Full circle

In 2003, amid widespread enthusiasm for the potential of biofuels to assist in both securing energy supply and reducing carbon emissions, the EU agreed the Biofuels Directive (2003/30/EC); a proposal aiming to promote biofuels and to increase use targets. Six years on, the industry has begun to mature and biofuels – defined as fuel derived from recently dead biological material, as opposed to fossil fuels, which are derived from long-dead biological material – are attracting attention for all the wrong reasons.

‘Anyone looking for bank funding for a biofuels plant in the UK today would not get many takers,’ says Ross Fairley, head of the renewable energy team at Burges Salmon. ‘The UK government can’t decide whether to support them, so why would a lender?’

The message coming through is simple: both business leaders and climate-change experts argue that the economic and environmental questions arising from the use of biofuels outweigh all the answers. The Gallagher review of the indirect effects of biofuels, published in July 2008 by the Renewable Fuels Agency (an executive non-departmental public body funded by the Department for Transport), found that ‘a slowdown in the growth of biofuels is needed’, which seemed to spell the end of expansion in this area. Sustainability is the biggest obstacle, and evidence shows that biofuels strategy accelerates deforestation, raises food prices and has doubtful benefits to the environment. More worrying for Western governments, the price of biofuels is considerably more expensive than other renewable options. Nevertheless, the US and most of the EU are eyeing the industry as a major source of the green energy mix going forward, even while its popularity is dwindling in Britain.

To read the rest of this article subscribe to Legal Business.