Another fake Net Zero market that nobody wanted is set to collapse

Telegraph

5 hours ago

This week came news that UK bioethanol producer Vivergo Fuels is once again on the brink of closure – this time as a result of the UK's trade deal with the US, which removes tariffs on cheaper American bioethanol imports. Its rival, Ensus UK, faces a similarly uncertain future.
Vivergo produces enough bioethanol to supply about 30 per cent of the UK's bioethanol needs for low carbon road fuels. Government rules require a percentage of bioethanol to be blended into petrol before it can be sold in order to reduce the carbon dioxide emissions associated with transport – considered to be one of the hardest to abate sectors.
This is not the first time that Vivergo has faced closure. Back in 2018 it shut down for four months due to uncertainty over government support. It only reopened when the Government created a subsidy scheme known as the Renewable Transport Fuel Obligation (RTFO), which forces fuel suppliers to sell renewable fuels. Bioethanol producers earn RTFO certificates, which they sell to fuel suppliers to help them meet their quotas.
And that's the heart of the issue: the UK bioethanol industry wasn't created to meet any actual consumer demand – it exists to satisfy a policy target: the use of green fuel in transport. Now it faces extinction thanks to a different policy priority: that of securing an advantageous trade deal with the US.
American bioethanol is cheaper to produce. If it now enters the UK tariff-free, it will almost certainly displace UK-made bioethanol. But once the emissions from transatlantic shipping are factored in, much of the carbon benefit from the RTFO is wiped out.
In 2023, the UK as a whole emitted 375 million tonnes of greenhouse gases, about 0.7 per cent of global emissions. Road transport accounted for roughly 100 million tonnes. Using UK bioethanol cuts transport emissions by around 82 per cent, but switching to US imports halves those savings. The impact on global emissions? Negligible – effectively defeating the purpose of the policy.
This is a textbook example of how net zero policies can create artificial markets that collapse as soon as political winds shift. Bioethanol was never commercially viable on its own, it was simply created to tick a box. And now, it's likely to be sacrificed for the greater prize of trade access – a goal with arguably broader economic value to the nation.
There's no easy compromise here. If the UK wants its trade deal with the US, it's unlikely to be allowed to impose carbon border taxes or other constraints on US ethanol without breaching the deal. But any industry that only survives because overseas competitors are excluded isn't genuinely viable. Unless there's a clear national interest – such as energy security – consumers shouldn't be forced to pay higher prices to prop up policy experiments.
The public didn't ask for biofuels, they were pushed into using them by renewable fuels mandates. And now the protections that insulated the UK bioethanol industry from international competition are being lifted, the future looks bleak for the sector. But then, the emissions savings were so paltry on a global scale that it's difficult to see the point of the complex system of mandates, certificates and subsidies that prop it all up.
Worse still, both Vivergo and Ensus run on wheat, and together consume up to 15 per cent of UK wheat production when operating at full capacity. Their closure would deliver another blow to a farming sector already reeling from successive policy missteps.
This is a cautionary tale. When governments create fake markets, they distort industries, misallocate capital, and raise consumer costs – all for gains that may prove illusory. There are very good reasons why we don't have a centrally planned economy, and it's time ministers stopped pretending we do.