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Global commodities trader Archer Daniels Midland is exploiting a loophole in UK green regulations to claim a double subsidy on the production of biofuels as a surge in imports threatens to wipe out the domestic ethanol industry, according to its British competitors.
Ethanol suppliers can claim a credit on every litre produced under a UK scheme that seeks to cut harmful emissions from transport and promote greener fuels.
But ethanol made from waste products is eligible for a double credit as an incentive for producers to prioritise that production. ADM โ the A in the so-called ABCD of international agribusinesses that play a pivotal role in global food supplies โ took advantage of this to claim double credit on its fuel sold in the UK that is made from a byproduct of corn processing.
However rivals have argued in submissions to the UK government that the byproduct โ known as unrefined liquid dextrose ultrafiltration retentate, or Uldur โ should not be classified as waste as it has several well-established uses. They argued that doing so undermined UK environmental objectives by enabling fuel suppliers to meet renewable fuel obligations using fewer litres of biofuel.
โThis isnโt about using genuine waste,โ one industry executive told the Financial Times. โItโs about finding clever ways to maximise financial returns through regulatory loopholes.โ
Chicago-based ADM has expanded its biofuels business, including making ethanol from corn, to serve a growing market for low-carbon fuels. Industry experts estimate that the UK double credit may have allowed ADM to generate up to ยฃ100mn in revenue last year. ADM declined to comment.
The row comes as Britainโs small domestic ethanol industry grapples with the implications of the recent UK-US trade deal that removed tariffs on American ethanol imports. This granted US producers a 1.4bn-litre quota of tariff-free access โ roughly equivalent to the UKโs entire annual demand.
The UK transport department this year sent out a call for evidence to establish whether Uldur โ a byproduct of processing corn into sweeteners such as corn syrup โ should continue to qualify for the double counting it was awarded in 2022.
Rival UK biofuel producers noted in submissions seen by the FT how the product had historically been put back into ethanol production or used as animal feed.
Matthew Sharp, of law firm Brown Rudnick, which advises companies on environmental regulatory issues, said the โsheer volume of supplyโ may have led the government to ask: โIs it actually waste product thatโs being used?โ
Imports of ethanol derived from Uldur โ which is not classified as waste in Germany or the Netherlands โ rose from zero in 2022 to 377mn litres last year, according to UK government figures.
Associated British Foods, an ethanol producer whose fuel is derived from wheat, has warned that it may be forced to halt production at its Vivergo plant, one of only two in the UK, citing the threat from cheaper imported biofuels.
โIf the government wants to subsidise imported bioethanol, then we canโt compete against that,โ chief executive George Weston told investors in April.
Adam Bell, director of policy at Stonehaven and a former head of energy strategy at the UK energy department, agreed that domestic producers could not match the Uldur-derived bioethanol that now dominated the market if the byproduct continued to be counted as waste.
โIt can always be sold cheaper, while still making cash just because of double counting,โ he said.
Vivergo said the double subsidy on Uldur had โseriously weakened our businessโ, while the UK-US trade deal had only โintensified regulatory problemsโ that already favoured overseas producers.
The UK government said all fuel supplied under its Renewable Transport Fuel Obligation had to meet โstrict sustainability standardsโ. The UK transport department said it was working with producers to understand their concerns and explore options for support.
