The FT reports - and what a surprise that is!- that the fall in crude oil prices from their summer highs of $80 a barrel during the Lebanon war to about $55 now, together with the rising costs of soft commodities that can also be processed into foodstuffs is catching the biodiesel industry in a tightening pincer movement:
In a week when ministers are expected publicly to emphasise the government's green credentials with the launch of consultation on implementing its Renewable Transport Fuels Obligation (RTFO), the Treasury will be told its fuel rebate scheme, meant to encourage uptake of "green" transport fuels, is not working.
UK biodiesel producers had expected now to be ramping up output and increasing production, ready for the introduction in April 2008 of the RTFO, which requires oil companies to include 2.5 per cent of renewables in transport fuel, rising to 5 per cent in 2010-11.
Instead, the producers are postponing expansion plans and running plants far below capacity because the rebate, fixed at 20p in 2002, is now too low to make biodiesel production economic at current prices. When the RTFO takes effect next April, there will be an additional incentive in the shape of a 15p-a-litre penalty for non-compliance for the amount by which an oil company's sales fall short of the 2.5 per cent figure.
But if the price of oil continues to fall and the price of biodiesel feedstock stays high or rises further, it could be cheaper for fuel suppliers to pay the penalty than to buy the biodiesel.
Not only are the greens and the new communities of "environmental entrepreneurs" i.e. hedge fund managers prowling Belgravia in chauffered black Range Rovers demanding more subsidies like the enormously lucrative Kyoto HFC scam, but a vital part of this new khmer vert is that most coddled social group of all, the farmers:
The Renewable Energy Association, the Environmental Industries Commission and National Farmers' Union representatives will meet John Healey, financial secretary to the Treasury, on Wednesday. They will stress that it is not only the future of the UK's biodiesel sector, and the supply prospects for UK agriculture, at stake.
My own personal view, regardless of the merits of biodiesel, which I expect will work, but not without the heavy use of genetic engineering for plants and enzymes, is that when it comes to dealing with farmers, Stalin was on the right track.
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