Biofuels to Cost U.K. Motorists $707 Million, Chatham House Says

Biofuels will cost U.K. motorists about 460 million pounds ($707 million) this year as the government increases their use in transport fuel, driving up food prices in poorer countries, Chatham House said.

Britain’s program to expand biofuel use doesn’t offer value for money and cheaper emissions reductions can be achieved elsewhere with existing technologies, the London-based think tank said today in a report.

European nations with climate change targets aim to boost biofuel use because it’s less polluting than fossil fuels. Environmental groups including Greenpeace criticize such policies for the impact on food prices in poorer countries by driving up demand for agricultural commodities and hastening deforestation as expansion encroaches on rainforest.

“Current biofuels are at best an expensive way of reducing emissions,” Rob Bailey, a researcher for energy, environment and resources at Chatham House, said. “At worst they produce more emissions than the fossil fuels they replace and contribute to high and unstable food prices,” he said.

The U.K.’s Renewable Transport Fuel Obligation program to boost biofuel use requires fuel suppliers to blend a proportion of the clean fuel with the petrol and diesel they supply. From today, the target rises to 5 percent of total fuel volume, the most ever consumed in the U.K.

The economic cost of displacing fossil fuels with more expensive biofuels containing less energy may be about 460 million pounds this financial year, with 322 million pounds in additional costs to businesses, Chatham House said.

Additional Target

An additional European Union target to supply 10 percent of transport energy from renewables by 2020 Britain must comply with will require larger volumes of biofuels pushing those costs to 1.3 billion pounds a year by 2020, the report said.

That scenario would entail ethanol consumption “several times over” current levels, according to Chatham House. The U.K.’s higher use of corn-based ethanol, accounting for 90 percent of ethanol supplied from April to October last year, will drive up corn and other cereal prices with negative consequences for poorer countries where cereal price spikes lead to increased poverty and instability, the report said.

“Policy making needs to catch up with the evidence base,” Bailey said. Without safeguards in EU or U.K. biofuel policy dealing with the impact of biofuels on deforestation and food security, the U.K. may fail to reach its EU target sustainably, according to the report.

To contact the reporter on this story: Sally Bakewell in London at sbakewell1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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