Whatever happened to the green industry?

Green-collar jobs are all the rage right now. First Gordon Brown, then David Cameron, have argued that if the UK invests during a recession in small but eco-friendly industries such as solar power generation or green construction we could not only create jobs but help tackle climate change. All very laudable. So what happened to the last green industry championed by the government? It's not a happy story.  

Biofuels were a similarly hot ticket two years ago: Gordon Brown was so impressed by the prospects for environmentally friendly fuels derived from plant oils that he devised the renewable transport fuels obligation, requiring fuel suppliers to include up to 5% biofuels in conventional fuel to reduce carbon emissions from cars.

When it came in this April, it was supposed to save 1m tonnes of carbon a year and help build a fledgling green industry that otherwise would have struggled to get off the ground.

Arguments now rage about whether biofuels are as green as they look – some argue that growing the crops contributes to deforestation and destruction of natural habitats, or take up land that could be used for growing food – but given the industry was entitled to rely on what the government said was its enthusiasm for their potential, it's interesting to see what happened next.

A drafting error in the legislation has, according to the biofuel industry, allowed suppliers to wriggle out of their new obligations. Now the Renewable Energy Association (REA) says some companies are going to go bust because demand for their product has vanished overnight. Instead of creating green jobs, these firms are shedding them.

One company established in May, when the future looked bright, has not produced a single litre since September, while others saw a dramatic drop in production.

Paddy Tipping, the Labour MP who has followed the issue closely, is trying to set up a meeting with ministers to discuss short-term assistance for the industry until ministers can correct the mistake (which they plan to do after this April, though many of the smaller firms say they can't wait this long).

Clare Wenner of the REA says there has been a double whammy with firms hit by collapsing demand plus an inability to get credit because of the credit crunch. She told the Observer many firms had been "holding on by the skin of their teeth pre-Christmas" and in some cases would not be able to get loans tiding them over till spring:  some of the smaller firms want compensation but they can't afford to sue the government, so that looks unlikely. "Not only have [the government] scuppered the industry, but their own objectives. They are not going to get the carbon emissions that they want," she says.

Biofuels are not uncontroversial but nonetheless this saga of raised, and then dashed, hopes is a salutary tale. Growing small niche businesses (as many green enterprises tend to be) isn't easy and requires consistent, patient government support over the long term. Will lessons be learned?