A series of recent announcements from domestic producers signal an industry under existential threat, not from innovation or obsolescence, but from unintended consequences of government policy – specifically, a trade deal struck to shield a different sector entirely – coupled with a broader lack of ambition in UK biofuel policy.
The latest trigger? A UK-US trade agreement designed to protect British car exports from Donald Trump-era tariffs. In a bid to preserve automotive trade, the UK agreed to drop import duties on American bioethanol. But in doing so, it opened the floodgates to cheaper US biofuel imports, undermining the viability of domestic production.
The collapse in confidence
Biofuel producers have been warning since early May, that the British bioethanol industry would collapse as a result of the deal and, in the past few months, several UK producers, including major industry players Vivergo and Ensus, have either shuttered operations or signalled likely closures.
Ensus took the decision to mothball its Teesside facility, directly attributing this to a “sudden and severe imbalance in the market” brought on by the tariff change.
Vivergo, owner of the UK’s biggest bioethanol plant, had already issued warnings about the sustainability of its operations under current market pressures. Citing both the immediate shock of US imports and longer-term policy uncertainty, it warned that concessions made in the recent US trade deal would wipe out the industry in the UK.
Following government confirmation that there would be no bail out, the closure of the Vivergo plant was confirmed on August 15th with owners Associated British Foods (ABF) stating: “Vivergo will have ceased all production of bioethanol and animal feed by 31 August 2025.”
The closure of the Hull-based facility puts 160 jobs at risk, leading the leader of Hull City Council, Cllr Mike Ross, to comment: “The Government is asleep at the wheel, and the result is job losses.”
Critics will suggest that the industry was already unprofitable, with significant financial losses being posted by UK producers already losing out to their US rivals. Downing Street denied that Vivergo’s threatened closure was connected to the accord, saying the industry “has been facing significant challenges for some time, long before our deal with the US”.
But the playing field was far from level, with UK companies already pushing for changes to the regulations that enable US companies to earn double subsidies – long before the trade deal dealt the killer blow.
The bilateral trade deal struck by Keir Starmer in May, which came into effect in July, allows 1.4 billion litres of US ethanol into the UK tariff free (down from 19%) – a volume that equates to the size of the UK’s entire current ethanol market.
Highlighting the impossibility of competing with a far better-supported industry, he added: “If we were to have the same support that the US industry has, we wouldn’t need that tariff. We would be able to compete. If we had the same energy costs. We wouldn’t need those tariffs.”
The influx of lower-cost US ethanol has drastically reduced margins for UK producers, who face higher energy and feedstock costs, and lack the economies of scale available to American giants.
The broader biofuel market
While not directly impacted by the removal of the US bioethanol tariff, another recent casualty of regulations and market conditions that disadvantage domestic biofuel production is Greenergy. With its biodiesel plant at Immingham facility a casualty of hostile market forces and weak policy, the supplier of transportation fuels has joined industry calls for urgent government action to ‘save the sector’ (see page 6).
Though biodiesel and ethanol are different products, both are now being squeezed by the same root causes: weak UK blending mandates, policy uncertainty, and subsidised US competition.
As detailed in our August issue coverage, despite “significant cost reductions” and a May review following its acquisition by Trafigura, Greenergy cited weak UK blending mandates, competition from subsidised US Hydrotreated Vegetable Oil (HVO), and high operational costs as reasons for the shutdown.
Speaking to FON at the time, Greenergy COO Paul Bateson was blunt about the situation: “It is difficult to see a change in policy in time,” noting that structural issues such as high energy costs and ageing infrastructure have been exacerbated by a lack of timely government intervention.
Unintended consequences
It’s not just the producers and their employees that will be impacted…
The crisis facing the UK’s bioethanol plants has ripple effects far beyond the factory gates. One of the sectors most exposed is farming.
Who grows the wheat?
The feedstock for UK bioethanol largely comes from UK arable farmers, particularly across the grain belts of Yorkshire, Lincolnshire and East Anglia. These plants buy millions of tonnes of wheat each year, often through forward contracts, providing farmers with a dependable outlet.
Why isn’t it food-grade wheat?
The wheat used for ethanol production is typically feed wheat – grain that doesn’t meet the strict protein and quality standards required for breadmaking. Rather than going into loaves, it would otherwise be destined for animal feed or export. Crucially, the process is not a straight diversion from the food chain: when starch is converted into ethanol, the protein-rich by-product, DDGS (dried distillers’ grains with solubles), goes straight back into livestock rations as a valuable home-grown feed.
What happens if the plants close?
Lost local markets: Without domestic bioethanol buyers, farmers will be left more dependent on volatile feed markets or forced to export at thinner margins.
Increased exports: More UK feed wheat will need to be shipped abroad — likely to EU countries where biofuel obligations are stronger, effectively exporting both the raw material and the value-added opportunity.
Crop choices shift: Farmers may look to move land out of feed wheat and into alternatives such as milling wheat, oilseeds, or even set-aside if returns falter.
Feed security hit: With fewer ethanol plants, the UK livestock industry will lose access to a reliable source of DDGS. This gap may need to be filled with imported protein feeds such as soya meal – often with higher carbon footprints, creating a perverse impact on UK sustainability goals.
In short, the closure of UK bioethanol plants is not only an industrial and employment issue, but also a farmgate and food security issue. Farmers lose a stable domestic market, livestock producers lose a valuable local feed source, and the UK risks greater reliance on imports at every level of the supply chain.
Policy blind spots
This crisis exposes critical gaps in UK policy. The Zemo Partnership, a key low carbon transport advisory body, recently published its Map of Missing Policies, outlining urgent steps to align the UK’s transport fuel system with net zero goals. Among these is a call to:
- Extend the Renewable Transport Fuel Obligation (RTFO) beyond 2032.
- Transition the RTFO into a greenhouse gas (GHG) reduction target scheme that rewards fuels based on emissions performance.
Voicing support for the Zemo Partnership report, Greenergy welcomed its recommendation to make the RTFO more ambitious and extend the target beyond 2032.
“With zero-emission cars representing only 3% of cars and less than 1% of HGVs in the UK, the report rightly highlights the vital role that renewable fuels, such as biodiesel and bioethanol, play in the transition.
“As a leading biodiesel producer, we are supportive of more ambitious RTFO targets. Higher targets can deliver immediate greenhouse gas (GHG) reductions in vehicles that will remain on the road for years to come. Failing to act now is a missed opportunity to accelerate decarbonisation and meet the UK government’s own climate goals.
“A straightforward policy change could create long-term demand for biofuels and provide measurable emission savings today, not just in the future.”
For context, the EU has already set a 14% renewable energy in transport target for 2030 – far higher than the UK’s current ambition, which remains unclear beyond 2032.
By implementing the called-for changes, the UK would move closer to the European model, where higher obligations and a clearer policy roadmap have stabilised the biofuels market and attracted continued investment.
Europe beckons
The difference in policy certainty is already influencing investment decisions. While uncertainty looms large over its Immingham facility, Greenergy has reaffirmed its commitment to operations in Amsterdam.
The company cited Europe’s “more ambitious renewable fuel targets” and supportive market structure as key reasons for its strategic focus on the continent.
This enhances the attractiveness of EU markets and underscores the increasing difficulty UK facilities face in competing on an uneven playing field.
A crisis made in Westminster
The irony is stark. In an attempt to protect the UK car industry, government negotiators may have inadvertently crippled a vital low-carbon sector. The US ethanol industry – backed by federal subsidies and vast economies of scale – can afford to undercut UK prices. And while British biofuel producers receive support under the RTFO, the current scheme lacks the ambition required to compete or to inspire long-term investment.
The Zemo Partnership has repeatedly stressed that UK transport emissions won’t fall without an integrated, long-term vision – one that includes a robust biofuels industry. With domestic producers folding under pressure, that vision is slipping further from reach.
The road ahead
If the UK is serious about decarbonising transport, this moment must serve as a wake-up call. The government must urgently:
- Reassess the impact of the US trade deal on domestic fuel security.
- Strengthen and extend the RTFO beyond 2032.
- Transition the RTFO to a GHG-based target system.
- Align with EU-level ambitions to ensure a level playing field.
Otherwise, the UK risks becoming entirely dependent on imported biofuels – outsourcing not only its emissions reductions but the economic benefits of domestic production.
Unless government policy changes, the UK won’t just lose an industry – it will lose control over its own clean fuel future.
Image credit: Dreamstime
