Examination of Witnesses (Questions 540-555)
IAN PEARSON
MP
10 MAY 2006
Q540 Daniel Kawczynski: Minister,
you acknowledge that the contribution from biomass can be very
insignificant yet the Renewable Transport Fuels Obligation is
predicted to save 16 times more carbon than the new subsidy for
biomass heat. Are you fully exploiting the potential of biomass?
Just as an aside, I would like to tell you that I recently visited
a company in my constituency that was importing burners that were
working on biomass and they were starting to sell them to facilities
throughout Shropshire. They were big enough to power whole theatres,
swimming pools and leisure centres. Basically these people were
telling me that the Government could be doing far more at the
moment to be promoting this sort of technology. It would be interesting
to hear your views on that.
Ian Pearson: I recognise the figures
that you quote I recognise because they come from the Climate
Change Review and I think you are right to suggest that we can
be doing a lot more when it comes to biomass. Again, it is an
area where I do expect to see significant future development.
It is one of the reasons why the Government set up the Biomass
Task Force and you will be aware of the Government's response.
Q541 Chairman: I have obtained one.
Ian Pearson: The Chairman has
got one. As you will see from the response, and I do not have
to repeat all that is in the response, there is a range of Government
initiatives that the Government has following on from what we
believe was a very useful report that was provided to us. It just
indicates that there is a lot more that can be done in this area.
Q542 Chairman: I do not know whether
you have had a chance though to have a look at one of the schedules
at the back of the original Biomass Task Force report. You may
have obtained a copy of it. I see you have. If you go to the back
of it, I think it is Schedule Two—
Ian Pearson: I am not sure that
three days into the job I actually got as far as Schedule Two.
Q543 Chairman: It was a question
that we put to Sir Ben Gill and you might care simply to reflect
on what I am saying. It seemed to me that there were a lot of
little itty-bitty initiatives and help but that it lacked coherence
as to its objectives. Looking at the summary of the response of
the Government it is a sort of target-free zone when it comes
to biomass. I have got no idea where you hope to end up. There
is quite a lot of inspirational stuff about what you could do.
The Road Transport Fuels Obligation has a clear target—5%
by 2010—but in terms of the area of biomass there is not
a similar target. What is the reason for that?
Ian Pearson: I think what I would
want to say in response is that we are planning to produce a Biomass
Strategy during the course of this year, and one of the issues
that we will certainly want to address as part of that strategy
will be whether or not we should set targets in this area. As
a Government we have been criticised in the past for setting far
too many targets but this might be an area where it could be useful
to set targets. I think the sensible thing to do is to await the
outcome of the Energy Review and renewables, as will be appreciated,
is an important part of the Energy Review. There is also work,
I understand, that is being done on a review of Waste Strategy
and, of course, there is the implementation of the EU's Biomass
Action Plan as well. I am keen that the Biomass Strategy needs
to reflect on all those developments.
Q544 Chairman: So that strategy and
timetable is likely to come out after the Energy Review is concluded
or before?
Ian Pearson: After the Energy
Review is concluded.
Chairman: After the Energy Review. One
of the high level conclusions for example is "Government
leadership through public procurement, including the commitment
to carry out a mapping exercise of the potential use of biomass
across the main procuring departments of the Government estate."
Is that type of exercise going to then inform the strategy and
actually say, "Right, well we have looked at the estate,
here are some things that we are committing ourselves to do"?
Ian Pearson: As I mentioned a
little earlier, we are looking very closely at sustainable procurement
at the moment as a Government and, again, it is an area where
we do want to encourage other Government departments to look at
biomass as part of a solution.
Q545 Chairman: Let us be very specific:
are you going to say to other Government departments that you
would like to see them have their own individual biomass strategy?
Can I just give you an example. In my own constituency there is
Kirkham Open Prison which I visited with the governor and he told
me about the enormous energy usage he had got. He also has a lot
of farmland so I said "Have you ever thought of growing biomass
and what you could not satisfy your own boilers with, do a deal
with local farmers to also provide feedstock and thus achieve
Government objectives of using biomass, reducing CO2
emissions and cutting costs?" His eyes lit up, he thought
this was the most wonderful idea and suggestion. I am now saying
to myself "When should I write to the Home Office to get
them to look at this kind of idea?" If I have understood
you correctly, when your strategy comes out might be a good time
to do that.
Ian Pearson: My suggestion is
that every Government department is required to produce a sustainable
development strategy and sustainable development action plan.
You might want to be suggesting that as part of the sustainable
development action plan Government departments ought to be giving
proper consideration to biomass as part of their energy uses.
Q546 Chairman: Will the strategy
work that you are doing also evaluate the effectiveness of the
plethora of schemes that are around? I see that it was irresistible
to launch yet another one, a new five-year capital grant scheme
for biomass boilers with funding of £10-15 million over the
first two years. A second round of the bio-energy infrastructure
scheme has also been launched and it joins the long list in that
schedule which I know you are going to read with keen interest
after this session. Are you going to be looking to evaluate whether
all of this plethora of schemes is actually achieving what they
set out to do?
Ian Pearson: We will certainly
want to do that. My view on Government is that I believe in evidence-led
policy making and we need to evaluate the policies that we have
and the particular programmes that we operate as a Government.
I would expect the strategy as being a document which summarises
the key actions that we need to take which are most effective
in achieving our policy objectives.
Chairman: I am going to take that as
an answer yes to my question and Mr Taylor will now move on to
some more evidence that he wants to discuss with you.
Q547 David Taylor: I neglected earlier
on to congratulate you on your appointment and to say that I was
one of many who worked in the by-election which returned you to
this place, and I am pleased to see you soaring through the Government
stratosphere. I want to ask for your frank assessment of the effectiveness
of the fiscal and other measures that the Government have introduced
in this area. Now, the Chancellor will not be forming his Cabinet
for a year or more, and whatever you say will be kept within this
room, so you can be as frank as you feel you ought to be. In terms
of biomass, the Chairman has said that there are lots of itsy-bitsy
schemes and he has quoted from some of them, and indeed in your
own Department's evidence, pages four and five, there are eight
categories of incentive schemes which are there to support the
development of biomass. Sir Ben Gill, when he gave evidence to
this Committee a week or two ago, told us of a new City academy—and
I am sure you have got some private reservations about those—which
was quoted £170,000 for a biomass boiler, getting in on the
back of the incentives, if you like, when the actual cost was
as little as £15,000 due to the confusion of advice and confusion
amongst the experts in the industry. He is diagnosing the problem
of take-up—and there is a problem—as being ignorance
out there and confusion, the fragmented network of incentives
which are there. How do you propose to address in your new role
this ignorance if it does exist?
Ian Pearson: If we are firstly
talking about biofuels and the incentives—
Q548 David Taylor: I am talking about
biomass in the first instance.
Ian Pearson: You are talking about
biomass in the first instance, okay. If you are talking about
biomass, as you will see from the evidence we submitted, there
are a range of areas where the Government is acting to provide
support, and they are summarised in 5.1 of the memorandum that
we provided in evidence. The feature of a lot of these is there
are some relatively small scale schemes which are still quite
new and we will need to evaluate their effectiveness as instruments.
Indeed, I think the feature of a lot of the programme here is
that we are still very much early days in terms of trying to promote
biomass. I have some sympathy with the view that Ben Gill expressed
when he said there is still some market ignorance out there as
well. There are market opportunities and I think the Committee
can hopefully publicise the opportunities that there are for biomass
and for biofuels in the future with its report. Certainly one
of the things that I will be keen to do is to see what more can
be done to build this important market for the future. I think
the strategy will be an important way of doing that.
Q549 David Taylor: You spoke in your
evidence a moment or two ago about the biomass strategy which
will be published later on this year, and a little more about
that. What sort of support mechanisms have been considered for
possible inclusion into this report without saying what the report
might contain, because you cannot know in detail yet?
Ian Pearson: I certainly cannot
go into detail at this stage in terms of the strategy. We really
need to see what will come out of the energy review as well, particularly.
What I think we have done though is helpfully summarise some of
the activities which are already taking place to date, and they
are certainly contained in the memorandum, but also in the Government's
response to the Biomass Task Force report as well. That is about
as far as I can go at this stage.
Q550 David Taylor: One final point,
going back briefly to ECAs and the adequacy of the fiscal incentives.
I think ECAs could be especially constrained amounts because they
do seem to be relatively small sums involved. The Chairman said
that capital allowances are a foregone tax, that is true, but
all that 100% allowance is doing is re-profiling that foregone
tax. The actual sums that are foregone are not significantly different
over the period of the writing off, are they? The amounts are
tiny. Here we are, you have acknowledged, one quarter of 1% of
biofuels when the target is 5%, you have to multiply that by a
factor of 20 in less than four years—April 2010—and
beyond that by a factor of six or seven to go from 5% to almost
a third. These are really severe mountains to climb and I am sure
we can do it but the amounts we are investing, the incentives
that we are giving, are relatively small, are they not, or tiny
even?
Ian Pearson: As I say, on the
enhanced capital allowances regime, the figures that are provided
as a potential cost to the Government of this are based on our
best available estimates. We are seeing increasing capital expenditure
on plant investing in particularly the biofuel sector at the moment.
It is very difficult I think to predict just how rapidly this
market will grow but certainly I would not want to question the
way the capital allowances regime has been set up at the moment.
I do think it will provide a useful additional policy lever to
encourage this market to grow. I have no doubt that the Treasury—once
this scheme has got state-aid approval and is actually implemented,
which as I say has not happened yet—will want to monitor
take-up very closely as they always do when it comes to capital
allowances.
David Taylor: The Treasury civil servant
before you came in admitted that the investment costs were not
huge, which is Whitehall speak for tiny. I hope that one of your
early responses, when you are fully established in this job, will
be to go back to the Treasury on this and try and improve what
is really just a window-dressing scheme and may be converted into
something like grants or something like that.
Q551 Chairman: I hope they do monitor
it.
Ian Pearson: I do not see it as
a window-dressing scheme at all. It is not the only answer when
it comes to encouraging the growth of this market but I do believe
that it is a scheme which will be welcomed by companies that are
already in this market or potentially want to enter into the market
in the future. It does give them, certainly, financial savings
and an encouragement to bring forward capital expenditure which
is what we want to see.
Q552 Lynne Jones: We touched earlier
on the need for research in this area. I would like to raise further
issues with you, and perhaps you might like to look at this. NERC
has announced the closure of three of the sites for the Centre
for Ecology and Hydrology. Although your predecessor in January
said that this would not affect research into climate change,
NERC themselves have acknowledged that there will be a reduction
in the work on the prediction of climate change impacts as a result
of this restructuring. Do you support this decision?
Ian Pearson: Let me say on climate
change research, more broadly, that I believe this is an area
where we do lead the world. If you look at the Hadley Centre and
the modelling work they do, it is enormously impressive. I went
and talked to some of the Hadley Centre team who were working
with the Japanese in Yokohama on the super computer there and
the modelling and climate change work that they have done and,
as I say, we are recognised world leaders when it comes to this
area. With regard to the situation with NERC, I am happy to write
and set out the Government's position.
Q553 Lynne Jones: You are right that
we do have an excellent science research base and it is very important
that we nurture that. We have heard recently that the Institute
of Grassland and Environmental Research has got a role to play
in the development of energy crops yet the Government has cut
its funding, why?
Ian Pearson: I am not sighted
of that as a particular issue but if I am going to write to the
Committee on NERC and a number of other areas where questions
have been raised today, I am happy to cover that point as well.
Q554 Lynne Jones: Prospect have produced
a document about the science base in this area, I have also had
representations from Cropgen who are involved in biotechnology
and the RSPB, for example, have expressed concern so maybe this
is an area you might like to look at because if we are going to
advance in this area, if we are going to have effective land use
in terms of crops then we do have to have excellent research.
It seems bizarre that we are cutting back in some of these areas.
Ian Pearson: I do believe that
we need to have excellent research, and I am certainly aware of
a number of excellent research projects which are around at the
moment. I cannot comment on some of the detail of individual schemes
but, as I say, I am more than happy to write to the Committee
about these.
Q555 Chairman: Before we say goodbye
to our first encounter with you, has your Department entirely
written off a renewables heat obligation for the use of biomass?
Ian Pearson: No, we have said
we will keep this under review. It is something the Biomass Task
Force was not particularly keen on. They said it was potentially
complex and bureaucratic but we will keep it under review.
Chairman: Minister, thank you for making
Herculean efforts to get up to speed in an area where a week ago
you had some knowledge and where you now, obviously, have considerably
more knowledge. We are very grateful to you for keeping your predecessor's
appointment with us and we are very grateful to you, also, for
your kindness in offering to write to us on a number of other
aspects of the questions that we have put to you. Thank you very
much indeed for coming to see us.
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