Select Committee on Trade and Industry Appendices to the Minutes of Evidence


Memorandum submitted by People, Paper, Oil and Cans

This submission has been written by People, Paper, Oil and Cans, a community based organisation located in Wandsworth, London. Our organisation is starting a scheme to combine waste recycling, biodiesel production and meaningful and productive employment with particular emphasis on people with learning and physical disabilities.

  We believe that the rate of duty on fossil fuel derived motor fuels should not be reduced, but that income raised from this source will be required to develop an active biofuels industry in the UK and support the tax relief and incentives that will be required to promote change.

  The impact of motor fuel taxation should not be considered in isolation from the other costs that make up the price to the public. Currently motor fuel used in the UK is exclusively derived from petroleum oil, which is traded on world commodity markets and therefore the price is subject to the effects of supply and demand. Estimates of the unexploited reserves of petroleum oil remaining vary, but the majority are within the 50 to 100 years timescale. In the UK our supplies of domestically produced petroleum oil are even more limited; supplies may be available for 10 to 20 years. Predictions of the longevity of petroleum oil supplies are also affected by the rate of usage, which is currently increasing at 5 per cent per annum[1]. The limitations in the ability of petroleum oil supply to meet demand are demonstrated by events such as took place on Thursday 19 October 2000 when motor fuel prices rose by 2 pence per litre (see attached report)[2]. Therefore, this type of price rise can be expected to continue with the progress of time.

  Various lobbies have suggested that motor fuel taxation should be reduced by 15 pence per litre and the Conservative party has proposed a three pence per litre reduction. It should be plain that reductions in excise duty could be wiped out very quickly by movements in the commodity price for petroleum oil and therefore a taxation reduction of this type can only be a short term fix for the current situation.

  It has been suggested that it is extravagant in the extreme to prospect for such a valuable resource as petroleum oil and then burn it. The most important uses for petroleum in future generations may well be for the manufacture of plastics and other important petrochemicals. Therefore we have a responsibility to ensure that they are available for as long as they are required.

  In addition to the problem of the limited supply of petroleum oil, the effects of the use of fossil fuels, including motor fuels derived from petroleum oil, are well documented. Pollution and carbon dioxide emissions stand out as being particularly significant problems caused by the use of motor fuels derived from petroleum oil. Pollution causes health problems, building and environmental damage. The Intergovernmental Panel on Climate Change has been established because increasing carbon dioxide levels may present the greatest problem yet to the world we live in. The burning of fossil fuels is largely responsible for the increase in carbon dioxide levels, which have been linked with changing weather patterns and rising sea levels. Consequential costs such as health care, insurance and land loss are not borne by the petroleum industry on a "polluter pays" principle.

  Anyone who is concerned to provide the best possible future for their children and future generations can understand the benefits that will result from reducing the consumption of petroleum oil. However, in order to maintain their quality of life, people will expect replacements for existing motor fuels to be available. This will require considerable investment and incentives to change.

  Situations involving rapidly rising petroleum oil prices have occurred at previous times in history, most notably during the 1973 crisis. Following the initial stages of this period, the petroleum oil consuming nations invested in energy efficiency and alternative energy technology. Significantly, the petroleum oil producing nations took heed of the threat to their industry that arose from reducing oil consumption and consequently prices fell back over the years following the crisis.

  If the Government considers that it is appropriate to give leadership under these circumstances, rather than appeasing popular demands, then maintaining the level of motor fuel taxation for fuels derived from fossil sources is an appropriate response to the current situation. This should be accompanied by reductions in taxation and other incentives for alternative fuels and other developments that will reduce the consumption of fossil fuels.

  A replacement for diesel fuel is already well developed. It is known as "biodiesel" and many countries around the world have active industries and research programmes. A study by the Austrian Biofuels Institute[3], published in January 1998, investigated 28 countries and found that there were 85 biodiesel plants in 21 countries. The UK was not among the countries with a biodiesel plant.

  In 1998 the following countries, within Europe, had tax policies relating to biodiesel as shown[4]:

    Austria—95 per cent tax relief;

    Belgium—100 per cent tax relief for experimental projects;

    France—tax incentives for the use of biodiesel blended with petroleum diesel;

    Germany—100 per cent excise tax relief;

    Italy—tax relief up to a maximum quantity of 125,000 tonnes;

    Netherlands—tax relief under review;

    Spain—tax relief on experimental projects;

    Sweden—tax incentives in place.

  Development of biodiesel in the UK has been hindered by the lack of an appropriate tax policy and consequently the relevant expertise and infrastructure for manufacturing biodiesel has not been fostered.

  Biodiesel is the first (and so far only) alternative fuel to have a complete evaluation of emission results and potential health effects submitted to the US Environmental Protection Agency (EPA) under the Clean Air Act Section 211(b)[5]. These programmes include the most stringent emissions testing protocols ever required by EPA for certification of fuels or fuel additives in the US. The data gathered through these tests complete the most thorough inventory of the environmental and human health effects attributes that current technology will allow. This implies that the US authorities consider that biodiesel offers worthwhile advantages over petroleum diesel and that biodiesel will form a significant part of their programme to reduce emissions. Over 30 million miles of testing have been carried out using biodiesel in the US.

  Biodiesel can be manufactured using waste cooking oil; in this case it could replace up to 2 per cent of current petroleum diesel consumption.

  Biodiesel offers many advantages:

    1.  biodiesel is renewable and produces no net carbon dioxide output when burned;

    2.  extensive testing has shown that Biodiesel can offer significant improvements in emissions, particularly in terms of polyaromatic hydrocarbons (PAH) which are the major carcinogenic compounds present in "petrodiesel" exhausts and sulphur compounds which contribute to acid rain;

    3.  using waste cooking oil to produce biodiesel minimises a major waste disposal problem and health hazard which would either go to landfill or be incorporated into animal feed;

    4.  biodiesel is biodegradable and has a low toxicity and therefore presents a lower risk to the environment than "petrodiesel";

    5.  biodiesel can be used as a direct replacement for petroleum diesel and therefore can be used without expensive vehicle modifications or new engine design;

    6.  biodiesel can be blended in any ratio with petroleum diesel;

    7.  if biodiesel is in short supply, vehicle operators can return to using petroleum diesel when necessary;

    8.  existing storage and distribution systems can be used for biodiesel;

    9.  biodiesel has high lubricity and cetane number, which can be used to offset the loss in these properties caused by the move to using low sulphur petroleum diesel.

  Biodiesel is then a first step in the search for acceptable, clean, sustainable fuels. Other alternative fuels will also need to be developed and will be encouraged by the successful deployment of biodiesel in the UK.

  Maintaining the current levels of tax on fossil fuels and using (some of) the revenue to support the development of an alternative fuels industry is the appropriate response to the current situation.

30 October 2000

1   The Certainty of Oil, Back

2   Keyvan Hedvat, Reuters, displayed on 20 October 2000. Back

3   Review on Commercial Production of Biodiesel World-wide 1997, Austrian Biofuels Institute. Back

4   Update July 1998, The Non Technical Barriers Network, Altener, Directorate General for Energy (DGXVII) European Commission. Back

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