UK bioenergy industry pins hopes on funds from Climate Change Levy

The UK Government could make up to 40% of its newly expanded Climate Change Levy (CCL) capital allowance scheme available to the renewables and the biomass energy sectors.

Speaking at British Biogen’s Annual Conference in Harrogate this week, the Head of the Agriculture Division of the UK Ministry of Agriculture, Fisheries and Food (MAFF) David Hunter said the Government would soon make a decision on how it could give financial help to farmers hoping to convert to growing energy crops, in the light of the European Commission’s failure to do so.

The Agriculture Minister, Nick Brown is, said Hunter, looking at options apart from EC funding to bolster the energy crop sector, particularly among livestock farmers looking to grow such crops. “40% of the CCL’s capital allowance scheme might be targeted on renewables, and the development of the energy crops sector is one option that is being looked at very hard. We are very close to making a decision but I cannot tell you today how these matters will fall out,” Hunter said.

On November 10, UK Chancellor of the Exchequer Gordon Brown announced in his Pre-Budget Speech that he would exempt the renewables sector from the Climate Change Levy (CCL). He also said he would treble the funding for the Levy’s capital allowance scheme for energy efficient products and technologies from £50M to £150M in the first year of the CCL’s introduction. The Treasury says this should allow for 100% first year capital allowances for energy-saving instruments.

At the moment, there is no EC funding to help livestock farmers move into energy crops such as short-rotation coppice (SRC) and miscanthus under the reform of the Common Agriculture Policy (Agenda 2000). However, arable farmers are eligible for planting grants and set aside payments under the Agenda.

The Trade Association for the British bioenergy industry, British Biogen, has lobbied the EC’s Agricultural Division for equal treatment of both livestock and arable sectors. While both sectors get planting grants of around 50% of the establishment costs of conversion to energy crops (approximately £2000/ha), livestock farmers lose livestock support subsidies in the process.

In addition, arable farmers get an annual area payment of £300/ha from the EC, even for set aside land. Livestock farmers do not. “We have always said that if you are giving this to people to do nothing, for God’s sake give it to the livestock farmers as well,” Peter Billins, Chief Executive of British Biogen told edie.

The collapse in sheep prices and recent food scandals have left UK livestock farming struggling. Many live in areas with low gas and electricity supply provision – such as Wales, the West Country and the North West – and would like to convert to growing energy crops to feed biomass power stations in those areas.

There is little hope of any EC funding for energy crops, Billins said. “The EC agricultural people are extremely disinterested in energy crops,” Billins told edie. “The contrast between the EU and the Americans is mind boggling. The EU is in the Dark Ages, they’re not grasping this at all. Even though there is a biomass department in the Energy Division, the EC hasn’t made the connection.”

As Agenda 2000 has failed to provide any funds for livestock farmers to convert, attention has turned to national sources of finance. Speaking at the conference, Hunter indicated the UK Government hopes to raise the level of up-front planting grants to livestock farmers. However, Billins told edie that where this money will come from and when it will be made available has not been made clear.

The best hope remains money raised by the CCL. Billins is optimistic that at least some money will come from this source, but questions whether that could be as much as 40% of the £150M made available by Gordon Brown. “Either way,” says Billins, “energy crops will be the most important component in the government’s renewables programme.”

The UK Government’s decision on its Renewables Review Policy is likely to be announced in January or February, Billins told edie.

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