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Carl Mortished: We’re On A Green Road To Hell

Don’t give way to petrol pump rage this weekend. If you don’t like paying 120p for a litre of road fuel, get used to it. Get used to 130p per litre. It is now policy that you should be gouged.

It is not just government policy but universal public policy. Everyone (meaning everyone who matters, and that excludes you) agrees that the cost of energy must rise and keep on rising.

I am not talking about fuel taxes but the fuel itself — the liquid that goes in your car, the electricity that powers your washer/dryer. It is required to be expensive by legislation. The fuel you pump into your motor this weekend must contain 3.25 per cent biofuel, rising this month to 3.5 per cent. Biofuels are typically more expensive than ordinary petrol or diesel. According to Argus Petroleum, the wholesale price of fatty acid methyl ester, a biofuel used widely in the UK, is 28 per cent more expensive than cargoes of diesel sold in the Rotterdam spot market.

Unfortunately, there is little opposition. White van man has no friends among the political parties, who are united in their support for more expensive energy. All the parties appear to support the drive to remove carbon from the transport fuel chain through increased use of biofuels, regardless of the evidence of mounting costs and forest destruction.

The folly of this strategy was recently exposed by the European Commission, the body that has promoted the drive to biofuels. An EU directive requires that, by 2020, 10 per cent of our road fuel should come from renewable sources. A study by the Commission on the land use implications of sourcing only 5.6 per cent of Europe’s transport fuel from biofuels concluded that any significant rise beyond 5.6 per cent would “rapidly” increase carbon emissions and “erode the environmental sustainability of biofuels”. In other words, as the percentage of biofuel in your tank increases, the risk of penetration by sugar cane and palm oil plantations into virgin rainforest sharply increases.

Like most political diktats, the figure of 10 per cent was plucked out of the air and no one at the Commission had a clue, when the policy was adopted, how the fuel industry was to meet the one in ten mandate without a huge rise in biofuel planting in the tropics.

According to Commission officials, there was an assumption that new biofuels, made from wood chips and plant waste, and electric cars would come to the rescue. There are today no such novel biofuels, merely expensive experiments . Meanwhile, electric cars are only as low-carbon as the electricity that powers their batteries.

Britain, however, has taken the renewable command on the chin : the Government is assuming that ordinary biofuels will make up 9.5 per cent of road fuel. To hell with the rainforest.

Nor can we hope for cheap electricity, because the parties are united in their belief that switching on the lights must also be expensive. There is almost universal political support for wind power, a ruinously expensive form of electricity generation, and the Tories would give wind farm operators a guaranteed price, ensuring their viability. In other words, even if coal, gas or nuclear is cheaper, you must pay for the puffed-up windmills.

What are we doing ? Where is the debate? In order to prop up the failed European carbon trading system, we will soon have a minimum carbon price — a threshold that will ensure a very cheap form of fuel, natural gas, will be priced out of the market in favour of more expensive ones, such as nuclear and wind power. Have the politicians done their sums? Do we want to make our energy supply so expensive? And if we do, how will our industries remain competitive against rivals in the Middle East and China. Asia will never impose such cost burdens on businesses that employ millions of people.

This is what happens when politicians set policy on the basis of ideology. Another cause of the recent fuel price escalation is the rising price of crude oil. The oil market is now firmly under the sway of state entities, be they the national oil exporters of Opec or the huge state-controlled energy companies of Russia and China. These entities are under the command and control of politicians. They are not interested in satisfying consumers and the rising oil price is boosting the power of the most hawkish nationalists, in Iran and Venezuela.

So, where do we find the free market champions? Sadly, no longer in Britain.

The Times, 10 April 2010