Written Evidence submitted by Vivergo Fuels (TER0287)
Introduction
Vivergo Fuels is Europe’s second largest bioethanol producer, with a £350m plant located in Humberside. We employ 150 staff directly, many in skilled STEM roles, and support over 3,000 jobs across the region. Our bioethanol – a low-carbon renewable fuel which is blended with petrol – is produced from locally grown animal feed-grade wheat (not for human consumption) sourced from about 900 farms an average distance of 34 miles from our site, providing a valuable domestic market for British farmers. As a co-product, we also produce protein-rich animal feed which is used by over 800 pastoral farms throughout the UK, reducing their requirements for less sustainable imported soya products. Our bioethanol is currently blended with petrol at a rate of 5%, helping to lower greenhouse gas emissions and improve air quality. If this rate was increased to 10%, which is common in many other countries including in the USA, it would be the emissions reduction equivalent of taking 700,000 cars off the road.
UK-US Trade and the bioethanol industry
We are mindful that when negotiating new trade deals, the UK should seek to promote not just ‘free’ but also ‘fair’ trade which provides a level playing field and does not disadvantage British companies.
The US bioethanol industry, as a direct recipient of agricultural produce which is heavily subsidised and often genetically modified, and using refineries powered by cheap shale gas which is largely unavailable in Europe, can produce a large amount of low cost bioethanol for use both domestically and via export. The US bio-ethanol industry has received billions of dollars of both Federal and State subsidies over many years, most notably in forecourt pump infrastructure to ensure the wide-scale adoption of this fuel. In addition to this high domestic demand, as the world’s largest producer the U.S. is the largest exporter of ethanol. In 2013 the US produced 50bn litres of ethanol compared to the EU’s 6bn, and exported 2.5bn litres.
If this large amount of low cost bioethanol found its way into the UK market through a free trade deal, bearing in mind these huge subsidies and agricultural advantages, it would cause significant harm to British bioethanol producers who would be unable to compete on equal terms due to the lack of subsidies and environmental restrictions in place domestically.
In response to this occurring previously, with cheaper US bioethanol being dumped into the European market and pushing domestic producers out, the EU imposed ‘anti-dumping’ duties in addition to the standard tariffs. We would request that any future trade deals aim to mirror these anti-dumping regulations to protect the UK industry. (it is worth noting that due to delays in the implementation of policy in the UK and the EU, that there remains an excess of installed capacity in both.
Trade deals with third-party countries
It is also important to ensure that this low-cost bioethanol cannot enter the UK via the ‘back door’ and as such, trade deals with other countries, particularly in the Americas, also need to take account of this threat and mitigate for it.
For example, there has been a concern that the Comprehensive Economic Trade Agreement (CETA) between the EU and Canada may enable this, either by US bioethanol being exported under the banner of Canadian produce or more probably due to it using the North American Free Trade Association deal to displace Canadian bioethanol which would subsequently be exported to the EU at a lower cost.
Due to NAFTA, Canada is already a net importer of bioethanol, importing mostly duty free product from the US. The production subsidies that have helped to support Canadian producers during this period are due to expire in 2017, which may lead to them seeking alternative exports whilst their domestic demand is met by cheap US imports. CETA and other such agreements therefore have the potential to enable the US to actively push Canadian ethanol out of the domestic market and over to the EU and UK, which its 1.2 billion litres are geographically well located for. As such, the risk is that the main beneficiaries of CETA and third party country deals will be the US ethanol industry to the detriment of the UK industry.
Whilst there are mechanisms in place to enable reporting of such incidents and impose defence measures, the length of time from reporting to action being taken can last many years, during which time businesses and jobs are put at risk.