Examination of Witnesses (Questions 460-479)
MR ANDREW
PERRINS AND
MR MARTIN
JOHNSON
10 MAY 2006
Q460 David Taylor: I am talking about
the ECA.
Mr Johnson: In terms of the ECA,
I think what the stakeholder discussion process has told us is
that people have said that this will be a useful additional measure
of support. A number of companies—British Sugar is one and
Losonoco is another—have given us that feedback, so I think
it is an additional measure of support. It sends a very clear
signal about the Government's desire to have not just any biofuels
but the best and most carbon-friendly biofuels, and I think while
we recognise that RTFO is the key thing, that this is an additional
financial mechanism, particularly for smaller companies which
struggle to access capital.
Q461 David Taylor: But the alterations
to its cash flow resulting from ECA would be insignificant compared
to the traditional writing off of these investments against capital
allowances.
Mr Johnson: I can only repeat
what I said in that we recognise that the RTFO is very much the
key thing. Companies have said that while not of massive benefit,
as you allude to, it would be of some additional help to them.
David Taylor: It is not only not a massive
benefit, it is a tiny benefit. Thank you, Chairman.
Lynne Jones: Can I come back?
Chairman: I am just conscious of the
fact that the Minister is outside and waiting for us.
Lynne Jones: I have not asked the question
I was supposed to ask.
Chairman: Very briefly.
Q462 Lynne Jones: The figures that
we have been given indicate that the carbon savings of transport
fuels provided by biofuels is significantly greater than the carbon
savings for biomass heating schemes. Why is that?
Mr Johnson: I am not sure. My
guess is that the policy position on biomass for road transport
biofuels because of the RTFO will deliver these very significant
savings by 2010 based on 5% biofuels, and it may be that in the
heating policy area there is not likely to be so much market penetration,
but I would probably have to defer to Andrew on that one.
Q463 Lynne Jones: We know that biomass
heating and biomass combined heat and power has the potential
to save far more CO2 per hectare of plantation, so
why are you going hell for leather producing the RTFO which at
best is going to produce second-best CO2 savings because
no matter how much capital allowance there is you have acknowledged
that we are not getting anywhere near with most of our supply
being from second generation biofuels? Why are you not putting
more effort into biomass heat and combined heat and power?
Mr Perrins: I would say in some
ways the RTFO is an easier target. It potentially allows a quick—
Q464 Lynne Jones: It looks good but
actually it shows very poor performance in terms of the environment
and CO2 savings.
Mr Perrins: It has the potential
advantage that it can be introduced relatively quickly. By definition,
it is a measure which applies across the whole economy. All road
transport will be obligated to comply with the RTFO rules. Biomass
heating has different characteristics in the sense that there
is not immediately available a similar uniform mechanism which
could be applied in a relatively short timescale to lead to such
a dramatic step change in market penetration. The measures that
the Government has announced on biomass heating will certainly
lead to both significant carbon savings and a significant increase
in uptake of this technology. The assessments, and maybe you are
quoting from the Climate Change Programme for example, are based
on what the funding which has been allocated to the scheme can
deliver on the timescale covered by that programme, which is—
Q465 Chairman: Ms Jones is referring
to Table A on Page 3 of Defra's evidence to the Committee which
shows a huge difference, for example, between biomass used in
grid electricity generation and the savings of CO2
for example from biofuels or from oilseed rape.[7]
There is a factor of four in carbon dioxide emissions between
the two in terms of savings. It is just colossal.
Mr Perrins: Yes, as I believe
Ms Jones said, it is recognised that if you take the comparisons
in terms of the given amount of land that you have available for
use for either of these purposes, the consensus would be that
using the land to produce biomass for energy generation, and in
particular heat, is significantly better than using the same amount
of land for biofuel. In assessing the overall impact of these
policies, it is necessary, I would suggest, to consider the state
of development, where we are currently with these technologies,
the potential uptake and the results of using different types
of policy mechanisms where, as I said, the RTFO in the transport
sector will have, when it is introduced, an immediate and dramatic
effect across the economy, which is not the case—
Q466 Lynne Jones: What do you call
`dramatic'?
Mr Perrins: The change from where
we are currently on biofuels which, as Martin Johnson said, is
less than half of 1% in the UK to 5% is arguably a dramatic increase.
Lynne Jones: 5% but then if your carbon
savings are not particularly great it is not doing that much for
climate change?
Chairman: I think we will have to conclude
our discussions there because I am conscious that the Minister
has been waiting for 20 minutes and I think that is a very good
question you can put to the Minister. Gentlemen, can I thank you
most sincerely for your help and Mr Johnson for your agreement
to supply to the Committee with some further information. Mr Perrins,
the same offer is always open to anybody who comes before the
Committee. If there is anything else you think we ought to know
about that we do not, we are always very happy to hear from you.
Thank you both for coming and giving evidence.
7 Ev 153, Table A Back
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