Biogas – Taxable Commodity or Potent Pollutant

Renewable energy policy has always been a broad-brush affair, with a wide range of different technologies lumped into the same basket. However, they utilise fuels that require very different engineering techniques to bring them to market and they must also be treated differently when it comes to financing. For example, the generation of solar, wind and wave energy needs much more space than biogas and, because they use ‘clean’ sources of renewable fuels it is often less complicated to finance this type of project than it is to finance renewable energy techniques the fuel of which comes from ‘dirty’ substrates such as waste or wastewater. Biogas technologies use fuel that is continuously produced. Projects can be located into a much-reduced footprint and uses a fuel that, if not treated, contributes significantly to the greenhouse effect that is driving the current climate emergency.

Essentially, biogas is a by-product from the process of degradation of organic material, such as food, garden or animal waste, which legislators everywhere have deemed, or are in the process of doing so, should be removed from the flow of materials going to landfill and so reduce the emission of uncontrolled greenhouse gases being transmitted to the environment.

In practice, the separation and collection of organic waste for anything other than composting, hasn’t happened exceptionally quickly and, in any case, a lot of this pre-decomposed material is often buried in landfill as daily cover as the only practical outlet for its use. This, of course, goes against logic as there are several reasons why organic material should be considered to be a target for widespread use as a renewable fuel.

When organic material degrades, either in a landfill or under the controlled conditions of an anaerobic digestion system, the main by-product is biogas, which is composed mainly of methane (CH4); an element that is not only highly flammable but is 21 times more effective than carbon dioxide (CO2) as a greenhouse gas. If it can be captured and used as a fuel, the greenhouse effects of its release are greatly reduced and, because it has a high calorific value, it can displace the use of fossil fuels to generate energy; another mechanism to significantly reduce the carbon footprint.

Despite technical complications and, directly as a result of recent government initiatives, biogas has been used for the production of energy all over the world, something that under other circumstances would have been impossible due to the complex and often un-quantifiable engineering obstacles involved. Power generation using biogas is now well understood and has a track record of success based on solid engineering practices, technological innovation and the deployment of highly trained personnel.

Perhaps the clearest indication of the success of any alternative energy technology that receives public financial assistance is that it develops to the point where it can wash its face as a purely commercial enterprise, thus making it attractive as a viable investment. In this respect, and in line with other more established renewable energy technologies such as solar or wind, government initiatives have ensured that biogas power generation can, given the correct set of circumstances, be successful to the point where many biogas power generation schemes can be profitable without the need for public financial incentive.

But the margins as a purely commercial operation are generally not large and, because of the small size of many of these plants, have considerable financial risks attached. As such, financiers tend to be more attracted to technologies that are easier to maintain and to which a degree of scale can be applied. In many countries too, the legislative environment is not conducive to using biogas for power generation as the source of the fuel as it is often not protected from financial and legal penalties that larger fossil driven enterprises would be able to mitigate.

In Europe, the legislative environment is different for each country within the European Union. In Spain, for example, biogas is not treated fiscally any differently from other fossil hydrocarbons and, as such, is subjected to a hydrocarbon tax. The result? Biogas projects, especially those related to landfills, are not executed and the gas, if not destroyed by flaring, is permitted to escape to atmosphere. In other countries, such as Morocco, because of the monopoly exercised by powerful state-owned companies, the law does not permit the sale of energy from small-scale projects and, again, this highly effective greenhouse gas is allowed to escape to atmosphere with little or no treatment.

Despite all the evidence for climate change and the overt stance of governments as active participants in the fight against it, many do not yet consider that renewable energy should be subject either to public financial assistance or exempt from taxes that would differentiate it from fossil-based energy producing technologies. Given the undoubted contribution of renewable energy from all types of renewable sources, any fiscal or legal obstruction to the implementation of renewable energy projects can only, at best, be considered to be ill-advised and, at worst, emblematic of a skeptical outlook to climate change as a phenomenon that can only be tackled with a coordinated global response.

To fulfill the tenets of those who do sign up to the climate emergency which, given the scale of the evidence currently being recorded, and apart from right-wing conspiracy theorists, is most of us, the main driver should be to ensure that any and all renewable energy technologies can achieve parity with conventional energy generation as soon as possible. And, whilst they are in a technologically vulnerable stage of development, they should be supported either by financial incentivisation or not be subject to punitive taxes.

Given the comparatively greater cost of producing energy from renewable energy and, in particular, producing energy from biogas, any legislative impediment to implementation puts the industry on a parlous financial footing. Given also that, unless physical conditions are promising, it is often not in the financial interests either of developers or waste management companies to consider biogas as a resource, a discouraging legislative framework can only result in more organic material going to landfill, with all the concomitant environmental consequences that such actions will produce.

The ideal situation would be that fossil fuels would have taxes applied that act as a disincentive to further development while renewable energy technologies would be encouraged by not taxing the output as a fossil fuel. However, as we do not live in an ideal world, the mindset of the current batch of legislative representatives must be revised to understand that renewable energy should not be seen as an impediment to social development; rather it should be viewed as a golden opportunity.

Whilst the application of renewable energy as a major source of providing our baseload energy requirements is increasing throughout the world, it has still to come of age. The technology has reached a development stage that, if it was permitted to compete on a similar footing with other technologies and for a fair sales price, it could be the energy source of choice and blazing a trail towards the nirvana of net-zero carbon. The small, yet powerful technical area of biogas as a renewable fuel source is also coming of age and, because of its inherent attraction of fulfilling many of the criteria of the Circular Economy, in the future it will be increasingly important as a mechanism for treating solid waste and wastewater.

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