Government reneges on promised financial assistance for UK's biggest bioethanol production facility
The UK government has announced that it will not be offering a bailout to the bioethanol plant in Lincolnshire, Vivergo Fuels. This decision was primarily based on the government's conclusion that providing direct financial support would not provide value for money to the taxpayer and would not address the long-term structural problems facing the bioethanol industry in the UK.
Factors Contributing to the Decision
The commercial viability of the plant was severely undermined by government policy changes, particularly the removal of a 19% tariff on US bioethanol imports as part of the recent UK-US trade deal. This tariff removal exposed the plant to competition with cheaper imported bioethanol, making it commercially uncompetitive.
High industrial energy prices in the UK, among the highest in developed economies, also contributed significantly to the plant's losses of around £3 million per month even before the trade deal.
Vivergo and its parent company, Associated British Foods, had extensive discussions with the government seeking a combination of short-term financial support and long-term regulatory certainty to enable the plant to operate profitably. However, the government declined to provide either, effectively favoring foreign producers under current regulations and trade policies.
Consequences of the Decision
As a result of this decision, Vivergo Fuels announced its closure, leading to the loss of around 160 jobs and a significant negative impact on thousands of farms in Yorkshire and northern Lincolnshire, which supplied up to one million tonnes of wheat annually to the plant.
Long-Term Implications
The government's decision not to provide support to the UK's bioethanol industry is noted for its potential impact on the resilience of the CO2 supply in the long-term. Critics argue that this decision could potentially devastate communities and is short-sighted, disregarding the benefits to jobs and energy security.
The closure of the plant, which converts wheat into ethanol, a fuel typically added to petrol to reduce carbon emissions, is also criticized for its lack of a plan to support oil and gas workers as the industry transitions.
The government, however, has framed its decision as a difficult but necessary choice, highlighting that a bailout would be a poor use of public funds and would not solve underlying industry challenges. The government is currently working on proposals to ensure the resilience of the CO2 supply in the long-term.
This news has been met with criticism from trade unions, who argue that the government's decision not to support the UK's bioethanol industry is a missed opportunity to potentially generate billions in growth in the Humber region and retain a sovereign capability in clean fuels.
- The UK-US trade deal's removal of a tariff on US bioethanol imports significantly contributed to the financial struggles of the Vivergo Fuels bioethanol plant, making it less competitive with cheaper imports.
- Escalating industrial energy prices, among the highest in developed economies, were also a significant contributing factor to the monthly losses of £3 million at the Vivergo Fuels plant.
- Despite discussions with the government, Vivergo Fuels was unable to secure a combination of financial support and regulatory certainty, leading the government to decline providing either, thereby favoring foreign producers.
- Critics argue that the government's decision not to support the UK's bioethanol industry through bailout measures could have devastating impacts on local communities, jobs, and energy security in the long run, while potentially foregoing billions in growth opportunities in the Humber region.
