Co-op report warns on heavy investment in biofuels

Companies in the UK have been warned that heavy investment in biofuels could be jeopardising future performance and profits.

Companies in the UK have been warned that heavy investment in biofuels could be jeopardising future performance and profits. Co-operative Insurance said that, while it supports the use of biofuels, it is concerned about the potential environmental and social dangers if growth continues at its current rate.

It warned that investment in the alternative fuels could backfire unless sustainability criteria are built into the supply chains.

Investment in biofuels has surged in recent years due to its attraction as a supposedly environmentally friendly alternative to fossil fuels.

Teesside is at the centre of European biofuels production with companies including D1 Oils, Helius Energy and Biofuels Corps building manufacturing plants.

Biofuels have been heavily supported by governments worldwide, as they move to try to cut reliance on oil, along with providing additional income to farmers.

However, vast amounts of land are required to grow biofuels, which critics say could cause its own environmental problems if not managed correctly.

It could also push up global food prices and affect biodiversity, as reported by the United Nations last week.

Co-operative Insurance said it will now engage with companies in which it invests to seek reassurance that they will put strategies in place to mitigate the risks.

Sam Lacey, responsible shareholding analyst at Co-operative Insurance and author of the report, said: "Biofuels are not a panacea for climate change but can play their part if governments and companies start thoroughly managing the social and environmental impacts.

"The current growth of the industry is happening without paying attention to long-term impacts. It must be pushed in a more sustainable direction and complemented by fuel efficiency measures and reducing our use of fossil fuels." According to a separate report in a Sunday newspaper, new targets requiring petrol forecourts to sell biofuels next year will not be met. This could result in an increase in the price of petrol by up to 2p a litre, as retailers pass on the penalty charges to customers.

Under the Renewable Transport Fuel Obligation, from next April around 50% of petrol sold at forecourts will have to contain fuels made from crops or recycled waste such as cooking oil. Retailers will have to pay 15p for every litre by which they miss the target. But soaring crop prices amid the huge increase in demand for biofuels means that it will work out cheaper for some retailers to pay the fine.

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