Select Committee on Environmental Audit Minutes of Evidence


Examination of Witnesses (Questions 100 - 119)

TUESDAY 20 NOVEMBER 2007

MR PETER KENDALL, MR GUY GAGEN, MR GREG ARCHER AND MS JESSICA CHALMERS

  Q100  Colin Challen: The more I hear, the more I think we have opened a can of worms. I have an article here from Science magazine published by the American Academy of Sciences and it says, "In all cases, forestation of an equivalent area of land would sequester two to nine times more carbon over a 30-year period than the emissions avoided by the use of biofuels. Taking this opportunity cost into account, the emission cost of liquid biofuels exceeds that of fossil fuels". If that is the case, and I do not know if you would agree with that or not, is it right that the Government should be promoting biofuels as a green fuel at all?

  Mr Kendall: I just think there is no one here or I have not come across anyone in the biofuels debate who is actually advocating one hectare of rainforest being depleted. There is no one who actually wants to see that as an outcome.

  Q101  Colin Challen: This is saying "reforestation" not "deforestation". We all understand deforestation, that is a different argument, but this is saying that reforestation is better for the climate than biofuels.

  Mr Archer: If we can bring about reforestation, if the countries of the North are willing to pay the countries of the South to reforest, if there are markets for those forest products, then that is fine, but the reality of the situation is that the countries of the South are looking for new markets to create employment opportunities and create wealth within those countries. They will only reforest those tracts of land if there is a sound economic reason for doing so. If we put that sound economic reason in place, then great, let us do it, but we cannot expect them to do it, to mop up the carbon that the northern economies have been generating for the last 100 years and not be compensated.

  Q102  Colin Challen: Well, perhaps they could do it with a much stronger international carbon trading system in place, and I think Brazil perhaps may like to see that outcome. At the moment of course, the reason we want to use biofuels is to convince ourselves that we do not have to change our behaviour one jot. Should the Low Carbon Vehicle Partnership be saying, "Use your car 5% less and then you don't need to worry about biofuels" because that is a lower carbon vehicle, by definition?

  Mr Archer: The Low Carbon Vehicle Partnership argues that there is no silver bullet, that we need more efficient vehicles, we need demand management for transport, we need walking and cycling and we need lower carbon-intensive fuels. You need all of those elements. The biofuels policy at the moment will bring in 5% fuels into the UK market, something the UK could actually supply through its own excess cereals production at the present time. Five per cent is a very modest target. The UK has also been arguing in Europe very strongly that we should only move to higher targets if sustainability criteria are put in place. The best way for the UK to influence those discussions in Europe and to ensure that European production is sustainable is to be operating best practice ourselves which is what is happening with the RTFO. The reporting scheme is the best scheme of its type in the world and the first scheme of its type in the world. We need to be sourcing responsible amounts of biofuels in a responsible way to influence other countries to do a similar thing.

  Q103  Colin Challen: But the best in the world at the moment is not very good because there is no worldwide certification scheme, for example, and we have seen in previous inquiries that that has applied to sustainable timber, that multiplication of these certification schemes and references to illegal logging as opposed to sustainable logging, that all makes life very complicated. Can we be sure that, if we are getting up to 5% biofuels in the mix, no company will advertise that product as a green product until we can be sure that it is actually a sustainable green product?

  Mr Archer: I cannot comment for how companies will choose to promote their products. Some will promote them responsibly, some will promote them less responsibly.

  Q104  Colin Challen: Well, would you recommend that no company should promote the use of a 5% mix of biofuels as a green product? I personally feel that they will and they will want to promote their usual greenwash message, but since we are still talking about 95% fossil fuel products and possibly the other 5% being worse than fossil fuels, according to this article, they should not be allowed to get away with it, should they?

  Mr Archer: One of the things that we are currently working on is a proposed kitemark scheme that would enable companies to demonstrate clearly on the forecourt whether or not their biofuel was sustainable or not. It is a proposed project which the Government asked us to undertake when they made their announcements back in the summer. That work is not finished yet and we will see how feasible it is to develop that kind of certification scheme. I think until companies can be clear and validate the claims which they are making, they should not be making unsubstantiated claims about the greenness of their products.

  Q105  Colin Challen: How long will it take to get the kitemark up and running, do you think?

  Mr Archer: I think a kitemark scheme would probably take about a year to 18 months to get operational.

  Q106  Colin Challen: And that means all these other questions will have to be answered that we are asking this morning.

  Mr Archer: The reporting scheme will be in operation from April and companies will be required to report on the sustainability of their fuel from the first month of the scheme.

  Mr Kendall: The point about whether 5% is making a meaningful contribution when we could actually improve the efficiencies of the vehicles, as Greg said, that is an adding-on effect. If we can produce 5% and maybe go on to 10%, I do think there is a really important driver of technology on this, and I work very closely with the processing companies building a bioethanol plant up in the North East, they see this as a bio-refinery that is going to evolve over time and, if we can meet 5% and do it in a very sustainable way, which is an absolute given on this, that is taking one car in 20 off the road in effect if we show real carbon savings and, if we then get 5% fuel efficiency, that is taking one in ten and, if we then get people to manage their cars more effectively, you will have another knock-on effect. It is really important, I think, that we do try and drive the evolution of green fuels. Your suggestion that we could reforest is not helping provide us with alternative fuels that we know are more carbon-beneficial and I do not think this is a headlong charge, as I said earlier on, for an American-style rush, this is about starting to drive that evolution—

  Q107  Colin Challen: The point I am trying to make is that this will actually encourage people to drive their cars more. The consistent trend in road transport which has gone up and up and up over the last ten or 20 years will continue. This will not discourage people from using their cars, it will encourage them to use their cars.

  Mr Kendall: I have seen from recent figures that in the United States, since the price of oil has gone up and the price of petrol to the United States' motorist, they are finding that the usage of petrol has fallen quite dramatically this fall, so I think the threat of $100 per barrel is impacting people's use. I do not think, because it is green, that it means we are going to spend a lot more on petrol or diesel.

  Mr Archer: Given the very negative publicity and media coverage of biofuels at the moment, I would doubt very much that too many companies will be publicising the fact that they are adding biofuel to petrol and diesel.

  Colin Challen: I shall look forward to that!

  Q108  Mr Caton: Can we come on to an aspect where the written evidence your two organisations have submitted differs quite markedly and that is on the subject of carbon standards, and this is really for the NFU. You reject the need for carbon standards to guarantee minimum greenhouse gas savings from biofuels and opt just for the sustainability standards to apply. How realistic is that position when the whole principal aim of the policy is to reduce carbon emissions and how did you come to adopt it?

  Mr Gagen: Thank you for raising that issue and it is something, when we wrote back to your inquiry, where I am not convinced that we did reject carbon at all. In fact, I think as the Committee has made very clear this morning, sustainability is the most important thing to get right from the first day. Carbon is certainly very important as well, but needs to be recorded after the fact, if you like, to demonstrate your criteria, whereas sustainability is the most important thing which has to be set in train before a crop is really put in the ground, so it is really a timing issue from our point of view. We certainly are not dismissive whatsoever of carbon accounting or responsible use of carbon or the fact that carbon needs to be saved to give this RTFO credibility, so, if it has not been clear, I apologise, but we are certainly not dismissive of carbon accounting at all.

  Q109  Mr Caton: So do you have any problems with the current proposed timescale?

  Mr Gagen: No, but we would be concerned if there was a very rapid ramping up of the carbon demand from April, for example, even through 2010 beyond what was technically possible from what we consider to be sustainable supplies, so we are just guarding against over-ambition, I believe, in our response.

  Q110  Mr Stuart: Should the certificates granted under the RTFO differentiate on the basis of greenhouse gas emissions in order to stimulate the market for more efficient biofuels and do you think this would help bring about a new generation of biofuels, a second generation?

  Mr Gagen: The NFU certainly supports in time, perhaps post-2010, that as a next stage in improving the efficiency of these products, but unfortunately we have to get an industry going first in order to be able to measure it and demonstrate those savings.

  Mr Archer: We have argued consistently from before the RTFO, from before we began the reporting scheme, that linking to carbon was the correct way to develop a biofuels policy in the UK. There are a range of views within the Partnership as to how that should be done, but my personal opinion, having looked at this in some detail, is a simple relationship whereby you reward biofuels with more certificates if they have higher levels of greenhouse gas saving is the right thing to do, so, for example, you could use a 50% saving for one certificate and, if you have a fuel with a 75% saving, that earns 1½ certificates, and 25%, half a certificate. That type of scheme will encourage people not just to supply biofuels as cheaply as possible, but encourage them to achieve greenhouse gas savings as cost-effectively as possible. It will also enable the new generation of advanced biofuels to potentially compete in the market because these will generally be more expensive in the early years, but they will achieve higher levels of greenhouse gas savings overall, and that provides the sort of market mechanism that will encourage the supply of fuels which have a higher greenhouse gas saving. It is a fairly small step from the reporting scheme which we have developed to that kind of carbon linkage and there are certain things we will need to change, but it is entirely manageable and my research has shown that it is probably legal under Trade Rules if it is done in the right way.

  Q111  Mr Stuart: And the differentiation you were suggesting there was once the figure for 50% and half for 25%. Have you done any work to look at the level of differentiation that might be required in order to incentivise, as you say, the additional investment that might be required?

  Mr Archer: It is difficult to know what the price of advanced biofuels will be because they are still at a very early stage. Even the oil companies would say that, if advanced biofuels cannot compete under that sort of system, they are too expensive and the price needs to fall until they can compete under that sort of system. That type of approach is most likely to be legal under Trade Rules. It is not arbitrary, it creates a level playing field, it enables fuels to compete on a performance basis. The EU, for example, is proposing that there will be some kind of mandate just for advanced biofuels. That is very unlikely to be legal, in my opinion, under Trade Rules. Similarly, if you were to try and skew the curve in some way, I think you would be liable to charges that what you were doing was arbitrary and, if it is arbitrary, it is questionable under Trade Rules.

  Q112  Mr Stuart: Last week, several witnesses told us that they felt that carbon and sustainability standards should be brought in at the same time rather than staggered. I wondered what your views were on that.

  Mr Gagen: As I alluded to earlier, I think perhaps bringing the sustainability ones in first gives those producers of feedstock time to put their schemes in place, whereas the carbon one certainly needs to come in as well, but perhaps not so quickly.

  Q113  Mr Stuart: Why?

  Mr Gagen: Because it takes time in the agricultural cycle to produce a crop, so it is just a simple timing factor there. If you are going to emphasise something, sustainability should be first. Sustainability also covers off some land-use changes potentially as well.

  Mr Kendall: We are having a very wide debate at the moment with your sub-group on labelling which I was giving evidence to last week. There is a real challenge with agriculture about measuring carbon. We are not taking 50 tonnes of steel into a factory and producing nuts and bolts out the other end, but we are working with the natural elements, so it is difficult to actually and precisely pin down exactly what we are doing. I think there is a lot of work going on at this moment in time in understanding all the carbon impacts and there is the work that I know Paul Crutzen has done on nitrous oxide emissions and obviously that is a devastating greenhouse gas. Understanding all these aspects of agriculture are really critical, so we are committed to making sure that we demonstrate our carbon savings and we do it correctly, but I think there is a time-lag on making sure that this can be done clearly and, as I say, the whole labelling issue for agricultural products is one that we want to see pursued, but it needs to be done with the knowledge and the science behind it.

  Q114  Mr Stuart: Are you confident then, if we look at it the other way round, that you have got sufficient time-lag, given the practical difficulties which you have explained?

  Mr Kendall: It is slightly easier with agricultural crops than it would be necessarily with livestock, so I think we are looking at the whole labelling of agricultural produce, cheeses, butters, milks, et cetera, with the dairy emissions, for example, and how we manage and, as was said before, these are really complex interactions. I think we should be able to deliver a better brief than I am on this, that we can show real carbon numbers sooner rather than later.

  Mr Archer: The carbon scheme which is proposed will include direct land-use change effects, so those will be quantified, so there is no risk that people will simply rush for tropical feedstocks produced in an unsustainable way because they would suffer a penalty in the greenhouse gas calculation anyway because that is taken into account within the carbon calculation that is done. There is a small risk of having 2010 for carbon and 2011 for sustainability. However, the mandatory sustainability standards are very much more difficult to do than linking to carbon and there is likely to need to be much more international negotiation and bilateral agreements reached with supplier countries, so the timetable that has been set out for the Government is pragmatic. If you wanted to introduce both schemes together, it would probably mean delaying the carbon scheme rather than the earlier adoption of the sustainability scheme because of the amount of work that needs to be done. My personal view is that 2010 is achievable and we should bring the carbon linked scheme in as soon as it is achievable.

  Q115  Martin Horwood: Can I talk to you about the sort of wider agricultural impacts. Clearly a buoyant demand for biofuels would lead to a general increase in agricultural commodity prices. Would you accept that and, if you do, does that mean that, as a proportion of their income, agri-environment payments will be less important to farmers and, therefore, they would be more likely to regard those as less important and perhaps opt out of them and work outside them?

  Mr Kendall: I am an arable farmer from East Anglia and I contract-farm for other people as well. My cereal prices this year have increased dramatically, which is why I am sitting here with a smile on my face, but it is nothing to do with biofuels, it is all to do with supply and drought around the world in different areas and the wheat market has been really shrunk and it is supplied by challenges globally on production.

  Q116  Martin Horwood: But of course, if it was a permanent and buoyant part of the agricultural market, it would have that effect?

  Mr Kendall: It will change the dynamics of how I relate to agri-environment schemes without a shadow of a doubt and quite a point in a speech I gave at the Cereals Event in June this year was to make sure that farmers, as they see better times, invest more in their wider messages of bringing consumers on to farms and explaining what goes on, but also making sure our biodiversity targets are met is absolutely critical. I do not see farmers, having put in field margins and different management techniques for hedgerows, suddenly abandoning them to try and get a small amount of extra production. Of course it is going to be difficult because we have a real challenge on rural development funding in the UK to actually pay people more for taking land out of production for biodiversity measures, but, when I look at the key measures on farm issues, hedgerow management, timing of trimming, alternate hedgerow trimming, alternate size, leaving margins on the outside of fields, these are ones that impact quite lightly on my actual output, but I think they will over time have quite a big impact on biodiversity measures. Having areas, for example, like six metres next to watercourses, because of restrictions on products and materials I can use, I will never remove those six-metre margins next to watercourses, so I believe that the benefits of those margins will be there for ever and not be removed because grain prices have gone up.

  Q117  Mark Horwood: Your financial incentive to do so will be less to maintain them, will it not?

  Mr Kendall: I have less if I do not. Of course there is an incentive to remove them, but because I also have regulation which stops me applying a certain amount of plant protection products within six metres of a watercourse, I will leave those agri-environment schemes and whatever the financial imperative is because it is not the most productive land. I think the NFU certainly pushed very hard on things like the voluntary initiative on the responsible use of land to try and make sure the message gets across. We need to address issues like pollutants in water, and chasing a small percentage of additional output will be short-termism of the worst kind.

  Mr Archer: One of the things the NFU has done is modified the criteria within its own assured combinable crop scheme in order that the feedstock produced under that scheme is deemed sustainable under the RTFO criteria. Therefore, what we are seeing is the development of a sustainable biofuels market is starting to strengthen the kind of practices which are happening on a farm. That will then be applied to all cereal production irrespective of whether it goes for food or fuel.

  Q118  Mark Horwood: That brings me on to my next question, which is about the wider issues of sustainability. We have talked a lot about relative carbon impact, but if we set that on one side for a minute and look at some of the other concerns the previous witnesses expressed. They could include an overall intensification of agriculture and, therefore, more use of nitrates, for instance. It could mean perhaps jeopardising our ability to meet the Water Framework Directive and it could mean a loss of biodiversity. How do you respond to that?

  Mr Kendall: I would love to put an invitation out to the Committee to come and visit me on my farm. I contract farm for a number of people as well. I would like to see us intensify in the science of farming in the way we use inputs smartly. We now scan the top of our sprayer with a photographic machine which looks at the green canopy of the wheat crop and it varies fertiliser use as it crosses the field and we now soil analyse all of our fields. I took some more land this year where we mapped the whole area and we then put phosphate and potash in the right areas, in the right quantities, at the right time, so we are trying to prevent those leaching impacts. I think there is a revolution of smart precision farming technology going on in farming which is going to make sure we can meet the challenge of producing more in the future but with a smaller environmental footprint. That is not widespread at the moment. I think with better prices we can see this sort of technology kick in because just not doing anything is not an option, we need to find smarter ways. There is some really good science out there which is going to help us do that.

  Q119  Mark Horwood: If there is a huge expansion in the use of land and it is not necessarily land which is in food production now, surely that is inevitably going to mean more fertilisers, more water extracted from the water table and less biodiversity, is it not, even if that is as well done as you can manage with all the smart tricks you can muster? Is that inevitable?

  Mr Kendall: We know we are going to lose set-aside going forward for obviously CAP reform issues and changes, but what we should see is what has gone on over the recent years. We have seen decoupling through CAP reform in 2004-05. We have now got cross-compliance measures which impose restrictions on how close we can cultivate and how near to ditches you go. Helen Phillips was giving a presentation yesterday on farming futures for the Defra Forward Looking Conference for 2020. She rather disappointingly said we only had 60% of our land in agri-environment schemes. That has come from nowhere in three years. I think there is an explosion of environmental management which has come into practice over the recent three or four years which will more than offset the decline of the set-aside disappearing. What we have to do—and this is a message you will get loud and clear from the NFU—is as we farm our whole farms again, with caution to the agri-environment schemes at the same time, do it in a responsible way. The prospect of the Government or the CAP saying we should leave 8% of our land idle is not one which I think fits with the message of decoupling or allowing farmers to respond to the challenges of the marketplace.


 
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