1. How do you know that the biofuels you supply really cut greenhouse gas emissions?

We have been counting the carbon benefits of our biofuels since January 2006. With the introduction of the RTFO in April 2008, we are now using Government figures to compare different biofuels and measure their greenhouse gas savings.

Not all biofuels offer the same carbon savings and our challenge as a business only to supply those that offer genuine whole of life savings. That means for example:

• Not supplying bioethanol derived from US corn or palm biodiesel that has caused deforestation or peatland destruction; and
  
  
• Favouring the lowest carbon biofuels as far as is commercially possible. All our bioethanol is produced from Brazilian sugar cane, which offers the greatest carbon savings of any crop-based biofuel. We are also working to increase our usage of biodiesel made from by-products.

Need more info? Read about our Biofuel sourcing practices.

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2. Which biofuels give the greatest carbon savings?

In general, biofuels made from crops grown in a sustainable manner in warmer and wetter tropical countries have a lower carbon intensity, both per hectare and per litre of fuel, than biofuels produced in colder, dryer northern climates where more energy input (e.g. nitrate fertilizers made from fossil fuels) is required.

To ignore these tropical sources of biofuel would significantly impact the world’s ability to cut carbon emissions through biofuel usage.

Need more info? Read our Carbon Perspective.

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3. How are biofuels affecting consumer fuel prices?

Biofuels are containing fuel prices by debottlenecking demand for petroleum fuel components.

Fuel prices at the pump are affected not just by the price of crude oil but also by the availability of refined oil products from which to produce petrol and diesel.

Worldwide demand for fuel is rising, yet there has been no increase in the amount of crude oil that refineries can process. A 1% increase in demand for fuel reduces world crude oil refining capacity by 25% which has a direct impact on oil market prices.

Biofuels ease the pressure on world crude oil refining capacity and therefore help to lower overall fuel prices. We estimate that the availability of biofuels today is reducing fuel prices by as much as $10 per barrel / over 3p per litre. Recent research conducted in the United States has shown that without biofuels, gasoline prices alone would increase to 20 to 30 cents per gallon or 10p to 20p per litre.

Need more info? Read our Biofuel and Consumer Fuel Prices Perspective.

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4. Are biofuels a cause of rising food prices?

In early 2008 many press reports blamed rising food prices on increased biofuel usage. However, the consensus amongst experts is that food prices have risen as a result of a complex mix of additional factors which vary according to commodity and region:

• Speculative trading activity on commodity markets;
• Increased food production costs due to high oil prices;
• Crop failure in key production regions; and
• Population growth and increased affluence particularly in India and China driving demand for meat and therefore grain-based animal feed.

Rising prices for wheat, for example, have been attributed not to an increase in demand but rather to a production shortfall in major producing countries caused by 3 droughts in 6 years.

Increases in rice prices seem to have been due to the commodity price boom. There were no underlying major market shocks to explain the price hike, with production and consumption growing at a similar slow pace.

The main cause of sharply rising corn (maize) prices seems to be a rapid decline in corn stocks. One of the causes of this was increased demand for corn for ethanol production in the US since 2003, although supply did increase to meet rising demand.

Sugar prices were not affected by the 'commodity rush' in early 2008, in spite of increased demand for sugar for ethanol production.

Need more info? Read our Food v Fuel? Perspective.

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5. What about palm oil sustainability?

According to Government figures, palm biodiesel palm from sustainable sources cuts greenhouse gas emissions at levels broadly similar to biodiesel derived from rapeseed or soy.

We are working to ensure continuous improvement in our palm oil sourcing:

• We are committed to sourcing RSPO-certified product as soon as this is commercially possible; and
• In the meantime we only buy palm if it can be traced back to well-managed plantations where there has been no recent land use change, whether rainforest or peatland destruction.

Three quarters of the world's palm oil is used by the food industry, with most of the remainder going into cosmetics and toiletries. Even allowing for increasing biodiesel usage, it is likely that only 2% of the world's palm oil will be used in biodiesel in Europe by 2010.

With reporting rules already in place under the RTFO and new rules expected at EU level, the fuel industry faces a much stricter sustainability regime than other palm users.

Need more info? Read our Palm Perspective.

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6. Will the UK Government's carbon and sustainability rules for biofuels really be effective?

We believe that Government incentives for biofuels should be;

• Based on carbon so as to encourage a shift to the lowest carbon biofuels.

For the first two years only the Renewable Transport Fuel Obligation (RTFO) targets will be based on volume of biofuel supplied. From April 2010 the intention is to reward biofuels according to the carbon savings offer, although this is currently under review.

• Contingent on meeting minimum sustainability criteria.

From the outset of the RTFO oil companies are required to report on the biofuels they supply but if no supporting evidence is available then they may report “unknown”. Whilst this at first appears weak, it is important to remember that the Renewable Fuel Agency intends to report on the performance of individual companies as early as September 2008 on a “name and shame” basis. Furthermore from April 2011 the Government intends to reward biofuels under the RTFO only if the feedstocks meet appropriate sustainability standards.

Need more info? Read our Renewable Transport Fuels Obligation Perspective.

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7. Do biofuels have "indirect effects"?

The Gallagher Review of the indirect effects of biofuels published in July 2008 recognised the complex relationship between food, land use, biofuels and fuel security.

The review noted that increased use of biofuels may effect demand for crops, which may in turn lead to changes in land use. However, the report also concluded that "there is considerable uncertainity regarding the type, scale and timing of indirect land use changes" that increased biofuel usage may cause.

The "indirect effects" of greater biofuel usage:

• Vary from country to country and from crop to crop;
• Are influenced by unrelated market conditions;
• Are not currently measured; and
• Cannot be measured by any one single methodology.

It will therefore be some time before any "indirect effects" are properly understood.

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