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Paddy Tipping: Does the hon. Gentleman recognise that officials from the Department for Transport initially told producers that it would be possible to change the legislation during the current year? Subsequently, there was a U-turn by the Government. If they want investment in biofuels, the rules of the game ought to remain steady. Unless people in the industry know the rules of the game, they will not invest.
Mr. Goodwill: I am sure that the Minister will want to comment on allegations of Government U-turns, but I hear what the hon. Gentleman says. I hope that such problems will not be repeated.
Jim Fitzpatrick: I do not accept that the Government have performed a U-turn. The analogy used by the hon. Member for Scarborough and Whitby is accurate: we have come off the accelerator without applying the brake. We are still moving in the same direction of travel, but have slowed the pace.
Mr. Goodwill: I am concerned that I am being a bit too supportive of the Minister, so I should ask him a few questions. Why was the drafting error not spotted earlier? Was the mistake in the Department for Transport or was it a result of inaccurate information supplied to it about the impact? Could the EU Commission be held responsible?
I have about half a dozen questions, which I hope that the Minister will have time to answer. The first is on biodiesel, as opposed to bioethanol. I am sure he is aware that bioethanol makes up a small proportion of the market at the moment. In the UK, only 200,000 tonnes of ethanol are being used, in comparison with the rest of the EU, where 2 billion litres are being burnt. The majority of biodiesel has been used without problem, but we have been alerted to one or two problems associated with cold-temperature waxing and particular problems where water may have contaminated fuel tanks. Could the Minister comment?
I have a BBC report dated 18 February 2008:
“First Eastern Counties Buses, which runs services in Norfolk, Suffolk and Cambridgeshire, said bio-diesel had turned waxy in sub-zero temperatures. The thicker consistency of the diesel meant fuel lines became blocked. The company said it had suspended use of the bio-diesel, and was refuelling buses with ultra low-sulphur diesel which is not temperature sensitive.”
How often are such problems likely to occur? We do not want pioneering companies that decide to use the fuels ahead of the game—perhaps even with higher inclusion levels than required—to find that they have problems and revert to the less green fuel.
The second problem, following on from that of cold-temperature waxing, is water in tanks. In some cases, bacteria have managed to live on the biodiesel in the wet bottom of tanks. The scum produced has caused clogging, not only in the filters but in the pipes of vehicles. That, once again, could give biodiesel a bad name.
Thirdly, does the Minister anticipate any water contamination problems as bioethanol becomes more widespread? Ethanol is very hydroscopic and might well result in other problems. A couple of years ago, a supermarket chain was supplying fuel that caused many problems, and I am concerned that biofuels could get a bad name. Is the Department aware of possible breaches of vapour pressure rules in fuel quality? As we use increasing amounts of lighter Saudi crudes to produce our petrol, concerns have been raised that the vapour pressure limits, which are set under European fuel quality rules, might be breached by higher levels of ethanol inclusion.
Is the Minister confident that all cars being sold now will be ready to use E10 fuel—10 per cent. ethanol petrol—by 2020, given that cars being sold now, of which I wish there were more, will still be around in 2020? Is he aware that, in Brazil, all cars currently use E25 fuel without any particular problems?
I have a question about tariffs for denatured or industrial ethanol compared with undenatured ethanol. All Brazilian ethanol is denatured, and the United Kingdom, Netherlands and Ireland impose an import tariff of 10.2 euro cents per litre, whereas France and Germany impose a tariff of 19.2 euro cents per litre. Will that mean that the UK will be a target for the arguably less sustainable Brazilian ethanol, which might well undermine UK ethanol production?
Is the Minister happy with the ethanol-biodiesel balance at the moment? From research that I have carried out, it seems that the vast majority of biofuel used in the UK is biodiesel, as opposed to ethanol, and given that the UK is a net importer of vegetable oil but a net exporter of wheat—as a wheat producer, I declare an interest—should we try to tip the balance more in favour of ethanol, which has a feedstock that the UK produces and which currently we are exporting? Of course, if we produce biofuels in the UK, as opposed to abroad, we will be in a better position to guarantee its sustainability.
Finally, has the Minister given any thought to whether, if we manage to come up with a useful formula to determine the sustainability of different fuels—whether produced in the UK, the rest of the EU or further afield—under World Trade Organisation rules we can impose environmental levies or prevent their import? When the WTO was in Seattle, at which time I was a Member of the European Parliament, we dispatched Commissioner Wallström to try to extract some concessions on environmental and animal welfare matters that should be borne in mind when considering world trade. She had the door firmly slammed in her face.
I thank the Minister for listening to the Environmental Audit Committee, for learning some of the lessons from the Gallagher report and for listening to the proposals that my party has consistently put forward. He has probably got the balance about right, but I know that he will keep the matter under review. We have outstanding concerns, particularly about how the sustainability of various fuels can be determined, how fuels from different sources can be made compatible and how we can consider land use changes and effects on food supplies. I raised that issue with the Prime Minister last year, when I asked which is more important—putting food into an African’s belly or putting bioethanol in a Range Rover’s tank. That is one of those questions to which there is never an answer, which is probably why I asked it in Prime Minister’s questions. Lastly, we are concerned about the important WTO point. Assuming that the Minister will answer questions to his usual accurate and informative standard, we do not envisage a need to divide the Committee.
4.55 pm
Norman Baker: The hon. Member for Scarborough and Whitby should get a record for the number of questions he has asked in 10 minutes. If the Minister manages to answer them all, I should be astonished, but they are important, so I hope that he will write to each member of the Committee to answer any questions that he is not able to answer today. I am particularly interested in the cold-temperature waxing issue, because I fear that if it is not sorted out, it could discredit biofuels generally, and that would not help any of us who want there to be an uptake of biofuels.
I should declare an interest of sorts, because my wife works for the Renewable Energy Association. I assure the Committee that I have not discussed this matter with her. I am happy to say that when we get home, we have other matters to discuss than the details of such orders.
Secondly, the Minister set out how the order amends the definition of relevant hydrocarbon oil, which is a welcome step forward. As the hon. Member for Sherwood and I have said in interventions, that error was identified in October 2008 and was referred to in an early-day motion of mine in January. It has now been corrected, with effect from 15 April 2009, but I am advised that there might be a difficulty, under the Energy Act 2004, in allowing retrospective action on this point. However, the hon. Gentleman seems to think that would be possible, so it is important that the Minister deals with that point when he sums up.
One consequence of that unforced error has been to cause the industry significant uncertainty and damage in recent months. I do not hold the Government responsible, as it may not be their fault. Errors occur, and it is a relatively technical one. What is important is that it has been identified and corrected as soon as possible, but the issue for me is whether it was corrected as soon as possible. That requires further clarification from the Minister. The Renewable Energy Association comments that the error has hit biofuel producers hard. It has even gone so far as to say, to me, that demand for biofuel has “dried up”. It has also said that renewable transport fuel certificates are “worthless”—a word that I used in my intervention on the Minister. Given that that mistake has occurred, have the Minister and his Department made any assessment of what the consequences have been for the biofuel industry, and whether it has caused the apoplectic consequences that the REA has mentioned? If he believes that case is overstated, what does he think the consequences have been? What steps does he feel able to take to restore confidence in the industry and to provide the kind of forward certainty that is necessary if we are to see investment over the medium and longer term? That is my key point on that change of definition.
The third element of the order that the Minister has discussed is the slowing of increases in the amount of renewable fuel required to be supplied under the RTFO. If he looks at the record, he will see that my party and I have been broadly supportive of the Government’s direction of travel on that. The record will show that when the former Secretary of State, the right hon. Member for Bolton, West (Ruth Kelly), introduced the targets, we supported them as striking a sensible balance between a wish to make progress and reduce greenhouse gases and a wish not to cause damage to the environment and source fuels unsustainably. Because the targets are being slowed down, it is incumbent on the Minister to explain how he has reached the figures that he has. I accept that it is a fine balance. What further work has he done on assessing the sustainability of supply in deciding that the figure reached was the appropriate one? If I read him correctly, the criteria in his mind are the ones that we share. I have not been party to the information that he has received, but I would like an assurance that the figure that he is proposing today is the right figure to strike that sensitive balance.
I shall take this opportunity, if I may, to refer to the linkage between the fuel quality directive and the renewable energy directive, because that is relevant to future targets as referred to in this order. The fuel quality directive places an obligation on member states to require transport fuel suppliers to reduce the life-cycle greenhouse gas emissions of their fuels by 6 per cent. by 2020 relative to the EU average in 2010. The European Commission also proposes mandatory monitoring and reporting of life-cycle greenhouse emissions from fuels as of 2009 and an obligation on fuel suppliers to ensure that greenhouse gases produced by their fuels throughout their life cycle—production, transport and so on—are cut by 1 per cent. per year between 2011 and 2020. I think from memory that that is article 7a. Can the Minister give an assurance that he is confident that the British Government will meet those targets in the fuel quality directive?
The renewable energy directive requires biofuels to meet mandatory sustainability standards. The Government have supported that; indeed, to be fair to them, they were quite active in promoting it in the European Union. As has been said, the directive contains a binding target for 10 per cent. of energy used in road transport to be renewable by 2020, but that is slightly different, I think, from the targets set in the fuel quality directive. I have tabled parliamentary questions on this previously, but can the Minister tell me how he understands the interlinkage between the fuel quality directive and the renewable energy directive? They seem to me to have marginally different targets and to be pointing in marginally different directions. I am not sure, but they may even come from different elements in the European Commission. What have the Government done to reconcile those two directives and the consequences for the biofuel industry?
Are the Government firmly committed to carbon linkage, in which the number of certificates awarded to a biofuel is linked to greenhouse gas performance? Are they firmly committed to the 2020 target? I assume that the answer is yes, but let us have it on the record if it is. Is the Minister confident that if the slow-down that the Government propose today—whether it is the foot off the accelerator or however he described it—is adopted, the 2020 target, to which I believe he is still committed, can be met? He will appreciate that it will require speedier action in later years up to 2020 if the earlier part of the process is slowed down. If the earlier part of the process is slowed down for good sustainability reasons, which I am sure the Minister will have, is he confident that there is sufficient capacity—the hon. Member for Scarborough and Whitby made a point about the amount required—that can be sourced sustainably in the later years up to 2020 to meet the European target?
5.3 pm
Paddy Tipping: I am delighted to be able to take part in this short debate. My hon. Friend the Minister will know that earlier this afternoon I took a delegation of people from the biofuels industry, including the Renewable Energy Association, to meet his noble Friend Lord Adonis. This debate gives me an opportunity to put on the record some of the points that were privately made at the meeting at the Department for Transport.
The hon. Member for Scarborough and Whitby raised important points about sustainability—as it is put crudely, food not fuel. Those are very important points. I commend the work of the Renewable Fuels Agency, which worked very hard to ensure that in the UK our resources, our fuels, are sustainable. Nevertheless, that is a big issue—the key issue, in many respects—and further work needs to be done both on sustainability and on the displacement of fuel before we go forward.
Let me say to the Minister that the Government have been right to commission the Gallagher review, and right to have a “taking the foot off the accelerator approach”—as the Minister puts it—to slow down the development of biofuels.
I accept that the Minister has taken his foot off the accelerator, but I am concerned about the drafting error. He has had opportunity to reflect, and will recall that the drafting error was discovered in October. Officials from his Department met representatives from the industry and a clear indication was given that the drafting error would be resolved in the current financial year. That did not prove possible, and it would help if the Minister could explain why. It has clear implications for industry—particularly UK industry, which we need to encourage and develop.
There has been some compensation for industry. Ministers made that clear, and it is why the target for next year has been moved from the proposed 3 per cent. to 3.25 per cent. Nevertheless, the figures worked through for the present year and the coming year will mean that 530 million litres less of biofuels is produced than under the original order. That is 19 per cent. less. The hon. Member for Lewes and others have talked about the certificates. The certificates had a value but at the moment they have no value whatsoever, and that has had real implications for people who work in the industry.
I want to pursue the point made by the hon. Member for Lewes about the renewable energy directive. The Government have signed up to that. It is a legal commitment to produce 10 per cent. of our energy from biofuels by 2020. The present RTFO proposal is stacked into the future and proposes a target of 5 per cent. by volume—which is different from energy—by 2013-14. I am concerned about the jump from 5 per cent. by volume in 2013-14 to 10 per cent. by energy in 2020. It is a big step. If the Minister wants the industry to respond—and it can respond—he must be clear about the trajectory into the future.
It is clear that the emphasis of the RTFO, and the Government approach, is to reduce carbon emissions. In 2020, electrical vehicles may well be in place to a greater degree than they are now. However, I suspect that that will not help us much towards the renewable energy directive. At present, biofuels are, in a sense, the only club in our bag, and it is important to make them work well. As the emphasis on producing biofuels is to reduce carbon emissions, it is essential that allowances of carbon price are at some point worked into the RTFO. That will make the system more complex, but if our ultimate aim is to reduce carbon emissions, we must make that happen.
My final point is that there is a strong biofuels industry in the UK. It is facing severe difficulties and some companies have gone out of business. Some have development plans for the future but, like all industry, they are not able to borrow from the bank. Part of that is due to the economic climate, but part of it—I say this strongly to the Minister—is that if people want to invest in UK industry, the industry and its financial backers must know the rules of the game.
Industry can live with any rules that the Government lay down, but it cannot live with uncertainty. Uncertainty about the policy platform and the agenda for the future is causing real difficulty. That is why I welcome the order. It is clear to me that further work needs to be done, involving the Government, the industry and non-governmental organisations, which also have a role, to work out a firm policy platform, because ultimately, biofuels will reduce carbon emissions. They will be a feedstock produced by growers and an important industrial sector in this country. However, if we are not careful, the boifuels used here in the UK will be imported. That is in no one’s interest.
5.11 pm
Mr. Rob Wilson (Reading, East) (Con): I am delighted to take part in this short debate this afternoon and I mean it when I say that I will not detain the Committee for long.
I have a few questions to ask that are slightly too long for interventions. The Minister spoke about the slowing down of the biofuels targets for reducing carbon output. He said that the targets are much more cautious than they were because the Government are still understanding the social and environmental impacts. Will he briefly say what those impacts are? Are he and the Government concerned only about the issues raised by my hon. Friend the Member for Scarborough and Whitby, or are there others?
My hon. Friend asked two questions, rightly, on cold-temperature waxing and on water contamination. I do not believe that those will be big problems for the larger companies because they have the resources and experience to deal with them, but how is the Minister proposing to help the multitude of smaller operators that lack the knowledge, experience and focus to deal with those problems? I am thinking particularly of smaller bus companies and taxi companies around the country. Will guidance be set out by the Department for Transport, or will it be left to industry bodies? How will it be handled? It would be helpful if the Minister dealt with those two relevant points.
5.12 pm
Ben Chapman (Wirral, South) (Lab): I am pleased to be able to say a few words to the Committee about the problem of those sections of British industry that use tallow as a feedstock and the effect that the order will have on them. The order concerns the British Association for Chemical Specialities, UK Cleaning Products Industry Association and the European Oleochemicals and Allied Products Group. Companies represented by those organisations have used tallow as a feedstock for many years without subsidy, but are now threatened, as they see it, by the order.
One company in my constituency, Croda, which has used tallow for 150 years to produce high-value, high-tech speciality chemicals, now sees a threat to its 125 employees as a result of the order. I have been raising these concerns for a few years with Ministers in the Department for Environment, Food and Rural Affairs and in the Treasury, and with the Minister present, who has been unfailingly helpful. Indeed, he commissioned a report from AEA Technology that confirmed, for example, that diverting tallow into biodiesel would lead to a net increase in greenhouse gas emissions, the closure of manufacturing plants in the UK, and job losses in oleochemicals, soap, and chemical speciality industries.
Not only is there a speciality chemicals company in my constituency; Unilever is also there, in Port Sunlight. The issue is of some concern to me but there are also wider concerns. The findings of the AEA report were confirmed by the Gallagher review. The Minister told me that the Government would take account of the AEA report in negotiations on the renewable energy directive.
It is the industry’s view that as a result of the legislation, there will effectively be a subsidy on the burning of tallow, which will have a detrimental effect on its supply and price. That will result in imports, to the cost of the companies and of the customer. I am not sure that the Government have always considered the needs of the industry in that respect. The Minister said that it would not be possible to change the RTFO legislation until April 2009. Well, here we are.
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