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The Temporary Chairman (Dr. Michael Clark): Order. We must conclude our proceedings on clauses 1 to 3 by 7 pm. If hon. Members will co-operate with me, I shall co-operate with them. I intend to call Mr. Brake and ask him to be fast, and I shall then call Mr. Clappison.
Mr. Tom Brake (Carshalton and Wallington): I shall be very quick in supporting the amendment and offering one example of why it should be agreed to. The "people, paper, oil and cans" project in Wandsworth works with the bio-regional development group based in my constituency. The core of the project is the conversion of cooking oil to biodiesel that can be used in vehicles which collect aluminium cans and white office paper for recycling. It seeks to create a virtuous circle, and the biodiesel will also be used in vehicles providing a service for users of the centre from which the project is being run.
The project sponsors say that the major stumbling block to success is the fuel duty. Even the promised 20p reduction would be inadequate, and the project would not be viable. A reduction of at least 40p--more than the amendment proposes--is required, in their view. The amendment would at least help that sort of innovation to proceed, and I hope that the Government will consider the points that have been made.
Mr. Clappison: We welcome the debate. The right hon. Member for Berwick-upon-Tweed (Mr. Beith) made an interesting case in support of his amendment, and other interesting points have been made, particularly in the characteristically well-informed contribution of my hon. Friend the Member for South-East Cambridgeshire (Mr. Paice), who has a long-standing interest in these matters.
We have already said that we want a reduction in duty on biodiesel and bioethanol. There are environmental grounds for such a reduction. In addition, those fuels give hard-pressed British farmers the hope of another market. If farmers were under pressure before the outbreak of foot and mouth, they are even more so now. It is right to explore every avenue to see what help can be given to them, and there is potential in a market for biodiesel and bioethanol.
The Minister has heard some expressions of farmers' opinions already. My hon. Friend and the right hon. Member for Berwick-upon-Tweed referred to the article in last week's Farmers Weekly, and I commend that article to her. I invite her to consider the analysis of Government policy under the headline, "Labour applies brakes to oilseed opportunity", and the opinion column, which expresses the view that the present state of Government policy
Miss Melanie Johnson: I am pleased to hear support from the Liberal Democrat and official Opposition Benches for the Chancellor's Budget announcement of a new lower duty rate for biodiesel. That consensus is welcome, but the amendment seeks to cut the rate for biodiesel not by 20p per litre, as we propose, but by 33p. That is a bigger reduction than can be justified. The amendment also suggests extending the duty cut to bioethanol and bringing the reduction forward from next year. That would be premature.
The Government are keen to stimulate development of viable alternative fuels that offer environmental advantages. Indeed, it was because of climate change benefits associated with biodiesel that the Government announced the 20p per litre reduction in duty. Although we recognise that the promotion of biodiesel can provide useful greenhouse gas emission savings, that should not be achieved regardless of cost. Many of the arguments advanced failed to take sufficient account of the costs of some of the current alternatives. Our climate change programme emphasises the principle that measures to tackle climate change must provide value for money--that is only sensible. A 20p per litre duty cut, while providing recognition for the environmental benefits of biodiesel, will ensure that there is no disproportionate cost to society in securing the reductions in carbon emissions.
Furthermore, it will take time to introduce a duty rate cut for an alternative fuel such as biodiesel. Not only do we need to settle on a UK specification for biodiesel to benefit from the duty reduction, and to seek the appropriate derogation from the EU mineral oils directive, we also need time to set up administrative arrangements to protect the revenue, and to protect legitimate biodiesel producers, motorists and hauliers by ensuring that poor quality biodiesel does not find its way into the UK distribution chain. Those are practical matters; they may involve time, but they are none the less relevant.
Mr. Beith: Will the hon. Lady clarify why, in her judgment, the higher rate of reduction is justified for road fuel gas but not for biodiesel? She has explained that she regards a 20p reduction as sufficient for biodiesel, but she is prepared to make a much larger reduction for road fuel gas, although the same arguments apply to both types of fuel.
Miss Johnson: The point relates to the environmental cost or the saving that will be made. I will run through a few figures. Before the Budget, the biodiesel lobby was pushing for a duty incentive of about 35p per litre relative to ultra-low sulphur diesel. That would have resulted in a cost of £2,333 per tonne of carbon saved, which would fall to £1,129 by 2010. It is true that the amendment suggests only 33p, but the cost would be nearly as large as that for a 35p per litre cut; in climate change abatement terms, that would still be extremely high. For example, the duty incentive of 20p per litre for recovered vegetable oil relative to ultra-low sulphur diesel would actually cost £281 per tonne of carbon saved. There is a significant difference between the figures.
Mr. Paice: Will the Minister tell us the total cost to the Exchequer of a duty of 6p per litre on road fuel gas? As the right hon. Member for Berwick-upon-Tweed (Mr. Beith) points out, she cannot trot out the figures for one side without giving the other side. This is a question not merely of a 1p reduction, but of the whole duty concession--from that on ultra-low sulphur right down to the 6p that she rightly proposes on road fuel gas. What is that cost to the Exchequer per tonne of carbon saved?
Miss Johnson: Biodiesel does not offer the same air quality benefits as road fuel gases--[Interruption.] The Department of the Environment, Transport and the Regions has made an analysis; it is in the Library and hon. Members can study it. Road fuel gases provide significant benefits relative to diesel--especially with regard to particulates and nitrous oxides--but there are no such air quality benefits from biodiesel. That is one of the points that hon. Members are not taking on board.
Mr. Paice: The hon. Lady must compare like with like. A diesel engine cannot run on gas, so we have to compare ethanol with gas and normal diesel with biodiesel. Will the hon. Lady tell the Committee how she can suggest that biodiesel is no better for the environment than conventional diesel? That is the comparison she should make--not a comparison with gas.
The Budget has already given strong indications that have led at least three producers to commission the construction of large biodiesel plants. More than 100 million litres of biodiesel should be produced by the end of 2002. We have given a signal that is being read and is receiving responses.
In his opening remarks, the right hon. Member for Berwick-upon-Tweed (Mr. Beith) asked why we said that a 33p cut would not be cost-effective. I have already covered that up to a point. The incentives for road fuel gases are directed predominantly at improvements in local air quality, in which cleaner road transport has a key role to play. The proposed incentives for biofuels are focused on climate change improvements, so a direct comparison is not appropriate. The evidence suggests that a 20p per litre incentive for biodiesel is a cost-effective means of delivering climate change benefits from the transport sector, so that is what we propose. We recognise that the promotion of biodiesel can provide useful greenhouse gas emission savings, but those should not be made regardless of cost.
The amendment also suggests a duty cut for bioethanol. The Government believe that would be premature. Greenhouse gas savings from ethanol depend very much on the feedstock used. The production of ethanol from wheat, for example, which was mentioned by several contributors to the debate, is well established, but unfortunately, on a life-cycle basis--taking account of the carbon dioxide implications of crop growing and processing the fuels, as well as its use as a motor fuel--it offers few greenhouse gas savings. I accept that the hon. Member for South-East Cambridgeshire (Mr. Paice) took some account of that fact. There are few savings because wheat cultivation and ethanol production are both relatively energy-intensive processes, so the environmental case for the promotion of ethanol in the UK is weak, if wheat is to be the predominant feedstock. The feedstock does not necessarily have to be wheat, but as there was some discussion of wheat I wanted to make that point.
Greenhouse gas savings of about 80 per cent. can be achieved by using ethanol produced from woody--lignocellulosic--biomass feedstocks; for the benefit of Members who do not know much about the subject, I should explain that those are wheat straw and forestry residues. However, that process is still very much at the research and development stage. The first generation of commercial production plants is not likely to be operational until about 2004.
Given the potential climate change benefits, we are keen to ensure that UK industry can contribute to research and development. That is why the Chancellor announced in the Budget statement that viable pilot projects for bioethanol would be supported through duty exemptions or reductions. That will help UK industry to build on existing biomass research, which is also supported by our new and renewable energy programme.
The amendment urges the Government to introduce lower duty rates for biofuels. I assure the right hon. Member for Berwick-upon-Tweed that we intend to do so. However, we shall not produce rushed legislation. Indeed, if we did so, I should no doubt be hauled before the House or one of its Committees to give an explanation. Furthermore, we do not believe that we should pay over the odds for those greenhouse gas savings when the revenue forgone could be more effectively directed towards other climate change abatement projects.