‘We’ll have to become electricity traders’ – biofuels market reacts to UK petrol ban

Focus article by Vicky Ellis

LONDON (ICIS)–European biofuels market participants are wondering what their role will be in the future after the UK became the latest country to announce on Wednesday a ban on all conventional petrol and diesel car sales by 2040.

The UK government announced earlier on Wednesday a plan to tackle air pollution which, apart from the ban on petrol and diesel vehicles, would include funds for local authorities to set up their own plans to reduce pollution levels in UK cities.

Some bioethanol and biodiesel market participants were digesting the news with humour.

“We should start trading electricity now,” joked one biofuels trader.

Bioethanol and biodiesel are blended into gasoline and diesel respectively, thanks to EU mandates designed to reduce carbon emissions with the use of biofuels.

As a result, their fortunes are closely linked to fossil fuels.

“It will be a massive impact – you don’t need crude, don’t need refineries, fuel, so you don’t need to blend bioethanol in fuel which is no longer existing,” added the biofuels trader.

Another biodiesel market player described the move as a “massive step”, adding: “If there are going to be no diesel cars, there are going to be no diesel requirements, or very little.”

The announcement has left market players confused about which vehicles may be affected.

“The question is, is it just for cars? If so, there will still be some diesel demand, and whether that will then become more heavily dependent on biodiesel, who knows. It’s a long way off,” said the biodiesel source.

The CEO at EU major producer CropEnergies, Joachim Lutz, which runs an ethanol plant at Ensus in the north of England, said ethanol reduces GHG emissions but also lowers fine particulate emissions, adding “there was no need to wait another two decades” to achieve that.

“In the long term, there might indeed be a change in mobility concepts, especially when it comes to the various combinations of petrol and electric engines [hybrids], but that is still some decades in the future,” said Lutz.

“The challenge in the short- and medium-term is what to do about the emissions of the existing vehicle fleet. Not everybody can afford to buy a new car every few years.”

Bioethanol trade group ePure was prompted to ask why the government is ignoring a quick win on emissions by rolling out E10, a mix of 10% ethanol in petrol, as urged by UK MPs in late 2016.

Its secretary general Emmanuel Desplechin said ethanol use reduces greenhouse-gas emissions by more than 66% on average, compared to fossil petrol, and would also result in lower emissions of pollutants like carbon monoxide, nitric oxide (NOx) and particulate matter.

“It’s interesting the government is making these plans when a new poll shows UK motorists overwhelmingly support the use of environmentally friendly E10 ethanol blend as a method of lowering transport emissions,” said Desplechin.

According to a poll conducted among 25,000 UK motorists by Fair Fuel, more than 82% of respondents supported the government promoting E10.

The view was echoed by the Renewable Energy Association (REA), a UK trade group, with its head of policy and external affairs, James Court, who also said the government could already reduce emissions greately by increasing the amount of renewable biofuels in the petrol mix. 

He defended the UK’s renewable fuel industry, which would support more than 10,000 jobs and has attracted more than £1bn of investment in UK’s renewable fuel manufacturing infrastructure, adding it was “critical” during the transition towards an electrified fleet.

For those in the industry, it feels as if the goalposts were constantly moving, according to the biodiesel source.

“[The news] Makes you crazy… You’ve got refineries in Europe built to produce gasoline, then Europe turns around and says they want everyone to drive diesel, and now diesel is being demonised, there are more gas cars now than has been for the last 20 years, so who knows.”

There is also a question of what happens to the agricultural industry, which supports biofuels providing feedstock.

Despite the concerns, with reports of nervy traders questioning what they will do after 2040, others were more sceptical.

“The death of liquid fuels has been rather early pronounced,” said another European bioethanol source.

“For a start, there’s not enough [electric vehicles] or lithium to make replacements for trucks and cars… It’s one of the things governments like to say, kill dirty cars. The reality is lots of ICE (internal combustion) engines will be kicking around for some time to come.”

In the very long-term, ethanol could be used in other applications, concluded CropEnergies’ Lutz.

“And as for the future: Ethanol made from renewable resources can not only be used as a fuel for combustion engines. Oil has a wide variety of applications and we all know it is limited. For many of these applications, we will have to look for sustainable carbon sources, such as ethanol.”

Image above: ImageBROKER/REX Shutterstock