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Biomass energy can reduce carbon emissions because the carbon dioxide emitted as the biomass is burnt has already been offset by the carbon dioxide the crop absorbed as it grew; although these carbon savings will be affected by the energy used in the crop's cultivation, harvesting, processing and transportation. Fossil fuels release carbon dioxide that has been locked away for millions of years.

At present, biomass provides 3.5% of UK electricity and 0.6% of heat demand. Biomass could potentially supply 6% of UK electricity by 2020. Demand for renewable heat could also potentially increase to about 6% by 2020.

The Bio-energy Infrastructure Scheme will support the biomass industry in England by helping those supplying biomass fuel for use in heat and electricity generation.

Phil Woolas said:
"We have to rethink our energy mix. We know biomass has the potential to considerably reduce our dependence on fossil fuels and cut our carbon emissions. UK producers are setting the standard and have shown production can be sustainable and our investment will support their commitment to this emerging industry.

"The fund will inject cash at the point of production. By investing in the biomass industry we are helping farmers, foresters and other producers to diversify and become part of the environmental industry sector which is currently worth more than £25bn and growing."

All projects must be based in England and must supply the biomass to end-users in Great Britain. Grants are available for up to a maximum of £200,000 per producer group or business.

The deadline for applications is 5 August 2008 for applications from businesses and 5 September 2008 from producer groups.