The amount of used cooking oil being re-purposed as fuel has plummeted since a tax incentive was axed - and industry insiders are warning that the situation could spell the end of the British biodiesel industry.

The UK Sustainable Biodiesel Alliance has revealed that the number of larger waste oil collectors in the UK has dropped from 31 to 20 in the past year.

Biodiesel derived from used used cooking oil (UCO) accounted for 45% of renewable fuel in the three months to April, according to the Department for Transport. But new DfT figures reveal UCO use has plunged, accounting for just 15% of biofuel in the latest quarter.

“Having made a lot of progress, it looks like the UK biodiesel industry will collapse,” said Adam Baisley, chief operating officer of Agri Energy, which collects used cooking oil from 50,000 to 60,000 catering sites and runs three oil refineries.

“UCO will get exported to Germany where there is a mandate to use biodiesel. If that happens, then a lot of the good work food companies have done in trying to recycle their waste oils will be undone.”

Until this April, UCO suppliers were given a 20p tax incentive and a Renewable Transport Fuel Certificate (RTFC) - which can be sold to oil companies to offset their use of fossil fuels - for each litre of biodiesel made from UCO. But the tax incentive was abolished on 1 April, and UCO suppliers were instead given two RTFCs for every litre.

Suppliers said the change had flooded the market with certificates, which had caused their value to plunge, and that the certificates were an unreliable substitute for the guaranteed income offered by a tax break.

However, the government insisted it was committed to the certificate scheme. “The previous duty differential provided no assurance of the sustainability of biofuels,” said transport minister Norman Baker.

The largest source of renewed fuel in the last quarter was bioethanol, which is derived from US corn and has been criticised for the effect it could have on food prices and for being less environmentally friendly than biodiesel.

In August, the UN food agency called on America to suspend production of bioethanol, warning that a US law requiring 40% of the corn harvest to be used for biofuel could contribute to a global food crisis by pushing up food prices.

Bioethanol has a higher carbon emission than biodiesel - compared with fossil fuels, crop-derived bioethanol uses 51% less greenhouse gas and UCO 85% less.

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