Oils and fats as fuels – Realistic Prospects for Development in Ireland

kilkenny | environment | opinion/analysis Saturday April 16, 2005 20:55 by Darragh Murphy - BNS Rural Development 42 Parliament Street - Kilkenny

The Facts and Figures of Biofuels

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With a small amount of state support, equivalent to that which most EU Member States are already
providing, a beginning could be made to the establishment of a liquid biofuel industry based on oils and fats
in Ireland. This could provide useful benefits in terms of greenhouse gas abatement and improvement of
vehicle exhaust emissions, as well as recycling organic wastes, making a start to the development of
renewable fuel technologies, and helping to meet substitution obligations contained in current EU directive
proposals and the states obligations under the Kyoto agreement on greenhouse gas emissions. On the
subject of other harmful exhaust emissions, at least one recent major study has demonstrated that
rapeseed oil produces almost 40% less soot than diesel fuel.3 All scientific evidence points to the potential
of biofuels to support the government’s programme commitment to support renewable energy development
and meet its obligations in a relatively cost effective manner.
Background: Pure and reused vegetable oils and animal fats can and are be used as renewable fuels in
diesel engines. Some of these uses are already commercial, others are still under development. These
uses would reduce carbon dioxide (CO2) emissions by over 3 tonnes per tonne of fuel used, and so make a
contribution to achieving our Kyoto greenhouse gas target. Also these fuels have no sulphur, which
improves exhaust emissions, and they are biodegradable, which reduces pollution risks from spillages.
These materials could never replace more than a small fraction of the mineral diesel requirement. They
should be seen instead as premium fuels whose use should be directed to applications that make best use
of their health and environmental advantages.
Vegetable oils can be used as engine fuels in two ways:

1. In unprocessed form, with some peripheral modifications to the engine; This use is relatively new but
developing rapidly in Germany; engine conversion kits are on sale and are working very well. Fuel
processing cost and industry start-up costs are kept to a minimum. This approach would have particular
relevance in Ireland; it needs a low capital investment, both the fuel and the by-product cake can be
used locally, and it is possible to start small and expand later. At least three groups are presently
anxious to start up small local projects where they would grow rape on set-aside land, crush and feed
the cake to dairy cows or pigs, and use the oil in local vehicles.

2. Converted into biodiesel and used in any engine without modification: This use is widely accepted and
supported by the vehicle industry. Also the fuel has been proven to emit less particulates and smoke
than mineral diesel. This reduces the harmful effects of exhaust emissions in cities. About 0.5Mt/yr is
produced and used in the EU. It requires substantial plant investment, and processing adds about
5p/litre to the final cost of the fuel. Because of the need for a large scale to justify the plant investment,
it would be more difficult to get such an industry off the ground in Ireland.

Current oil/ fat use as fuel

Currently, the main fuel use of oils/ fats in the EU is biodiesel produced from crops grown on set-aside land:
mainly rape in northern Europe, with some sunflower in the south of the continent. Rape would also provide
a native source of animal feed protein, which is in limited supply at present. Ireland has about 30,000ha of
set-aside; if half of this could be brought into oil-seed production, it would provide about 15,000t of fuel oil
and 30,000t of oil-seed cake.
A cheaper raw material is recovered vegetable oil (RVO) oil from the food and restaurant industry. The use of
this material in animal feeds was disrupted by the 1999 Belgian dioxin-in-chickens incident, (which was traced
to RVO), and by the linking of foot-and-mouth disease to the feeding of food wastes to animals in the UK. EU
legislation to ban its use in animal feeds is under way. If no alternative use is found in the Republic, two
possibilities arise:

?? Collection will shrink, with the inevitable result of more being dumped into sewers and land-fills.

?? It will be exported outside the jurisdiction of the state to tax regimes that may soon offer excise remissions
of up to 50 cents per litre (in our terms).
Up to 10,000 t/yr of RVO could be collected. Teagasc’s Oak Park research station, together with research and
practical experience in Austria, shows that it can be used to make good quality biodiesel. The possibility of
using the material directly in converted engines is now being examined in Germany and Ireland.
Beef tallow, whose market as an animal feed has been disrupted by BSE, is another possibility. The disposal
of tallow from the rendering of BSE-risk offals (ca. 3000t) has been an environmental headache. This has been
eased by the use of the BSE tallow in boilers in rendering plants, but the market for non-BSE tallow is also
depressed. Total tallow production is about 80,000t, two-thirds of which goes to animal feed. The long-term
future of tallow as animal feed must be in serious doubt, and alternative outlets are very desirable.
Biofuel economics: Biofuel technologies are still relatively new. While the price difference between them and
fossil fuels has narrowed significantly in recent years, they still need some pump-priming support in the early
stages of competition with fossil fuels. Present costs vary from about 25 cent/litre for clean waste oil used and
unprocessed - to 50 cent/litre for biodiesel from fresh rape-seed oil. This compares with about 30 cents/litre for
mineral diesel before excise, VAT and distribution costs.
Subsidy for biofuels could be justified on many grounds:

?? Reduction of greenhouse gas emissions
?? Reduction of harmful exhaust emissions from diesel engines

?? Recycling of organic materials currently in or heading for the waste stream

?? Provision of native, renewable fuel supply with associated economic activity

?? Support of an economically and environmentally sustainable crops for farmers

?? Support for new largely rurally based enterprises

?? Development of renewable fuel technologies that will be needed in the future

?? Compliance with substitution obligations in upcoming EU Directive proposals
EU Biofuel Regimes

Some EU member states (e.g. France, Germany, Italy, Austria and Spain) promote vehicle biofuel
production by reducing road excise. This support mechanism is permitted by the EU. The Scandinavian
countries promote all forms of biofuel use by means of their carbon tax regimes. Germany has lowered
biofuels duties to 6%, the same as their VAT rate on foodstuffs. The recent UK budget announced that a
remission of 20p/litre (30 cents/litre) will be introduced on biodiesel in the 2002 budget. By that stage,
virtually all of Europe will have some form of support for vehicle biofuels. The UK measure is likely to
stimulate considerable biodiesel production, and in the absence of similar action here, a cross-border traffic
in feedstocks is likely to develop, with a potential loss of income opportunities to the state.
The EU is currently considering a proposal from the Transport Directorate to oblige member states to
achieve target substitution rates of mineral fuels by their equivalent biofuels. The targets proposed begin
with 2% by Dec 2005, extending to 5.75% by 2010. While it would hardly be possible for Ireland to meet
these targets, a beginning could be made by the introduction of some form of biofuel excise remission.
What needs to happen in Ireland to develop the potential of biofuels? Ireland has much to gain from a
development of the use of oils and fats as fuels. For example, a 30,000t industry based on RVO, tallow and
oil-seed crops grown on set-aside, with the fuel used in about 15,000 vehicles would achieve the following:

?? Halve the amount of particulates emitted by these vehicles

?? Reduce CO2 emissions by about 100,000t: A French study has estimated the value of CO2 abatement at
about €25 per tonne of CO2, or €39 per tonne of biodiesel used; this would amount to about 1.3 M
Euro/year for this project

?? Reduce sulphur emissions, and consequent acid rain damage to buildings

?? Maintain the viability of rendering plants.

?? Maintain the viability of RVO collection services.

?? Achieve about half the mineral diesel substitution target contained in the EU proposed directive
Benefits to the Rural Economy
While the environmental and economic benefits of the promotion of biofuels are general to the population,
its potential for the development of the rural economy are of particular interest. The profile of biofuel
enterprises and chains of supply will by their nature be disproportionately based in rural areas. The support
of biofuel developments would thus assist in the areas of:

1. Providing sustainable alternative enterprises for farmers. An aim which has proved problematic in
implementing.

2. The provision of downstream employment in rural areas, a sector that the Government has
prioritised for support under the National Development Plan (NDP).

Both the above would be considerably assisted by the development of a vibrant biofuels sector at a
comparatively minor cost to the exchequer.
Another environmental and economic benefit of the growing of biofuel crops, particularly winter rape, on setaside
or untilled soil is that such a cover crop would have in the reduction of nitrate leaching and run off to
such land. Such leaching has become a problematic issue for both farmers and state agencies and
compliance with the EU’s ‘Nitrate Directive’ has become a major issue nationally. Acceptable ground cover,
(from the set-aside regime point of view) would have multiplier effects in the development of a ‘virtuous
circle’ with regard to the resolution of the issue.
The Agreed Programme for Government makes specific reference to the need to institute “Eco-taxes” and
supports for renewable energies. The zero-rating of bio-fuels would be a very effective and cost-efficient
manner of partially addressing this commitment.
Costs to the Exchequer
Based on an adoption of the principle of treating biofuels as foodstuffs for the purposes of duties as per the
German model, the costs at a ‘zero %’ rating are still modest even when precluding the undoubted pay-back
to the state that will accrue from increased economic activity in the sector.
On the current and reasonably projected interest in the growing crops for biofuels, it can be estimated that
planting in the near to medium-term future (1 - 3 years) is very unlikely to exceed 500 hectares nationally.
The estimated biofuel oil yield would thus be in the region of 1,500 litres per hectare and the potential loss,
of excise duty, (based on a complete derogation), to the exchequer would be approximately €200,000 over
that period4. The combination of all the benefits from the project would easily out-weigh this cost. To
encourage the development and integration of the sector, a derogation should be provided for any use of
vegetable oils or animal fats as vehicle fuels (RVO inclusive). The market could then determine which
technologies are most appropriate in Ireland.
Form of any Derogation
During the period of the previous excise derogation regime there was some confusion as to the purpose of
the measure and who could avail of it. Despite some approaches by biofuel interests and individuals to the
Department seeking to avail of the derogation, none seem to have been granted to commercial entities.
Obviously, in line with the objectives of this submission, it is vital that any future measure should be easily
available to those proposing commercial initiatives.
Summary
The Ad-hoc Network on Biofuel Promotion hopes that the Minister of Finance and the Government will
agree to our request remove excise duty on biofuels in line with the arguments detailed above. Members of
the network would be happy to meet with the Minister or his representatives to discuss the submission and
its implications.


BNS Rural Development currently provides the secretariat to the Network. Communication
with the Network can be effected through:

Declan Rice or Darragh Murphy
BNS Rural Development
42 Parliament Street
Kilkenny


Acknowledgments

The Network extends its thanks to Dr. Bernard Rice of Teagasc’s, Oakpark Research Centre, Carlow for the
furnishing of much of the above research data.

Bibliography and Internet Links

Connor B.P., & Assoc (2002) Study and Development Strategy for the Use of Vegetable Oil as a Motor Fuel
in counties Kilkenny and Southeast Tipperary, Ireland. Commissioned by BNS Rural Development
Ahern, B & Harney, M (2002) An Agreed Programme for Government between Fianna Fáil and the
Progressive Democrats
europa.eu.int/comm/taxation_customs/taxation/information_notes/fuel.htm
www.nf-2000.org/secure/Fair/F484.htm
Attendees At Biofuels Networking Meeting At BNS Offices On Wednesday The 10th Of July 2002
Tommy Cooke, Chairperson – BNS Rural Development, 42 Parliament St, Kilkenny
Darragh Murphy (as above)
Declan Rice (as above)
Simon Dick, Clearpower Ltd, 36 Fitzwilliam Square, Dublin 2
Douglas ffrench-Mullen, Eilish Oils Ltd., Kilmurry, Newtown Mount Kennedy, Co. Wicklow
Brian Connor, B.P. Connor & Assocs, Richmond, Priests Road, Tramore, Co. Waterford
William Deevy, Goldstar Oils Ltd, 10 Maudlin Court, Thomastown, Co. Kilkenny
Stephen Harte, 54 College Orchard, Newbridge, Co. Kildare
Des O’Connell, Bellevel House, Castledermott, Co. Kildare
Paul Kelleher, Greencon, Co. Cork
Gabrielle Carroll, Wicklow Rural Parnership, Savillecross, Rathdrum, Co. Wicklow
Attended as observer:
Dr Bernard Rice, Teagasc, Oarkpark Research Centre, Co. Carlow
Non-attendee at meeting but indicated support for the submission and agreed to join network:
Anthony Browne, Cornerstown, Bridgetown, Co. Wexford
Dr Robin Howard-Hildige, University of Limerick, Plassey, Limerick
John O’Mara, Eilish Oils Ltd., Kilmurry, Newtown Mount Kennedy, Co. Wicklow