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5.6 pm
Mr. James Paice (South-East Cambridgeshire) (Con): Unsurprisingly, I will join the general consensus about the need to support biofuels, but I want to address the issue from a slightly different angle, by pointing to a fundamental inconsistency in the way in which the Government have dealt with the correct obligations that they undertook at Kyoto.
My main thesis is my concern about climate change and the need for this country to do all that it can to help to minimise its impact, so I want to consider biofuels as part of the whole energy scenario, rather than concentrate on the narrow issue of road transport. We risk getting it wrong by narrowing our focus to road transport. I want to consider biofuels straightforwardly against the fundamental objective of reducing the impact of climate change. Of course we cannot ignore other issues, such as the security and reliability of supply, the environmental impacts of whatever steps we take and the economics—the cost of saving carbon dioxide and the impact on the rest of the economy of whatever decisions we take—but I start from a fundamental belief that biofuels have a significant role to play.
The energy White Paper shows that the Government are planning a massive expansion of wind power for electrical generation, yet on 17 September in evidence to the EFRA Committee, the Economic Secretary said that the likely cost per tonne of carbon saved through offshore wind generation is the same as for biofuels. I ask the Minister to take back to the Government a
question: why is there such a rush for wind power, yet such reticence about biofuels? Wind power is highly inefficient and unreliable—no one can guarantee that the wind will always blow in any location—and it has high maintenance costs. Most importantly, it has an atrocious environmental impact.The environmental footprint of wind power must be considered. I am glad that the hon. Member for Great Yarmouth (Mr. Wright) is here because his constituency contains one of the earliest fleets of windmills, which I have seen on several occasions, and they have a significant impact on the environment. I defy all those hon. Members who represent constituencies where planning applications for wind farms are in the pipeline—there are many of them—not to say that there is huge local resistance to them. They are all opposed.
There is also the issue of substitution. The Government are running down nuclear power and replacing it with wind power, but they are not actually reducing carbon dioxide emissions at all. Whatever one's views about nuclear power, it does not generate carbon dioxide. I happen to be pro-nuclear but, even if one is not, one cannot pretend that running it down has an impact on the global environment. The rush to wind power is singularly unwise.
Hon. Members have rightly referred to bioethanol and biodiesel and about the levels that can be put into existing engines. The figure is between 5 per cent. and perhaps 15 per cent. for bioethanol, but I understand that there is no upper limit for the maximum inclusion rate of biodiesel. We have discussed the duty derogation and, although I know that I am probably renowned as a bit of cynic, it really is a piece of green trickery by the Government.
By introducing a 20p derogation, the Chancellor is able to claim green credentials in the full knowledge that that would not cost him anything. The derogation is not enough to trigger a realistic industry. As the hon. Member for Sherwood (Paddy Tipping) neatly said, all we have got is a bit of chip oil. We have not got a serious industry, and we will not have one with the derogation that we have at the moment.
The Economic Secretary, in his evidence, seemed to be very worried about sucking in imports and subsidising industries elsewhere. We have discussed agriculture and there has been a substantial increase in food imports, but the self-same Minister said that security of supply was not an important factor. I think he is wrong, but that is what he said. Therefore, worrying about whether the supply is from imports or domestic production would not seem that important. I passionately care about domestic production and, given the right incentives, I am convinced that we could have one.
Norman Lamb (North Norfolk) (LD): Will the hon. Gentleman give way?
Mr. Paice: I am sorry, but I shall not give way because other Members wish to speak.
I wish to turn to a point that my right hon. Friend the Member for Fylde (Mr. Jack) covered in a different way—the fundamental difference between the Government's policies for power generation and for
road transport. The consumer pays for the introduction of renewables for power generation—whether that is wind power, wave, solar power or any other method—but, in the case of biofuels and road fuels, the Government wish to use a duty derogation. That is a total inconsistency from a Government who go on and on about joined-up government and working together.Cargill plc has said to me and, I am sure, to other Members that a 2 per cent. market share for biodiesel with a 28p derogation would cost £108 million, whereas a derogation of just 1.5p on a 95:5 blend would cost the same, but would satisfy 37 per cent. of diesel requirements. I put it to the Minister that there are alternative ways of addressing this fundamental problem without necessarily going down the wholesale route of a massive derogation.
I want quickly to touch on the agricultural impact of an expansion of biofuels. Much has been said about that, and some environmental bodies have questioned whether that would be in the interests of our national environment. My principal concern is climate change, but I shall not debate issues involving the common agricultural policy. However, I believe that the reforms that are in train are, in principle, going in the right direction.
If we have biofuels, there will obviously be a new market for wheat, sugar beet and oilseed rape. That must be good. Whether it would have a significant impact on the price—that is the fundamental issue for whether there is large-scale expansion in the acreage of those crops—is more questionable. In the past two years, the wheat price has varied by 100 per cent. Two years ago, it was £55 to £60 a tonne, but the price reached literally double that even though it has fallen back a bit now. It is therefore difficult to foresee what will happen to prices, and that is the case without a biofuel industry. It is difficult to be precise.
For sugar beet, we are looking at the seed quota, but that is a wholly unsubsidised element of the sugar beet crop, so it is not a serious issue. The situation might have the greatest impact on the ultimate price of oilseed rape, but if we went down the derogation route, its price would be constrained by the duty relief. However, it would always be open to the Government to reduce the derogation if that were the way in which things went.
The hon. Member for Southampton, Test (Dr. Whitehead) referred to our mineral oil imports. No Minister of any Government can ever forecast what the oil price will be, so the questions of the economic impact on agriculture, whether the acreage would expand and the likely cost of developing the industry depend on crystal ball gazing into what the real price of oil will be. If any hon. Member can say what the oil price will be in the next five years, they frankly deserve to be awarded everything available—none of us knows.
I know that other hon. Members wish to speak. It has been said over and over again that the Minister is on our side, but he must take a message back to the Government. It is his bad luck that he is here to account not only for himself, but for the whole Government's woeful response thus far to biofuels. He must go back to his colleagues and say, "There is great inconsistency in how we are approaching the use of energy vis-à-vis its impact on climate change." It does not make sense to
encourage the widespread use of wind power that will be paid for by the consumer—it will not necessarily reduce global warming one iota because it will be introduced largely at the expense of nuclear power—yet at the same time to refuse flatly to do what is necessary to generate a market for biofuels.At the end of the day, I do not mind whether the market is achieved through a duty reduction rather than a renewables obligation, although I personally prefer the incentive approach to that of regulation. I do not like the idea of using capital grants because they tend to be regionalised and we are not considering a regional issue, but a national one. Additionally, East Anglia, which is the biggest arable area in the country, receives little money through capital grants because it is reasonably economically prosperous. I am not raising that as an issue, but it demonstrates why regional capital grants are not the way forward. I do not mind which of the other two ways forward the Government ultimately choose, but for goodness' sake let us choose one and get on with it.
5.17 pm
Mr. David Drew (Stroud) (Lab/Co-op): I shall make three main points in the small time available, but first I congratulate the Chairman of the Select Committee on the way in which he presented the case in the report. The Committee has a reputation for churning out a certain quantity of reports, but this report shows that we can also produce the quality. The debate has been useful.
My three points are fairly simple. I want to touch briefly on imports. There is a danger that the Government seem to be uniquely capable of achieving a lose-lose situation. When we heard evidence from the Financial Secretary—I do not want to chide him specifically—we were told that the market was seen to be the main determinant of the best way to produce biofuels, and that if that meant through imports, so be it. That is not good news for the domestic industry. The Government's response to the report, through the Department for Environment, Food and Rural Affairs, argues that it is not terribly interesting to consider the environmental audit of what happens in other countries. We are signed up to Kyoto, which is an international agreement, so perhaps we should take account of not only our domestic industry, but the damage that we might do to other parts of the world. That is a problem, and we should have the strength of our convictions to do things locally—the Government also argue that—and perhaps more effectively.
For the fifth time of asking, I congratulate my hon. Friend the Member for Southampton, Test (Dr. Whitehead) on pushing forward the bioethanol escalator, but I wish to counterbalance the idea that we can achieve what is possible by simply blending that in with existing supplies of fuel.
My hon. Friend the Member for Sherwood (Paddy Tipping) and I visited the BMW plant in Sao Paulo, where we learned that biofuel production kick-started the Brazilian motor industry. Brazil will have a great hegemony in future vehicle production, because it is the first country to invest in such fuel. It has proved that biofuels work, and we should learn a lesson from it. However, we should opt for blending, and not pursue biofuels as an alternative.
As the hon. Member for South-East Cambridgeshire (Mr. Paice) said, biofuels provide an opportunity to overcome our reliance on traditional forms of energy. The Brazilians, of course, were not environmentally driven initially—they were scared to death that the Americans would turn the petrol pumps off, and wanted something else to increase their energy supply. We should not underestimate either the physical need for such fuels or the need for fiscal incentives.
Other hon. Members have skated over the need for stability, but I shall be blunt about it, whether it is achieved through financial incentives or exhortation. I visited the Arbre plant with the all-party group on renewable and sustainable energy. We have gone backwards, as we had a state-of-the-art biomass plant near Doncaster, which failed because there were no incentives for farmers to supply raw materials. There were no stable contracts, and we need to overcome that problem. We have taken a backward step, but we need go forward. My hon. Friend the Member for Southampton, Test and I have worked together, and have discovered problems with renewables obligation certificates. We must give producers a guaranteed price so that there are stable conditions for trade and investment in future. That is crucial to biofuels, as it is to other forms of renewable energy.
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