| Previous Section | Index | Home Page |
Mr. Mark Francois (Rayleigh) (Con): I thank the Chairman of the Select Committee for his courtesy in giving way. May I lend weight to his arm by telling him that farmers in Essex, not least in my constituency, are keen to encourage biofuels? Does he agree that, contrary to the claims of some lobby groups, most farmers are environmentally aware? They care about the environment; the beauty of that is that it represents a win-win for farming and the environment.
Mr. Jack: I am delighted that Essex farmers are so perceptive. They recognise the potential of their set-aside land to grow the crop. I am sure that they are aware of a key finding in the Select Committee report: we asked DEFRA to do more work on the environmental impact of increasing the amount of oilseed rape that is grown under the circumstances that I outlined. I am also sure that perceptive Essex farmers realise that there is more work to do on that. My hon. Friend's comments show the genuine enthusiasm of British farming, at a time of immense change and transition, to seek new opportunities.
The challenge for farming—the Secretary of State referred to it in Question Time—of having to think through more carefully what it will do in the regime of the single farm payment means that farmers will look to the marketplace for opportunities. Here is a gigantic opportunity. Biodiesel production in the United Kingdom is currently approximately 25,000 tonnes a year. Half of that comes from cooking oil and the balance from imports. That clearly shows that we have the potential to do something about the matter.
Mr. David Heath (Somerton and Frome) (LD): I am listening to the right hon. Gentleman carefully. Does he agree that one of the prerequisites of a viable agriculture industry is a secure market to which to sell? Does he believe that, for bioethanol, a component of that might be a regulatory approach to substituting it in conventional petrol rather than fiscal support, which is the alternative mechanism?
Mr. Jack: The hon. Gentleman makes an important point, which I want to develop shortly. There are several ways of achieving the objective that I hope we all share, and they do not necessitate a high cost to the Treasury.
Let us put the production and the targets to which I referred earlier into some sort of context. Cargill produced some interesting data. A document that it sent to me stated:
- "If the Government were to follow EU guidelines targeting 2 per cent. biodiesel by 2005, this 400,000 litres per month must be expanded 80-fold to 32 million litres per month."
- "the Motherwell plant will add some 4.5 million litres per month, leaving a further requirement of 27 million litres"
The Motherwell factory is an investment by the Argent Energy Group, which has a turnover of some £230 million. The plant is designed to produce 45,000 tonnes a year of multi-feedstock biodiesel. Unfortunately, it will use cooking oil and fats as the initial feedstock. There are signs of investment in the capital to produce the product, but not sufficient to persuade the industry in the United Kingdom.
How do we persuade the Government to move the argument forward, given the targeting required by the European Union, the enthusiasm of UK agriculture to produce the feedstock and the desire of companies such as Cargill and British Sugar to invest respectively in biodiesel and bioethanol? I shall rehearse with the House an argument that I first made last year during debates on the Finance Bill, in which I applied the logic that is used on the renewables obligation in electricity to the parallel situation in road fuels. The House might recall that the renewables obligation requires electricity producers to take a proportion of their generated output from renewable sources, blend it with electricity from other sources and sell it at a uniform price. Although consumers cannot distinguish the sources, because
electricity is a homogeneous commodity, they thereby encourage the renewables because of the slightly higher total electricity price that they pay.My first thought was that the Treasury could apply the same logic to fuel. If there were a derogation of 30p to encourage more investment—which the industry deems sufficient—let us consider what the cost per litre at the pump would be if the Treasury spread out the costs of providing biodiesel. Concentrating first on biodiesel, the 2 per cent. target, with a 30 per cent. derogation, would have a duty cost of £120 million a year, which would in effect require the pump price to rise by 0.6p per litre. If we did the same with bioethanol and petrol, the total cost at the pump would be a further 0.6p per litre. With the 5 per cent. diesel target, we would be looking at a cost increase of 1.6p per litre if the £300 million cost were funded through duty derogation.
That simple piece of mathematics would in effect provide the Treasury with a free good because the users of fuel would pay, as do the users of electricity, for the renewables obligation. However, the argument may have moved forward, because a further development has now been suggested in the context of the Energy Bill that is before the other place. Although the amendment to that Bill to which I am about to refer has been withdrawn, the Minister might care to know that it will return on Report.
The amendment, which has all-party support and was tabled by the noble lords, Lord Ezra, Lord Carter and Lord Palmer, has at its heart an obligation that would
- "require all producers selling road transport fuel in the United Kingdom to show that over the course of a calendar year a specified proportion of such fuel was biofuel."
Evidence supplied to me ahead of today's debate suggests that such a move would not attract a tidal wave of imports, and that imports might move to easier fuel duty markets than the United Kingdom. That simple amendment none the less raises the possibility of having biofuels—both bioethanol and biodiesel—at a cost that would be paid by the user, not the Government, although the Government's support would be required to put the obligation to meet the target into law. That possibility should be investigated very carefully.
I return to my starting point, because in his comments on recent meetings with Treasury Ministers on that matter, Mr. Peter Clery, the chairman of the British Association for Biofuels and Oils, has said that he was encouraged by those discussions, in which he had something of a meeting of minds with the Economic Secretary to the Treasury. It seems that this possibility was considered feasible and that the Government may have indicated a degree of support for it. I should be grateful if the Minister would be kind enough to address that issue when he winds up.
On the implementation of the biofuels directive, the European Union has said in a letter to Mr. Clery dated 8 March:
- "Member States are free to require each fuel supply company to achieve a given proportion of biofuels relative to the quantity of petrol and diesel fuels that it places on the market on the Member State's territory (without specifying how this should be achieved in terms of blending)."
I campaigned for assistance with the development of LPG on health grounds. The Government, by giving 40p a litre for LPG, seem to be saying that they value those gains at a greater monetary amount than they value the reduction of CO2. I find that a difficult intellectual position to accept, when both objectives appear to be of equal merit.
Mr. Andrew Miller (Ellesmere Port and Neston) (Lab): I have been listening to the right hon. Gentleman very carefully. In the context of the comparison with LPG, does he agree that there is one fundamental difference, namely the massive infrastructure costs that will have to be borne by the vehicle companies and the fuel distributors? There is therefore justification for a differential.
Mr. Jack: I am not going to disagree with the hon. Gentleman's line of argument, save to say that the current derogation on biofuels is 20 per cent., while that on LPG is 40 per cent. It is difficult to explain why one is twice as much as the other, in the face of the two sets of important objectives.
We now have the potential to use agricultural set-aside land productively, to do much to generate new activity in rural Britain, to safeguard companies such as British Sugar that wish to pioneer bioethanol production in this country, and to give a further boost to manufacturing jobs by virtue of producing our biofuels. At a time when we are considering important issues of energy security, we would have the potential for a further secure supply. When all that beckons, and when DEFRA produces arguments that are irrefutably in favour of this proposition, it is time for the Government to be bold, to take up these ideas—which might well not cost them anything—and to give biodiesel the chance to be developed for the benefit of us all.
| Next Section
| Index | Home Page |