| Previous Section | Index | Home Page |
Mrs. Gillian Shephard (South-West Norfolk) (Con): My right hon. Friend the Member for Fylde (Mr. Jack) referred to it.
Norman Baker: I am aware that the right hon. Member for Fylde referred to it and used the word "muddled", but I was quoting directly from the report. In any case, if the right hon. Gentleman did mention the same passage, I am happy to repeat it, as I entirely agree with it. The summary goes on to say:
- "Different Government departments disagree about the main reason for increasing use of biofuels and about what level of Government support is necessary."
The fact that there is no lead Department in this area is a recipe for chaos and inaction. The same problem was evident in the previous Parliament, in connection with animal welfare. The breadth of responsibilities on that issue was huge: it was spread across many different Departments, and I was one of those who told the Government that they needed to sort the problem out.
To the Government's credit, they brought under DEFRA everything to do with animal welfare apart from experimentation, which is a Home Office responsibility. I hope that a draft Bill on animal welfare will move matters forward, but that example shows that changes can be made and a lead Department identified.
What is the solution in respect of biofuels? Who will bring matters together and identify a lead Department with the clout to take all the measures that the House considers necessary? If we do not give responsibility to a lead Department and sort out the mess in Government, the brutal reality is that the use of biofuels ain't going anywhere.
If biofuels policy is taken forward, I predict that, very late in the day, someone in Government will say, "We're going to miss this EU directive target. We're on the skids and nowhere near it." That will lead to sudden, jerky decisions being taken, with the inevitable result that imports will have to deal with the problem. We will therefore miss the opportunity to help Britain's rural economy.
Mr. Roger Gale (North Thanet) (Con): Does the hon. Gentleman agree that the driving force in this matter is the Treasury, which is patently not enthusiastic? Nick
Tapp is a farmer in my constituency, and his enthusiasm for biofuels has enthused me in turn. I raised the matter with the Treasury, and the Economic Secretary wrote back to me to say that, even with a discount of 20 per cent. per litre, 30 per cent. of such fuels were being imported. The implication was that increasing the discount would lead to higher imports and higher feedstock exports by farmers to Germany, with the result that there would be no gain. Does the hon. Gentleman agree that economies of scale will never be achieved as long as that attitude prevails?
Norman Baker: I entirely agree. That argument is covered in the report and in the Government's subsequent response.
Of course, the Treasury is behind everything that the Government do. It need not be worried about biofuels, for the reasons given by the right hon. Member for Fylde. However, if it is going to make decisions on taxation for environmental reasons, it needs to conduct proper analyses of what will happen as a result of the decisions that it takes.
When the Treasury introduced taxation differentials for liquefied petroleum gas, its motives were good. It felt that it had to respond to pressure for taxation differentials for cleaner fuels, but it did not think through the consequences or weigh the advantages of LPG by comparison with biofuels. The Treasury does not feel able to back down on that, because the LPG industry is saying, "You promised us the differential. We want some certainty, and you can't move the goalposts." The Treasury has some sympathy with that view. As a consequence, it has got into a bind that it cannot get out of.
Mr. Miller: The hon. Gentleman must take another factor into account. LPG is particularly popular in some rural communities such as those in Cornwall, where it is more readily available than in many other counties.
Norman Baker: I take that into account, and it is only right that, having been given some signals, the LPG industry should not be left high and dry. My point is that the Treasury is allowing that particular consideration to get in the way of a biofuels policy.
Mr. Heath: I do not want to depress my hon. Friend or the House too much, but I fear that the sclerosis on that particular topic has being going on for some time. I clearly remember a similar debate in which the hon. Members for Southampton, Test (Dr. Whitehead) and for Sherwood (Paddy Tipping) participated. In that debate, there was also consensus from both sides on the way forward. In the last Parliament, when the right hon. Member for Gateshead, East and Washington, West (Joyce Quin) was Minister of State in the Ministry of Agriculture, Fisheries and Food, MAFF expressed a clear view that it wanted to progress the issue, yet nothing has happened in the intervening period that could be construed as a viable policy for biofuel, and that is the problem.
Norman Baker: I agree with that statement, which brings me to my final point—I am conscious that other hon. Members want to contribute, and rightly so. The Minister must tell us what will happen at the end of this
debate and what he will do with the consensus that he will take away from it. What is the relevant mechanism in the Government? How will he deal with his Treasury colleagues? What clout has he got with other Departments? What will the outcome be? We need to know the process—if he does not know the outcome, at least he can tell us about the process.I regularly say that I have got a lot of time for the Minister—I am sure that he welcomes my saying that in front of his parliamentary colleagues. If I can use a metaphor, however, I fear that he has been put at the wheel of this particular vehicle but other Departments have not put the fuel into it, and he must sort that out.
4.42 pm
Mr. Anthony D. Wright (Great Yarmouth) (Lab): The biofuels sector is the least developed part of the sustainable energy industry, largely because the current price of fossil fuel has made further development uneconomical to date. It is essential that we do as much as possible to reverse that. We must ensure that biofuels are supplied quickly and effectively to the transport market where there is significant demand for them. I therefore call on the Government to provide more resources for the development of a fledgling industry.
Although it is essential that individual biofuels are viable in terms of their environmental impact and the net environmental gain of their large-scale production, we must not undermine the many benefits that such fuels could bring to our environment and economy. As I have said before, the use of bioethanol and biodiesel as fuels for road vehicles could have a large-scale impact on reducing carbon emissions and greenhouse gases in the UK. Bioethanol produces 50 per cent. fewer carbon dioxide emissions than other fossil fuels. According to the Sheffield Hallam study, Biodiesel from oil seed rape produces savings of 72 per cent. to 86 per cent. in carbon dioxide emissions and 56 per cent. to 80 per cent. in greenhouse gas emissions compared with ultra low sulphur diesel. Such savings are in line with the Government's commitment to reducing CO2 and greenhouse gas emissions by 12.5 per cent. by 2008 to 2012.
The transport sector contributes nearly a quarter of the UK's emissions of CO2, and it is imperative that we set up an effective emissions reduction strategy to counter the 5 per cent. growth in emissions from 1990, cut CO2 emissions and meet urban air quality standards. That strategy must include a greater focus on the potential of biofuels.
A commitment to fuel diversification through biofuels would lead to the development of a vibrant new industry with a consequent increase in economic activity, job creation—estimated by a June 2003 report by the East of England Development Agency to be in the region of 12,000 new jobs—and associated socio-economic benefits. Fuel diversification in favour of the sector could provide an alternative avenue to already depleted North sea oil reserves, leading to greater fuel security. That all depends on the sector's growth and the Government's commitment.
I welcome the fact that the Government will introduce a new rate of duty for bioethanol from 1 January 2005, set at 20p a litre below the rate for sulphur-free petrol. I also welcome the alternative fuels framework
introduced in the 2003 pre-Budget report that outlines a clear set of principles to determine future decision making for the development of biofuels across Departments. The rolling three-year period of certainty in the differentials in duty rates for alternative fuels is another welcome and transparent part of that framework. I would also like to note that the Government's reply to the Environment, Food and Rural Affairs Committee's report on the matter is encouraging.I was pleased to note that the Government fully accept the Committee's recommendation that DEFRA should, as a matter of urgency, carry out an economic appraisal of the effect that a UK-based biofuels industry would have on farming. Further, I am pleased that DEFRA will publish detailed workings of that evaluation. DEFRA's central science laboratory has already assessed the impact of biofuels on habitats and biodiversity in the UK. It states that
- "biofuel production from a broad mix of arable crop feedstocks will have a neutral effect on the farmed environment".
I encourage the Government to look for new and innovative ways to turn the sector into a vibrant new green industry in the UK. We must meet the EU Commission's target of 2 per cent. for the volume of biofuel to be used in the UK by 2005, and of 5.75 per cent. by the end of 2010. I hope that DEFRA—and the Department for Transport—will take those targets into account in consultations on meeting those requirements and will provide more resources for the industry, because time is of the essence. We need effective and proactive joined-up Government, not a lack of support for the admirable goals that I have laid out.
The Government have stated, in response to the Committee's report on biofuels:
- "The Government fully agrees that fiscal incentives should always be considered alongside alternative methods of support, such as capital incentives, grants or regulatory solutions. The Government keeps all types of support under review."
Most important for DEFRA to consider, in my opinion, is the fact that the current regional selective assistance provided by the Department for Transport, while perfectly sensible in its own right, is not flexible enough to encourage national growth of the biofuels industry. It would be far more advantageous to establish a scheme similar to that which is already in place for bioenergy and wind farms. I would be interested to know what the Minister believes the potential of such a national scheme might be, as opposed to the regional assistance that can be provided at present.
Other problems that must be thought through relate to the common agricultural policy, which allows payments of Euro45 a hectare for growers of energy crops. That will not have any significant impact on bridging cost differentials between bioethanol and fossil petrol. In its consultation with other Departments on that
matter, DEFRA must also consider the benefit of other initiatives, such as the renewable transport fuel obligation. That scheme, if introduced, would require producers selling road transport fuel in the UK to show that a specific proportion of each fuel sold over the course of one calendar year was a biofuel. Such a step would be a bold and successful move and must be thoroughly assessed. According to the estimates of British Sugar plc, such a scheme could have a starting proportion of biofuels of 1 per cent. for 2006, increasing annually by 1 per cent. until 2010. The mandatory inclusion of that quota would ensure that the requirements of the EU directives were met, that there was a market for the new product and that oil companies played their part in the development of a new UK industry.While the Government should be congratulated on introducing a new rate of duty reduction for bioethanol, they should be bolder in setting a duty reduction in the region of around 30p a litre on that fuel. While it is true that such increasing duty reductions will lead to greater importation of biofuels, a measured introduction of further reductions over time, in conjunction with the establishment of the industry in the UK, would have a positive effect. Certainly, the lack of such an incentive is hampering the industry's growth at present.
The threat of imported biofuels with lower environmental credentials could seriously undermine the fledgling industry. The real risk, however, is that UK producers with strict environmental standards will be undercut by less satisfactory non-EU imports. I find unsatisfactory the response of the Government to that threat, as outlined in the seventeenth report from the Environment, Food and Rural Affairs Committee. The Government state that they
- "anticipated that there will be limited international trade in refined liquid biofuels in the medium term. However, the Government has always considered that a higher level of duty derogation on biofuels could encourage imports of biofuels."
- "auditing the environmental impact of biofuels in the countries in which they are produced is extremely problematic and it is unlikely that a cost-effective and robust system of regulation could be introduced."
As to the current exclusion of ethyl tertiary-butyl ether from the fuel duty rebate, experience in other European Union member states indicates that the preferred method of introducing bioethanol into the fuels market is by converting methyl tertiary-butyl ether to ETBE plants. Currently, the 47 per cent. bioethanol that makes up ETBE is not covered by the fuel duty rebate. Does my hon. Friend the Minister believe that addressing that anomaly would be another positive step in developing an effective biofuels market?
There must be an increase in Government resources for the development of a strong UK bioethanol industry, whose development could be quick and
successful. The production technology for such an endeavour is well known, and the industrial will is present. I encourage the Minister to take on board the comments raised today and to examine ways in which more resources can be freed up, to put the bioethanol industry on a sound footing for the future.I also hope that the draft transposition strategy for the biofuels directive, including targets for the level of biofuels used in the UK for 2005 and 2010, will indicate clear Government support for the development of the industry. We are not looking for excessive subsidies in the long term but for a promising start. The Government must act expeditiously to ensure that farmers and processors are sufficiently pre-warned of future biofuel targets.
| Next Section
| Index | Home Page |