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. What
might be the effect of the credit crunch on investment in new plant?
Has the Minister received any communication from potential or current
investors that they are having trouble accessing capital, which might
jeopardise investment in that area? Bioethanol is a tried
and tested technology, so although there might not be a need for too
much investment in research and development, the large-scale plants
that might be needed will require large amounts of capital. Also, is he
confident that the research and development of second-generation
biofuels—those produced from biomass that will produce the
biobutanol to which he referred—is on track to deliver them on
time? All the points made in the Environmental Audit Committee report
and the Gallagher report indicated that the next generation of biofuels
from biomass is likely to be much more
sustainable. 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. The
Minister has referred to three achievements, or consequences, of the
order, one of which was the introduction of two new types of renewable
transport fuels, namely biobutanol and renewable diesel. We have no
objection to their inclusion; indeed, it seems a welcome
development to us. I understand that the order also removes one of the
descriptions of eligible renewable fuels—a mixture of rebated
heavy oil and biodiesel—as it has been rendered obsolete by a
change to the duty charging provisions to the Hydrocarbon Oil Duties
Act 1979. Will the Minister confirm that? It seems to be relatively
uncontroversial, but it would be useful to have that clarified for the
record. 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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