Loophole in 'botched' law threatens Britain's biofuels industry

The British biofuels industry has warned that oil companies are set to save millions of pounds because of a mistake by government lawyers in drafting biofuels legislation – an error that could lead to the demise of the UK's alternative fuel industry.

Officials from the Department for Transport, led by the former Defence Secretary Geoff Hoon, are due to meet with representatives of the biofuels industry this week to try explain the botched draft, which will allow oil firms to ignore the requirement to include small amounts of biofuels in their fuel mix for supply to motorists.

Biofuels producers claim that the drafting error is likely to see many of the UK's alternative energy producers go to the wall in the coming months.

"This error effectively renders the UK biofuels industry redundant until April 2009," said Terry de Winne, head of Allied Biodiesel Industries, the sector trade body. "This cock–up could completely destroy what little remains of the UK biodiesel industry by the end of the year."

Around 18 oil firms are expected to use the loophole, which in effect enables them to ignore the Government target of 2.5 per cent biofuel to be used in motoring fuel. Under the Renewable Transport Fuel Obligation introduced in April, it was intended that roughly every other litre of petrol sold on a forecourt would have to contain fuel made from crops or waste such as cooking oil. Under the terms of the scheme, retailers have to pay a 15p penalty for every litre by which they miss the targets.

The RTFO requires fuel suppliers to ensure that, by 2010, 5 per cent of all road vehicle fuel comes from renewable sources. It is hoped that the targets will eventually cut annual carbon emissions in the transport sector by between 2 and 3 per cent.

A spokesman for the Department for Transport could not be reached for comment.