The UK government has decided against bailing out the country’s bioethanol plants, which have warned they would be forced to close without a rescue package as the U.S.-UK trade deal has made them unviable.
The trade deal from May removed a previous 19% tariff, which the UK imposed on imports of U.S. bioethanol. As a result, the UK-produced bioethanol has been unable to compete with the zero-tariff imported U.S. bioethanol.
Vivergo Fuels, the UK’s largest bioethanol plant, warned at the end of May that “if there is no government intervention in the next few weeks, our plant will have to close. That is because the government has made a series of decisions that undercut UK ethanol production in favour of US imports. The most recent trade deal was the final blow.”
Another bioethanol plant, the Redcar plant operated by Ensus, also warned in June that the U.S.-UK deal “fundamentally undermined its business position.”
But the UK government announced on Friday it would not be stepping up to support the domestic bioethanol production.
The UK has “taken the difficult decision not to offer direct funding as it would not provide value for the taxpayer or solve the long-term problems the industry faces,” a government spokesman said on Friday.
Vivergo’s owner, Associated British Foods (ABF), responded to the government’s decision saying that it was “deeply regrettable” that the cabinet would not support a “key national asset”.
“In making this decision, the government has thrown away billions in potential growth in the Humber, a sovereign capability in clean fuels that had the chance to lead the world,” Vivergo said.
In a separate development, Greenergy, owned by commodity trading giant Trafigura, last month said it would begin consultation on a proposal to cease production at a biodiesel plant in the UK amid difficult market conditions.
By Charles Kennedy for Oilprice.com
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