Alternative energy sources: Food, and fuel, for thought

Vegetable oil has emerged from the larder as a cheap, eco-friendly alternative to dwindling fossil fuels. But its supporters are outraged at new tax hikes that may stop them in their tracks. By Oliver Duff

The bottle of vegetable oil has had a mundane existence up to now. Relegated in the popular imagination to the greasy task of frying chips, it hardly seems the likely source of an environmental revolution set to change the way we drive.

Yet thousands of British motorists have chosen to abandon garage forecourt pumps and run their vehicles on waste vegetable-oil from pubs and restaurants, or pure oil off the shop shelf.

The logic behind this apparent madness is that using the oil cuts a vehicle's carbon emissions. If widely practised, it might slow global warming. It is cheaper than diesel, supports local entrepreneurs (by keeping fuel money in Britain) and reduces our reliance on fast-dwindling petrochemical resources. The politically minded "veg-oily" also boasts of how he has "opted out of George Bush's war for oil" in Iraq.

The practice took off during the winter 2000 fuel crisis, when truckers and farmers barricaded fuel depots in protest at rising prices. Unbeknown to the Government, a handful of campaigners took it upon themselves to break motoring convention and fill their tanks with the yellow liquid. Fuel crisis over, they saw no reason to stop the cheap and green experiment.

The first signs of what was then an underground movement could be observed in the aisles of Asda in Swansea. Men in grimy overalls were making furtive repeat-trips to the supermarket, filling their trolleys with 12 litres of vegetable oil at a time.

Staff thought it was just "one of those things", even though sales of the cheapest brand were 20 per cent up on the previous year, much higher than any other British store. "We thought they were doing a lot of frying," said Mike Hebson, store manager. "Healthy eating has not hit Swansea in a big way."

The alarm was raised only when transport inspectors, carrying out spot checks, discovered a car half-full of cooking oil. The driver said he had been buying it from the supermarket for 42p a litre for months - considerably cheaper than the 73p a litre that heavily discounted diesel retailers were charging - and that his engine ran beautifully, without any need for modifications. Unimpressed, officials impounded his car and fined him £500 for not paying fuel duty.

The problem with veg-oil motoring - aside from the more tricky process of buying oil in bulk, and the possibility of engine clogging if used with the wrong type of fuel-injection pump - is that the Government is cracking down on such environmental entrepreneurship. Facing allegations of mass tax evasion among motorists in south Wales, police were forced to set up "frying squads" of detectives to sniff out offending exhaust pipes and apprehend the drivers. An international media witch-hunt descended on the region.

To the credit of the veg-oil motoring pioneers, they have brought the movement above board in the past two years. "We realised we had to make it mainstream and do everything legally if it was going to have a real impact on the environment," said Dominic Goodwin, a Kent businessman who runs his modified car on pure veg-oil that he buys from a cash-and-carry store.

So more than 450 biofuel and fuel substitute producers registered with Her Majesty's Revenue & Customs (HMRC). Many more came clean and acknowledged they had to pay the 27.1p a litre fuel duty demanded by law the moment they poured cooking oil into their tanks.

Now they accuse the Government of betrayal, however. HMRC has thrown a proverbial spanner into the works, stalling efforts to keep veg-oilies on the right side of the law, by dramatically raising duty on veg-oil used as a fuel to 47.1p a litre. The decision threatens to bankrupt the burgeoning word-of-mouth backyard industry and drive its devotees to illegal cowboy garages.

"This will send a lot of us back underground," said one driver. "We want to help the environment - and before this we could save money at the same time. Now the Government has made it more expensive than using filthy diesel. A lot of us will just chance it and do it on the quiet. I know I will."

Another said that being caught for tax evasion was "a price worth paying" to help save the environment. "All green fuels should have no tax to encourage people to use them," he said. "The Government doesn't care about helping the environment, so we have to. All revolutions start by flouting the accepted authorities."

Others are determined to press ahead legally, hoping the authorities can be forced to retreat. "How are we ever going to get a green industry going if we strangle it with bureaucracy?" said Tom Swinburn, 51, a Co Durham farmer who is setting up a business mass-producing rape oil. "In Germany there are 240 plants like mine, helping the environment, because Germans don't have to pay duty on vegetable oil. It could be the same here."

Many of the 450 registered UK producers - and the hundreds more who haven't declared their existence to the taxman - are worried by the example of Plymouth Bio-Fuels, which was handed a demand for £16,000 backdated tax, that will force it to shut if it loses its appeal. A Somerset producer, Oz Oils, put prices up to cover the tax hike and lost most of its customers.

The veg-oilies believe that multinational petroleum companies, having invested in biofuel development with one eye on dwindling stocks of fossil fuels, are pressuring Whitehall to crush "the small man's motoring revolution" in its infancy.

"It is clear that the petroleum industry is putting pressure on the Government to alter the taxation regime in a way that favours them," said Mr Goodwin. "The Government should be encouraging manufacturers to make vehicles that will run on vegetable oil. It would be a fantastic solution to the problem of global climate change." He is challenging HMRC over whether he should be taxed at the same rate as diesel.

Mr Goodwin has the support of Caroline Lucas, the Green MEP for the South-east, who believes the Government may be breaking EU law, as well as common sense. "Tony Blair has repeatedly told us that tackling climate change is his biggest priority, but his Government doesn't seem to be taking the same view," she said. Road transport emissions grew by 50 per cent between 1990 and 2003, accounting for about a quarter of all Britain's carbon emissions.

HMRC denies it has reclassified vegetable oil into a higher tax bracket. A spokesman said it had "clarified" and "reviewed" it - meaning drivers now had to pay more. "The law has not changed since 1979. We don't accept pure vegetable oil as a biodiesel. It has to go through a process and have certain characteristics."

But processing - usually through trans-esterification - requires energy, making it less environmentally friendly. Proponents say that converted diesel engines (fitted kits cost from £400 to £1,200) run smoothly on neat vegetable oil or recycled waste vegetable oil from pubs and restaurants.

Elsbett, which manufactures a conversion kit, estimates that 30 million miles have been driven on vegetable oil, many of them in Germany, where the sector receives the strongest governmental support.

In the UK, the bitter war with tax collectors threatens to shatter the environmentally friendly driver's dream. Only by keeping veg-oil motoring cheap and legal, say fans, will the revolution ever move into the mainstream.

'We were faced with the prospect of huge tax bills,' Steve Dewar, business adviser, 34

Steve Dewar has run his VW Golf on biodiesel he has home-brewed using waste vegetable oil from restaurants for four years. He has recently scrapped plans to go into business with a Birmingham garage supplying other green-minded motorists.

"I've had a lot of interest locally - 40 people came to our pub meeting one night wanting to know how to do it themselves," he said. "There is genuinely huge potential here. It is easy, it is cheap and it is good for the climate.

"But when Customs said duty on veg oil was rising [from 27.1p a litre to 47.1p] we were faced with the prospect of huge backdated tax bills. It wipes out the savings we used to make.

"We have heard the horror stories of the company in Plymouth [Plymouth Bio-Fuels] with a £16,000 tax demand and it just destroys the best-laid business plans."

By day, Mr Dewar is a business adviser for Groundwork Birmingham & Solihull, an environmental regeneration charity which would like to help set up a local biodiesel manufacturer, generating jobs for the long-term unemployed.

"If we can do something ourselves in our own yards to cut carbon emissions and recycle a waste product, then it supports the government agendas of creating jobs in communities and reducing greenhouse gases," Mr Dewar said. "But they are trying to scare people away from doing this."

By Oliver Duff

Not just for cooks

* The concept of using vegetable oil as a fuel dates back to 1895 when Dr Rudolf Diesel developed the first engine to run on it. He demonstrated it in Paris in 1900 and outlined an experiment using peanut oil as a fuel. "The use of vegetable oils may seem insignificant today," he predicted, "but such oils may become in the course of time as important as petroleum."

* Virgin (unused) vegetable oil can be harvested from oil feedstock plants like sunflower seeds, rape seeds, soybeans and palm oil. Farmers say they would benefit from more lenient taxation on the use of vegetable oil as a fuel.

* Vegetable oil from local restaurants can be used but must be treated. If used without processing, the fatty acids would congeal, leading to expensive problems. The fatty acids are removed from the oil through transesterification, resulting in a smoother liquid similar to diesel. Methanol and lye, used in one treatment process, are toxic however. Great care is required.

* Some drivers use vegetable oil blends - mixing veg-oil with white spirit, or topping up their usual diesel with, say, 20 per cent veg-oil.

* Vegetable oil can only be used in diesel engines, and works better in older cars.

* Converting an engine to run on pure vegetable oil costs between £400 and £1,200.