The UK bioethanol industry currently stands on the precipice of collapse, following the government’s recent decision to decline financial assistance meant to sustain it during challenging market conditions. As key players within the sector, the Hull-based Vivergo Fuels and the Ensus plant located in Redcar, Teesside, have both raised alarms about their impending closures if they do not receive governmental support. A significant contributing factor to this sobering state of affairs is a recently struck trade agreement allowing the importation of US-produced ethanol without tariffs, fundamentally undermining the competitiveness of local producers.
Vivergo Fuels, owned by Associated British Foods (ABF), expressed disappointment at the government’s choice to forgo support for what it deemed a critical national asset. The firm emphasized the potential for technological innovation and economic growth within the Humber region should the right regulatory environment be fostered. They argued the decision signifies a significant loss, stating that it compromises the potential growth within this vital sector and threatens jobs as operations may shift overseas.
The U.S.-UK trade agreement, finalized in May 2023, eliminated a considerable 19% tariff on ethanol imports from the United States, permitting an import quota of 1.4 billion liters, a figure approximating the scale of the UK’s market. This shift has made it increasingly difficult for local bioethanol producers, including Vivergo and Ensus, to maintain profitability. Moreover, Vivergo contended that they had formulated a plan aiming to restore financial viability to their operations, only to face rejection from the government.
The sentiment surrounding the government’s decision is echoed in the fears expressed by Vivergo, which warned that such actions could lead to a loss of billions in potential growth, jeopardizing the UK’s standing in the clean fuels sector and diminishing a capability that could place the nation at the forefront of the industry globally. The current outlook, according to Vivergo’s leadership, reflects a lack of foresight that could result in lost jobs and economic stability for communities relying on these plants.
Approximately 270 people are directly employed at these facilities, but the ripple effect of their closure could extend to thousands more in the associated supply chain. In response to the mounting economic pressures, a government spokesperson acknowledged the financial challenges faced by the companies over the past decade yet deemed direct funding an ineffective solution for overcoming the long-term issues pervasive within the industry. They asserted the decision was made considering value for the taxpayer and emphasized support intentions for workers and families affected by the potential closures.
The bioethanol sector, pivotal for the production of renewable fuel, typically sources its raw materials from UK agriculture, significantly contributing to domestic agricultural markets. Specifically, Ensus facilitates the production of around 30% of the UK’s commercial carbon dioxide, integral to sectors ranging from soft drinks to medical and nuclear applications. Indeed, government officials have committed to continuing collaborative efforts to ensure stability within the CO2 supply chain.
Moreover, the bioethanol product, made from agricultural outputs such as wheat, corn, or sugar beet, plays a critical role in blending with gasoline, enhancing the nation’s efforts to achieve a more sustainable fuel matrix. Looking ahead, while the government aims for 10% of aviation fuel to come from sustainable sources like bioethanol by 2030, immediate actions must address the industry’s current crisis for these long-term goals to materialize.
As the situation develops, it remains to be seen how the government will navigate the concerns raised by bioethanol stakeholders and whether they can strike a balance between fiscal responsibility and the imperatives of bolstering domestic industries vital to the UK economy.
