The European Union's biofuels industry is unlikely to expand until the debate about their impact on climate change is resolved and clear policies emerge, the head of major UK biofuels firm said on Wednesday.
"The (biofuels) industry is being held back by a lack of robust discrimination between what is good and what is bad," Alwyn Hughes, chief executive of Ensus said, referring to the differing environmental footprints of biofuels.
The European Commission is due to report to the European Parliament later this year on a concept known as indirect land-use change (ILUC).
Biofuels are seen by advocates as a way to cut greenhouse gas emissions that contribute the climate change. There are concerns, however, that changes in land use caused by the expansion of biofuels may in some cases lead to the release of carbon stored in soil, offsetting any positive benefits.
Nine environment groups issued a report this week that concluded the EU's goal of getting 10 percent of transport fuel from renewable sources by 2020 could accelerate climate change as well as deprive the poor of food.
A major strategic review of the EU's energy policy was issued on Wednesday.
The clearance of rainforests to allow for the expansion of crops such as palm oil, which can be used to make biodiesel, is often cited as one example of when biofuels could have a significant adverse impact on climate change.
"The uncertainty around this (the ILUC debate) clearly puts question marks over the growth of the industry but it is equally clear there are some very good biofuels out there," Hughes said.
"The NGOs (environment groups) are really having a go at the people who are driving deforestation. I agree with them that they should be taken out of the (biofuels) mix," Hughes said.
Hughes said his company would need "a clear policy framework in order to allow us to invest."
"I think it is important the ILUC issue is resolved at the end of the year clearly and crisply," he said.
REFINERY OPERATIONS IMPROVING
Ensus runs one of Europe's largest biorefineries in north-east England which has the capacity to make around 400 to 450 million liters of bioethanol a year from about one million tons of feed wheat.
The refinery entered commercial operation earlier this year and now regularly runs near capacity, Hughes said.
"We are often running at above a one million ton (per year) wheat rate," he said.
"We are clearly running a lot better today than we were three, four months ago. Hopefully in 12 months time we will be running even better," Hughes added.
Wheat prices has risen sharply this year, boosted partly by a drought in Russia. Earlier this week feed wheat futures in London climbed to a 2-1/2 year high.
"We all know that wheat prices have been higher than would have been expected given the level of (global) stocks but ethanol prices have responded (risen) so margins in the market are reasonable," Hughes said.
Hughes also noted that prices for the two major alternative feedstocks for ethanol production, corn and sugar, have also risen strongly.
UK feed wheat supplies are expected to be tight in early 2011 due to lower overall availability and a brisk start to the 2010/11 export campaign due partly to a lack of competition from the Black Sea region. "We are planning at this stage at get all our (wheat) requirements from the UK but the position is tighter this year," he said.
Ensus is owned by two U.S. private equity funds, the Carlyle Group and Riverstone.