Memorandum by The Margarine and Spreads
Association
I write with regard to the House of Lords Inquiry
into the European Commission's EU Strategy for Biofuels. As an
industry we are fully supportive of the objectives of the Government
and European Commission in this area. We would however like to
take this opportunity to raise our key issue of "crowding
out" for the margarine and spreads sector in relation to
the current policy. This will also impact other food sectors within
the UK, due to the significant increase in demand for land.
A wide range of raw materials can constitute
feedstock supplies for the biodiesel industry however a number
of factors have resulted in rapeseed oil being the main supply
and therefore resulting in crowding out for our industry. The
factors of key concern are as follows:
— The current biodiesel standard (EN
14214), which excludes most oils except rapeseed oil. A review
of this standard would allow the use of oils other than rapeseed
oil.
— The underuse of by and waste oil
products. A review of the current legal framework regarding animal
fats and by-products would facilitate the use of these materials
for biofuels production.
Fuel tax exemptions and mandatory biofuels incorporation
carry important implications throughout the entire food, feed
and non-food chains and are both possible sources of distortions.
As a consequence the demand for rapeseed oil has increased dramatically,
as has the land space required to grow it. Our estimates are that
13.6 million hectares of land are required for target compliance
production in 2010. Given that total arable land in EU is c. 82
million hectares, 13.6 million hectares represents approximately
16.5 per cent of total arable land within EU. This estimate of
16.5 per cent of arable land is substantially higher than compulsory
set aside of 10 per cent and therefore the entire biofuel production
can not solely take place on set aside land. It will therefore
"crowd out" food production.
As background, rapeseed oil is the preferred
oil for the margarine and spreads sector for a number of reasons.
Firstly, it provides the desired properties for consumer acceptance
and due to the unsaturated nature of the oils the margarine and
spreads industry has played a positive role in the nation's health
by reducing saturated fat intake. Secondly, rapeseed oil can be
guaranteed as GM free. This is also the reason why it is used
by the biofuel industry as currently, there is little consumer
acceptance for GM biofuel in UK.
EXECUTIVE SUMMARY
1. The Margarine & Spreads Association
(MSA) fully supports efforts to tackle climate change, but by
doing so the most sustainable (from an economic, environmental
and social perspective) solution has to be found. A study by RWI[27]
(Rheinisch-Westfaelisches Institut fuer Wirtschaftsforschung)
shows however that the current focus on a limited number of feedstocks,
mainly rapeseed and palm oil, does not constitute the most sustainable
way forward.
2. The margarine and spreads sector uses
a number of the main feedstocks associated with biodiesel production
as a food ingredient. MSA therefore have concerns that by growing
non food crops on land previously used to grow food crops it will
result in insufficient volumes of edible oil for the food industry.
The ingredients of key concern are oils: primarily locally produced
rapeseed oil. The 5 per cent blend obligation will create a demand
for c.1 million tonnes of biodiesel, [28]which
exceeds current UK production. The pressure on land space will
cause a shortfall in supply which will both push up prices and
result in an increase in imports.
3. The RWI study estimates that 13.6 million
hectares of land are required for target compliance production
in 2010. Given that total arable land in EU is c.82 million hectares,
13.6 million hectares represents approximately 16.5 per cent of
total arable land within EU. This estimate of 16.5 per cent of
arable land is substantially higher than compulsory set aside
of 10 per cent and therefore the entire biofuel production can
not solely take place on set aside land.
4. Given the link between our industry and
the use of rapeseed oil for biodiesel we believe that the European
Commission and the UK Government must consider the food industry
when formulating new biofuel policies. Regulatory impact assessments
should be conducted before any new policy is introduced and these
should include sections which examine the potential consequences
for domestic food manufacturers, both in terms of their food production
and the energy they use. In addition, given the global nature
of this issue the impacts need to be assessed in a global context.
5. We would also encourage the Commission
to recommend more study on the impact of biofuels to the food
production chain before setting policy, or creating incentives
or targets.
BIOFUEL TARGETS,
ECONOMIC INSTRUMENTS,
BIOFUEL OBLIGATIONS
AND PRODUCTION
OF BIOFUEL
6. Biomass and biofuel are currently part
of a range of solutions to tackle climate change. We would support
their use where it makes sense environmentally and provides the
most cost-effective option in making a positive contribution to
climate change. We would also ask that when conducting a cost
benefit analysis of bioenergy that it is undertaken in a global
context. There should also be recognition that biofuels are just
one of a range of options available to tackle climate change.
There are many other effective, inexpensive and less impactful
solutions which could be used alone or together to tackle the
problem (for example, enhancement of power plants, improving car
engines, biomass residues etc.)
7. Biomass and biofuel can be obtained from
several different feedstocks and should be analysed and compared
individually. In terms of Greenhouse Gas abatement costs, biodiesel
originating from rapeseed oil and bioethanol originating from
sugar beats and wheat are more expensive alternatives (£/tonne)
for power/fuel generation than many other options such as bioethanol
from sugar cane, other biomass (reed, poplar, wood waste) and
wind power. In addition, the cost of producing bioethanol from
sugar-cane is roughly zero whilst the same matter produced from
sugar beat and wheat costs £145/tonne. Thus, these differences
have to be calculated and the best economically viable solution
applied locally.
8. Another feedstock for biofuel is oilseed
bearing trees eg Jatropha and further investigation into their
cost effectiveness should be undertaken, particularly given the
beneficial contribution such a potentially valuable raw material
could contribute to the economies of the developing world where
this crop is prevalent. Supply of jatropha would, unlike other
biofuels not be competing with demands for it from the food industry.
Having reviewed this feedstock and due to its drought resistance
and ability to grow on marginal land, it offers the possibility
of an economically, socially and environmentally sustainable contribution
to energy provision.
9. Bioethanol in Brazil is produced at full
cost-effective scale: Sugar-cane syrup is extracted for production
of sugar or bioethanol (for blending with gasoline as biofuel).
The residual liquid sewage can be used as fertiliser for the next
crop and the solid remains from crushing is burned to generate
power to run the entire facility with excess energy exported.
10. The same kind of approach can be found
in lignocellulosic facilities. They are able to retro-feed their
residues and offset the energy intake.
11. The cost effectiveness of biomass and
biofuel needs to be looked at in conjunction with the range of
other measures that can take place to reduce CO2 emissions. Studies
have demonstrated that in some situations it is more cost effective
to enhance (modernise) old conventional power plants than to use
biofuels, with the same or better results in CO2 abatement. The
impact of new car engines consuming less fuel/km, and biofuel/engine
improvement are very interesting developments and their cost effectiveness
again needs further investigation.
12. Second generation biofuels under development
are also promising alternatives and may eliminate some of the
disadvantages that biofuel crops produce. In addition, new technologies
such as wave and wind power generation should be investigated
further for their cost/environmental effectiveness.
13. Overall, there should be further research
undertaken to customise solutions which will lead to the most
cost-effective and environmentally beneficial outcome.
TRADE IN
BIOFUEL, TECHNICAL
BARRIERS AND
LOOKING AHEAD
14. Due to the incentives and higher prices
on offer to farmers, it is expected that land use will change
from food to non food crops. Raw material availability for food
purposes is likely to decrease and prices of major agricultural
commodities would increase to the point of drastically affecting
prices to consumers.
15. The graph below illustrates that based
on the target of 5.75 per cent biofuel by 2010, a 2.25 million
MT/Year growth in EU-25 biodiesel production for the next five
years would be required. Therefore basing this demand on rapeseed
oil would have a profound impact on the rapeseed market.
16. The graph below illustrates that Rapeseed
and Canola oil consumption is increasing both at EU and world
level. Therefore, an increase in demand at UK/EU level can not
necessarily be achieved by supply at a global level.
17. In the graph below the impact of the
increase in demand for biodiesel has already started to take hold.
The price of rapeseed (red) has started to increase dramatically
over the last few years and when compared to sunflower in blue
and soybean in green rapeseed has continued to rise where they
have fallen.
18. The graph below further illustrates
the price increases that have already taken hold. The price of
rapeseed is outlined in orange (top line), mineral oil as red
(bottom line) and Sunflower as yellow and palm oil as green.
19. Disruption of the food chain would be
serious, as world food production has to date only been able to
keep up with demand.
20. We would therefore encourage the European
Commission to recommend that the European Committee for standardisation
amend the current iodine rules to make more oils eligible for
biofuels production—such as sunflower oil. This would also
help reduce the pressure on current domestic biofuels, namely
rapeseed oil, as well as palm oil.
19 June 2006
27 The RWI study is a meta analysis of research data
conducted by Manuel Frondel and Jorg Peters RWI-Essen and
funded by the International Margarine Association of the Countries
of Europe (IMACE). The study reviews the environmental, economic
and land use aspects of rapeseed-based biodiesel. Back
28
D1 Oils. Back
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