Valley's Ahead of Climate Game; the North-East's Biofuels Industry, Based on Teesside, Is on the Front Line of the Government's Charge to Stave off the Global Environmental Apocalypse of Climate Change. Nigel Stirling Asks How Well Equipped the Region's Sector - Europe's Largest - Is to Meet Government Targets for Slashing the Carbon the UK Releases into the Atmosphere

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Byline: Nigel Stirling

BEFORE Sir Nicholas Stern's landmark report on climate change this week, the North-East had firmly established itself as the centre for biofuels production in Europe in the next few years.

The apocalyptic conclusions from the former World Bank chief economist's 579-page report only reinforced the Government's commitment to curb carbon commissions, one of the earliest manifestations of which was its Renewable Fuel Obligation.

The obligation, which has been mirrored in Europe, requires oil companies supplying UK forecourts to increase the proportion of biofuels they sell to 2.5% in 2008 and 5% by 2010.

Industry research suggests biofuels - either diesel mixed with vegetable matter such as rapeseed or palm oil, or ethanol, an alcohol-based fuel typically made from sugar cane or corn - save 40% to 50% of the greenhouse gases produced by mineral fuel, taking into account carbon expended on fertilisers and transport.

Stern's report will add to calls for the Renewable Fuel Obligation to be increased to 15% as part of Tony Blair's Climate Bill next year. The region's biofuels industry, based on Teesside, appears to be potentially a major beneficiary of any expansion in renewable fuels capacity in the UK.

One NorthEast head of innovation, industry and science Chris Pywell hailed this week's report as a significant development for the industry on Teesside.

He said: "Stern signals a change in the overall political environment for renewable technology. Clearly to measure the impact, it will be critical to see what measures will come forward over the next six months. But clearly the Government seems to be of a view that something needs to be done now to prevent future costs."

According to development agency figures, seven investors have signalled an intention or have already begun production of biofuels in the Tees Valley.

One NorthEast estimates these will yield pounds 1bn of investment in plant and up to 2,000 jobs, with as many jobs in linked industries, such as agriculture and early-stage processing. Mr Pywell says Teesside's long experience in petrochemicals gives it a natural advantage in attracting process industry start-ups, with its expertise in areas ranging from waste management to firefighting on industrial sites.

In the past month, Billingham's Biofuels Corporation has said it will push ahead with plans to build two huge biofuel plants alongside its current plant at Seal Sands.

The Aim-listed company, already Europe's largest biofuels producer, will more than double capacity in the next couple of years by building the 200,000-tonne-a-year plants beside its 250,000-tonne plant.

Speaking before the publication of the Stern report, Biofuels Corporation chief executive Sean Sutcliffe said: "Five per cent [carbon] savings is only a start. The UK is being cautious, but only because there has not been until now the volumes available to deliver the carbon savings.

"We have one of the biggest plants in Europe and when I go to customers in Europe they say to me that we are delivering a step-change to the biofuels industry by delivering significant quantities of high quality production."

But it has been far from plain sailing for the fledglingbiofuels industry both on Teesside and farther afield and there must be nervousness in Government circles about the sector's ability to ramp up production to the levels needed, based on its performance so far.

Biofuels Corporation's Seal Sands plant has been plagued by production delays, cost pounds 15m more than first projected and is currently 18 months, and counting, past its deadline for full production.

A pounds 50m one-off loss attributable to the closure of hedging contracts nearly finished off the business and the company was saved only when Barclays bank agreed to a pounds 71m debt package. Biofuels' share price crashed to an all-time low earlier this month. …