Biomass involves burning wood or plants to create heat, electricity or transport fuel, and the industry receives hundreds of millions of pounds in annual government support.

But the National Audit Office (NAO) has now said the government "cannot demonstrate" that biomass companies are complying with sustainability rules, because it is not measuring them properly.

Shares in Drax, the UK's largest biomass generator, fell 10% when the NAO announced the probe in September.

It comes as the government considers extending financial support for the industry, which its climate advisers have warned does not provide good value for money.

However, the Climate Change Committee (CCC) also agrees that biomass will help the UK economy move away from fossil fuels.

Biomass provided 11% of the UK's electricity in 2022, and there are plans to add technology to the UK's largest plant, Drax, that would remove carbon dioxide from the atmosphere to help offset emissions from other industries.

The energy security department last summer committed to tightening up its sustainability rules.

Meg Hillier MP, chair of the Committee of Public Accounts (PAC), said: "Biomass could have a key role in achieving net zero, but only if it is genuinely sustainable."

The government should "urgently review its assurance arrangements, so it knows that the billions of pounds of consumer and taxpayer-funded support are helping the UK meet its climate targets", she added.

How sustainable is biomass?

Selaine Saxby MP said the science on the technology [of biomass] had changed since the UK first began subsidising it as a way to replace polluting coal-power.

"Far more sustainable options have now been developed and improved, such as solar, wind and nuclear power generation, and I call on the government to support these technologies over biomass energy generation."

The government classes biomass as renewable because new trees and plants absorb the carbon dioxide emitted when the biomass pellets are burned - though the climate impact is disputed.

This status entitles the industry to government financial support - such as via the Renewables Obligation and Contracts for Difference schemes - totalling £22bn in the last two decades.

The CCC considers biomass to be low-carbon only if generators follow sustainability criteria to prove their wood has been sourced sustainably.

The government "has not evaluated whether its current arrangements are effective at ensuring compliance", the NAO said today as it published its probe.

If biomass is not as climate-friendly as the government expects, it may have to do more elsewhere to "achieve its net zero target", such as looking at other ways to remove carbon dioxide from the atmosphere, or reducing power demand through behaviour change, the NAO said.

Rob Gross, director of UK Energy Research Centre (UKERC) and professor at Imperial College London, said biomass was useful because it was "dispatchable" - meaning the amount of energy it provides can be adjusted to meet demand.

"In principle it should be possible to ensure the supply chain is sustainable on multiple criteria, but this is difficult to achieve in practice," he said. "It isn't just carbon. Biodiversity remains a concern too."

'No surprises' in biomass report

Investment analysts at Barclays said there were "no surprises" in the NAO's findings that "high standards are required for further support".

Likewise, JP Morgan said: "This report should be taken well by investors, as there was a risk that the NAO said that biomass subsidies were not 'value for money', which has not been said."

Both Drax and the government welcomed the NAO's findings, saying they too are committed to stronger sustainability rules.

A Drax spokesperson said: "The NAO acknowledges the important role that sustainably sourced biomass has to play in addressing the climate crisis and displacing fossil fuels in the production of dispatchable electricity.

"It's essential that sustainability reporting and criteria are robust and fit for purpose. This was also recognised in the government's biomass strategy published last year, which outlined a review which has already begun."

A spokesperson for the energy security and net zero department said: "We welcome the NAO's report, which found no evidence of firms not complying with our stringent sustainability criteria, which are in line with internationally recognised standards.

"As set out in the Biomass Strategy, we will be consulting later this year on how we can go further."

They said generators "only legally [receive] subsidies if they prove they have complied with our strict rules."