Give biodiesel anothe Tax Break

CHANCELLOR GORDON Brown must give the renewable fuels industry a bigger tax break on biodiesel if production from virgin rapeseed oil is to be economically viable.

Dominic Vincent, of NEBiofuels – a consortium of agricultural input suppliers, farmers and the petrochemical industry – told a recent NFU Combinable Crops Conference that a further 8p/litre duty rebate was needed, but admitted it was an uphill battle.

 “We’re doing what the government wants – looking at new markets and creating environmental benefits and economic benefits for the north east,” he said. “But when you mention more subsidy and farmers in the same breath, ministers ask why?”

 With construction of a new 250,000t biodiesel plant – the biggest in the world – about to start on Teesside, Mr Vincent said there was a great opportunity for growers.

But without the tax rebate, the plant would look to used cooking oil and imported palm oil for feedstock, as opposed to oilseed rape.

The alternative to a tax concession, he said, was for ministers to adopt the recently agreed Renewable Transport Fuels Obligation, included in the Energy Act 2004, which would oblige fuel companies to include a proportion of renewable fuel in their supplies, creating potential new demand for oilseed rape.

 “At a 5% blend, if it all came from rapeseed oil that would require 625,000ha of rape,” he said. According to Mr Vincent’s figures, the cost at the forecourt of biodiesel from oilseed rape is 86.2p/litre based on a rapeseed price of £140/t, compared with the fossil fuel equivalent over the past 12 months of 78.4p/litre.

“For every £3.75 it increase in the oilseed rape price, it adds another 1p/litre to biodiesel production costs,” he added.

Biodiesel costs (p/litre) Refined virgin rape oil: 29.5 Esterification: 10.3 Duty: 27.1 Distribution: 6.5 VAT: 12.8 TOTAL: 86.2ppl [source: NEBiofuels]