Government's green agenda has added 3.5p to every litre of petrol since 2021 thanks to E10 switch

The Government's green agenda is costing you an extra £2 every time your fill up your car, a study has revealed.

The move to E10 petrol with an increased mix of eco-friendly bioethanol content in 2021 has contributed to a 3.5 pence per litre increase in costs for motorists, The University of Warwick has uncovered.

Its analysis also found that required biofuel content in both petrol and diesel has become another trigger for volatile fuel pricing - and it is motorists who suffer most, with retailers passing on costs to drivers at the pumps.

E10 unleaded with a 10 per cent biofuel blend replaced E5 (5 per cent mix) on 1 September 2021 to become the 'standard' type of petrol sold at forecourts across the country.

This was mandated as part of efforts to reduce vehicle emissions and meet decarbonisation targets, with the Government stating that the moved to E10 'is not expected to change pump prices'.

But while greener petrol has lowered the CO2 impact of road transport, there are other major drawbacks as on top increased prices at the pumps.

Experts have warned that E10 will make your car's engine run less efficiently meaning you have to fill up more frequently and – most concerningly - not all cars on Britain's roads can safely use it.

The Renewable Transport Fuel Obligation (RTFO) is a key government policy introduced in 2008 aimed at reducing carbon emissions by mandating the blending of biofuels into the road fuel mix with conventional fossil fuels.

But the biggest impact on drivers came on 1 September 2021 when the bioethanol content in standard unleaded was increased from 5 to 10 per cent.

MPs at the timed claimed the move to E10 would cut 750,000 tonnes on CO2 emissions per year - equivalent to taking 350,000 cars off the road today, or every motor registered in North Yorkshire.

For diesel, the mix of biofuel is 7 per cent and has been for 15 years.

The biofuels used in petrol and diesel are different.

Bioethanol used in unleaded petrol is typically made from grain, corn, and sugar crops, while biodiesel is predominantly vegetable oils and animal fats - which can have impacts on food prices. Some biofuels are derived from waste - such as used cooking oil - which are deemed the most sustainable of all.

The Government's impact assessment ahead of shifting to E10 petrol in September 2021 said the move from 5 per cent to 10 per cent bioethanol content in petrol 'is not expected to change pump prices,' though did warn it would add to fuel costs because drivers would need to buy more fuel as a result (we will return to this matter later on).

However, The Economic and Social Research Council in collaboration with The University of Warwick found that the wholesale cost (the price paid by retailers) of biofuel has been fluctuating dramatically in recent years - and not always in correlation with oil and fossil fuel pricing.

Its report said that bioethanol's impact on petrol pricing has ranged from negligible to adding up to 8ppl to the wholesale cost of unleaded in late 2021.

And the impact on diesel prices has been larger, with biofuel price increases ranging from around 1ppl in 2015 to adding 14 ppl in mid-2022.

'Over the past five years, RTFO requirements have, on average, increased wholesale prices for unleaded by 3.5p, and for diesel by 6p,' the study concludes.

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Driving the hike is a trio of factors.

The first is the increase in bioethanol mix for standard petrol from September 2021 when shifting from E5 to E10.

Secondly, the price of ethanol - which had been similar to fossil unleaded - has been rising since 2015. In 2020 it reached 77ppl, 3.5 times higher than its pure fossil counterpart, and in late 2021 it peaked at 130ppl, while fossil unleaded stood at 46ppl.

Third, and the most striking, is that biodiesel is considerably more expensive per litre than all other products - and also more volatile.

In 2012, it was around 20ppl more expensive than fossil diesel, and this gap has generally increased over time, peaking in 2021 at 125ppl, standing close to four times more expensive than fossil diesel.

Furthermore, the study said retailers have been using 'rocket and feather' tactics to pass on to drivers at the pumps the biggest jumps in biofuel costs while taking longer to reflect declines at forecourts.

'50 per cent of wholesale price increases are passed through within two weeks, while equivalent price drops take three weeks on average,' the study explained.

'As a result, volatile price increases are amplified relative to price declines.'

The research panel added: 'This volatility can make budgeting and planning difficult for consumers, a challenge exacerbated during periods of high inflation, such as in 2022, when real earnings were eroded.'

Based on a typical family car with a 55-litre fuel tank, owners of petrol models are paying an extra £1.93 at each filling station visit due to the impact of increasing biofuel costs. For diesel drivers it is an additional £3.30.

Calculating the annual cost using an average of 7,400 miles per year, the Government's green fuel agenda is costing drivers of petrol cars an additional £28, while diesel drivers are paying an extra £48 solely in higher biofuel costs.

In short, motorists would have been financially better off had the Government retained a higher fossil fuel mix for petrol.

But despite adding yet another financial strain to driver's bank accounts, ministers are using a calculation of the benefit of reduced greenhouse gases under the RTFO versus the higher cost to consumers to defend the move to E10.

This 'social cost of carbon emissions calculation' is designed to measured the carbon emissions affect on a wide range of factors, which includes human health, agricultural production and property values.

It says that for every £1 cost to consumers, the use of biofuel in petrol and diesel has saved £5.70 worth of carbon damage.

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Steve Gooding, director of the RAC Foundation, said: ‘Any biofuel is only as beneficial to the environment as its sourcing, and the rules and regulations under which it is used.

‘That said, this analysis is clear: whilst the biofuels that are blended with the petrol and diesel available on the forecourts may have pushed up prices for drivers the environmental benefits have far outweighed the costs.'

Mr Gooding believes the carbon-reducing impact of biofuels suggests governments should be considering the benefits of developing synthetic e-fuels as well as the transition to electric vehicles as part of their Net Zero ambitions.

‘While all eyes have been on the promotion of electric motoring and the trajectory the government’s zero emission mandate should follow, there is a strong rationale for exploring the role more sustainable, less carbon-intensive fuels could play for the many millions of combustion-engined cars likely to be on the road well into the next decade and beyond,' he told This is Money.

RAC spokesperson Rod Dennis said the fact biofuel represents a greater proportion of the fuel at the pumps means fluctuating biofuel costs have a bigger impact today on the overall price drivers have to pay.

'In recent years, greater demand for biofuels - not just in the UK, but in other countries too - has seen the price they command go up,' Dennis told us.

'Like any traded commodity though, biofuel prices can be enormously volatile so it can be hard to predict where they’ll go next.'

The use of E10 can result in long-lasting damage to engine components for vehicles not compliant with the higher bioethanol mix.

When it was introduced as the standard type of unleaded in 2021, it was estimated that between 600,000 and 700,000 older petrol vehicles on the road would not be compatible with E10.

The vast majority of these are classic cars, with MPs suggesting that their enthusiast owners are likely already using fuel additives to protect their engines from modern fuel mixes.

However, E10 could also be destructive to vehicles built in the last 20 years.

The general rule of thumb is that any car registered before 2002 could be at risk if they use E10 petrol and should be checked for compatibility.

'Over 98 per cent of petrol cars in the UK can run perfectly well on E10, but some older models, classic cars and motorcycles shouldn't use it,' according to Greg Carter, a technical specialist at the AA.

That said, only since 2011 has it been a rule for all new cars sold to be able to run on E10.

If you have a vehicle older than 2011, it's worth verifying if the greener fuel is recommended for your motor.

While it should say if your petrol model is compatible with E10 inside the fuel filler cap on your car, you can also find out by using the Government's online checker tool.

Filling an incompatible car with E10 can cause a variety of issues in older vehicles, experts have warned.

Simon Williams, fuel spokesman at the RAC, said: 'Owners of classic cars need to be particularly careful not to fill up with E10 and then leave it sat in the tank for long periods, as this will likely lead to expensive damaged seals, plastics and metals.'

John Mayhead from classic car insurer Hagerty also told us: 'Because ethanol is hygroscopic, it absorbs water from the atmosphere. And that water, in turn, finds its way into your car.

'This can lead to condensation in fuel tanks, fuel lines and carburettors and cause corrosion in brass, copper, lead, tin and zinc components.

'As ethanol is also a solvent it can eat through rubber, plastic and fibreglass, so hoses and seals are likely to perish more quickly because of the higher concentration of ethanol in E10.'

Even Department for Transport tests have identified potential damage risks to classic cars.

Degradation to fuel hoses, seals and rubber components, blocked fuel filters, damaged fuel pumps, corroded carbs, blocked injectors and corrosion in fuel tanks have all been acknowledged in official Government documents.

However, experts at the Historic and Classic Vehicles Alliance (HCVA) - a campaign group setup in 2021 to lobby government to protect classic cars and their owners - said many of the concerns about damage caused to older models has been blown out of proportion.

Malcolm McKay director at the HCVA told This is Money: 'It [E10] is a danger if you have deteriorating, incompatible components in your fuel system, but it isn't the end of the world: Brazilian historic vehicles have been running on 25 per cent bioethanol since the 1970s.'

He went on: 'Some elastomers, plastics and composite materials used in pre-1996 car fuel systems are not compatible with petrol containing ethanol: it will gradually dissolve them.

'Cork, shellac, glassfibre-reinforced polyester and epoxy resins, nylon and polyurethane are on the 'unsuitable' list.

'Replacement with compatible materials is advised: paper, leather, Teflon, polyethylene and polypropylene are on the 'OK' list.

'If any components in your fuel system are already old and deteriorating, ethanol will find them and accelerate the deterioration – to the point where you could rapidly have running problems and even leaks that could start a fire.

'It's also worth noting that some fuel tank lining products used in the past to coat the inside of pinholed fuel tanks are not compatible with ethanol and cases have been reported of these breaking down, leaking and blocking fuel lines. New lining products are available which are resistant to ethanol.

'Long-term storage of ethanol petrol can lead to corrosion in metal parts of fuel systems, as the ethanol element can absorb moisture if left in the system for a long time, such as over winter, in a humid atmosphere.'

While E10 petrol is greener than E5, it isn't more economical for your car's engine. Ultimately, it burns faster due to the higher concentration of ethanol in the mix.

This means drivers who cover above average mileage will need to visit filling stations more frequently than they did pre-September 2021.

The DfT's impact assessment ahead of the move from E5 to E10 petrol stated: 'As the energy content of the fuel will also decrease, motorists will have to buy more litres of fuel.

'Overall fuel costs for petrol cars are therefore estimated to increase by 2.3 per cent as a result of moving from 5 per cent to 10 per cent bioethanol content.'

The AA told us that recent volatility seen since 2021 - not least the outbreak of the Ukraine war - has 'aggravated' the impact of the estimated 2.3 per cent increase.

'The impact of Putin, Middle East conflicts and general economic turmoil has eclipsed any downside from making road fuel greener,' Luke Bosdet, its fuel price expert told us.

The AA has warned that owners of petrol-powered lawnmowers should steer clear of E10 petrol.

Instead, it is recommended that they only buy super unleaded for their garden equipment.

This is also the case for petrol chainsaws, shredders, wood chippers and generators.

'Petrol powered garden machinery and generators are also likely not to be compatible, so these should use super unleaded,' Greg Carter explained.