considerations outlined above.

Q18. Do you agree that we should defer setting a 2010 target until 2007?

Q19. What are your views on the level that a 2010 target should be set at?

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