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27 Oct 2009 : Column 13WH—continued
Despite the successes in the recycled biofuel sector, progress is being stymied by red tape and onerous regulation. The certification of waste storage and the handling of waste substances can be hugely bureaucratic. Rather than encouraging the uptake of the systems, that can put off enthusiastic newcomers. What steps is the Minister taking to streamline those processes? How is he encouraging public institutions such as schools and prisons to adopt such systems? How many councils offer or support local cooking oil recycling schemes? How is he helping them to put pressure on local transport providers, such as bus contractors, to use such
products where possible? There is no point in trying to expand the market further when regulatory and fiscal constraints are pushing the market in the other direction.
Anne Main: Does my hon. Friend agree that the public will fail to understand why the matter is being dealt with in the way it is? They are being asked to alter their lifestyles and to pay ever-higher taxes on things that are not sustainable and that pollute. They will therefore wonder why we are dealing with the sustainable fuel that we have in this way. It seems mad. As he said, this issue is a no-brainer.
Gregory Barker: My hon. Friend has put her finger on it. It does not make sense to ask for schemes to encourage the uptake of low-carbon fuel while refusing to make sensible minor changes to its fiscal treatment so that it makes commercial sense to produce it. Her suggestion of a 90 per cent. renewables obligation certificate would be a sensible way to reflect the fossil fuel element in such fuel.
The role of Ofgem in this matter must be questioned. I am meeting Alistair Buchanan this afternoon and will put it to him that Ofgem's position runs contrary to common sense. Although it can be argued that recycled cooking oils are not a purely renewable source of fuel, they are undoubtedly a low-carbon alternative to fossil fuels. We must embrace that. It is not a purist ideology but a route map to a low-carbon economy. There will be not a totally carbon-free economy but we could have a low-carbon economy.
Either the Government are hiding behind Ofgem and failing to provide the clear policy leadership that we have a right to expect on this important topic, or they are taking the jobsworth, pedantic, apathetic approach that is typical of all Governments who have run their full term. The failure to grip something that is commonsensical is symptomatic of that third-term malaise. I assure my hon. Friend the Member for St. Albans that we will grasp this issue. It is a no-brainer, it is not a big deal and it ought to be a key part of the low-carbon economy. It will be addressed in our energy Green Paper. I hope that the Minister will respond positively and that we will not have to wait for a change of Government to get the common-sense change that we need.
10.25 am
The Parliamentary Under-Secretary of State for Energy and Climate Change (Mr. David Kidney): I have 35 minutes, which hon. Members may use to examine this issue in detail. However, I do not plan to waffle just to fill up that time. Hon. Members are welcome to intervene if they want to explore particular points.
I congratulate the hon. Member for St. Albans (Anne Main) on securing this important debate at an important time in the development of policy on this issue. She showed a tremendous command of her subject. I was planning to say that she put her case sensibly and reasonably, but I revised my view when she carried out an unjust personal attack on me. I have lost any sympathy for her and the case that she made. However, let us continue to examine the issues, devoid of personality.
The hon. Lady focused on what she called the "bonkers anomaly". I accept that there is a debate to be had about part of the policy in this area. However, she did
not mention any of the good things that have been done. The industry has reached the position it is in because of the support that has been mentioned, but no credit has been given to the Government for giving that support. The Government's future direction in this area is consistent, makes sense and hangs together. I would have liked some credit for the way in which this country virtually leads the world in reporting requirements for sustainability in this sector. We have one of the best systems and are trying to encourage the rest of the world to adopt similar standards.
We established the Gallagher review when concerns were expressed about sustainability. That is a valuable resource. I am not sure whether the hon. Member for Cheadle (Mark Hunter) was criticising the Government for setting up the review or for responding positively to its conclusions, but I think that both were the right things to do. We slowed down the progress of the road transport fuels obligation in response to Ed Gallagher's report. "The UK Low Carbon Transition Plan" and the renewable energy strategy that we published in July show a consistent and stable pattern for Government policy.
Gregory Barker: There have been questions over the sustainability of biofuels and ethanol that are imported from the developing world and over whether they are farmed at the expense of natural rain forests. Does the Minister agree that those issues are a million miles away from the sensible and pragmatic re-use of waste cooking oil? It is an almost entirely separate debate.
Mr. Kidney: At several points in the debate, hon. Members have raised the sustainability of the international bioenergy industry, the importance of protecting the environment by diversity and the food supply. I agree with those points. I will not go into those areas in this debate, but refer hon. Members to the well-informed Adjournment debate in the Chamber on 13 October, which was secured by my hon. Friend the Member for Brent, North (Barry Gardiner). I dealt with those issues during that debate. The Government are worthy of credit for chairing the working group of the Global Energy Partnership that is developing the sustainability criteria for the future of biofuels throughout the world.
The hon. Lady's complaints are a tale of two regulators. She mentioned the description of used cooking oil as a waste product. She said that it is a tricky product to dispose of. I agree. The regulator responsible for the safe disposal of tricky waste is the Environment Agency. It has made decisions about the definition of waste that have caused difficulties in the industry-I accept that. However, it is an independent regulator set up by Parliament to make such decisions. Who am I to try to override or second guess its judgments? We have to work with the agency's conclusions, and we have tried to do so in relation to this matter by developing a series of end-of-waste protocols that are acceptable to the industry. Those protocols enable the industry to get around the obstacles put in its way by the Environment Agency's rulings, and are acceptable in terms of our international obligations, including under European Union law.
Anne Main:
In response to the Minister saying, "Who am I," I am delighted to say that the Minister is the Minister. I would love to think that if the Environment
Agency is putting obstacles in the way of the Government and he wishes to deal with the matter differently, with his good offices, he could sit the agency down and say, "This is what we wish to achieve. Please don't put obstacles in our way."
Mr. Kidney: No, I am sorry. The Environment Agency is not putting obstacles in my way; it is putting obstacles in the way of people who might dispose of tricky wastes in unacceptable ways. That is a public good and I want it to do that. However, I do not want the agency inadvertently to get in the way of good businesses that we want to support-hence the development of the end-of-waste protocols, which are currently in train. That is something I am doing now, as the hon. Lady asked me to.
The Environment Agency is one regulator. The hon. Lady mentioned the other regulator-Ofgem-which is the guardian of the renewables obligation system. When we in this House make our decisions about promoting renewable energy in this country, it is important that we can reassure the public and give them confidence that they are, indeed, renewable sources of energy. On the use of methanol derived from natural gas, it is true that, last year, Ofgem made the decision that it is from a fossil fuel source and therefore is not a renewable source. Ofgem is an independent regulator and is responsible to Parliament. It made that decision and ruling after taking independent expert advice and consulting the industry and the public at large. Again, I say who am I to overrule the decision of the regulator?
Gregory Barker: I am concerned that the Minister seems to be a bit confused about who he is. Let me tell him who he is: he is the Minister in the Department that should have policy oversight. Is he telling us that the Department of Energy and Climate Change and his ministerial team have ceded responsibility for strategic direction, policy and decision making to unelected quangocrats? That does not come as a great surprise because that is what it feels like, but I am surprised to hear him admit it in Westminster.
Mr. Kidney: With respect, I think it is the hon. Gentleman who is confused. Parliament sets the law on waste disposal and on renewable energy, and it establishes independent regulators to uphold the law for us. If they uphold the law for us, we should not complain when they do their job properly. If as a result of their conclusions, we think that the law needs to be changed, this is the place in which to do it. I welcome the hon. Lady's suggestion that there is one change of one law that might benefit a particular industry, and we will debate that later during my contribution. However, I want to assert the independence of regulators to do their job free of political influence, when we, the politicians, have given them a job to do.
Mr. Heald: If we take together the removal of the 20p advantage for biofuels and the effect of the Ofgem bonkers anomaly, how much extra revenue does the Treasury get?
Mr. Kidney: I have no idea what the answer to that question is. I will examine whether I can get such a figure from the Treasury, and if I can, I will write to the hon. Gentleman with an answer to his question.
While we are on the subject of the 20p differential-there is a train of thought in my mind, but I have been diverted to deal with this-although no credit for the measure has been given to the Government by hon. Members, people are now complaining that it will come to an end. The decision for it to come to an end was taken in Budget 2008 and the judgment was made that, by the time it came to an end, the industry would be sustainable without it. It was thought that replacing the differential with the road transport fuels obligation for transport power and the renewables obligation for heat and light energy would be sufficient to take the strain in terms of giving support to the industries concerned. We also recognised that there was a sustainability issue, and the RTFO and the renewables obligation both include mandatory reporting of sustainability standards, whereas, clearly, an across-the-board 20p reduction in duty has no such requirement.
The hon. Member for Cheadle made an intelligent point about whether we could in some way modify the duty differential perhaps to take account of particular subsections within the industry that we thought were particularly desirable and had continuing support for. That is a good point to make as a Budget representation, and I shall pass it on to my right hon. Friend the Chancellor. So the duty point is certainly not simply about clawing in lots more money; the decision was made in the Budget two years ago.
On the question about the bonkers anomaly, I would like to ask whether it really is an anomaly. If Ofgem's conclusion that a source of the reagent for converting the biomass into a biofuel is methanol produced from natural gas-a fossil fuel-is reasonable, are there alternatives to methanol from a natural gas source that could do the job just as well? The hon. Lady said that there is a recycled methanol and that Ofgem would also claim that that was not eligible for the renewables obligation. I think that she is wrong about that, but I will check the point with Ofgem. It seems that if we have a recycled methanol source, instead of a methanol from natural gas, which is a fossil fuel, the objection that Ofgem has to that particular reagent would be overcome and there would not be an obstacle. So, as I said, I think she is wrong, but I will check the matter with those who know.
Anne Main: I would be delighted if the Minister sought clarity on the matter. However, whatever the source of the methanol, it is a small proportion of the product-about 10 per cent. Does he agree with Ofgem that having a small proportion of something derived from a fossil fuel in a product makes it entirely fossil fuel? That is the bonkers anomaly that most people do not think is reasonable.
Mr. Kidney: The point is that we are talking about renewable energy and Ofgem has concluded that that particular biofuel is not 100 per cent. from a renewable source. What are we going to do? Should we make an exception for that one source but not for others where fossil fuel is mixed or is part of the process for producing a renewable energy? Are we going to make an exception just for this one industry, or are we going to say that sources other than renewable are acceptable for support from a renewables obligation? We might want to do that and we could do so if we wanted.
Anne Main: I was asking the Minister what his opinion was about the fact that 90 per cent. of that particular biofuel is thoroughly renewable.
Mr. Kidney: My current opinion is that the renewables obligation supports 100 per cent. renewable sources, not less than that. However, as I said, I am open to the argument being made in the debate, and I will take away the hon. Lady's suggestion of, for example, a 0.9 renewable obligation certificate, because it is 90 per cent. I will consider that suggestion, because it is constructive.
On a more general point, the hon. Lady mentioned that we will be implementing the European Union's renewable energy directive in 2010. We intend to draw up a national action plan to show how we will implement that directive by June next year. Everything we have said in the debate will inform the preparation of that national action plan, which will be done across Government and will include contributions from the Department for Transport, the Treasury and my Department. This debate has also been valuable for that reason.
My final direct response to the points made relates to the hon. Lady's comment that she wanted me to hear from the sector itself. I am perfectly willing to meet sector representatives if they want to talk to me about their concerns and make constructive suggestions. I hope that that is helpful to her.
I want to say something about bioenergy generally. It does, indeed, have a hugely important role in delivering the UK's renewable energy and climate goals. We expect that the majority of the UK's 10 per cent. renewable transport target for 2020 will be met from biofuels, and that about 30 per cent. of the overall UK renewable energy target could be delivered through biomass heat and electricity. Taken together, those figures equate to about half of the UK's overall 15 per cent. renewable energy target for 2020 being met from bioenergy. We certainly see that as a considerable, substantial and mainstream contribution to renewable energy. Bioenergy offers exceptional opportunities for the UK. It can create new business and green jobs, particularly in the agriculture, forestry and distributed energy sectors. It can provide greater diversity for the UK's energy mix, and so increase our energy security. It can also make a large contribution to the UK's ability to meet its carbon budgets.
Before I get to the main body of the speech, let me explain the terminology. I am taking the European Commission's approach that biofuel refers to transport fuel made from biomass, and that bioliquid refers to liquid fuels that are made from biomass and used for electricity or heat generation. Fuel made from recycled cooking oil or recycled ethanol may be a biofuel if used for transport but a bioliquid if combusted for electricity or heating. Bioenergy is a flexible catch-all phrase that covers solid, liquid and gaseous biomasses and their use for any energy purpose-transport, heat or electricity.
First, let me address the potential use of bioliquids for electricity generation. The renewables obligation is the Government's main mechanism by which to support renewable electricity generation. It places a requirement on licensed electricity suppliers annually to provide Ofgem with a certain number of renewables obligation certificates or to pay a buy-out price for any shortfall against that target. The obligation increases year on
year. Since its introduction in 2002, it has successfully tripled the level of renewable electricity in the UK from just 1.8 per cent. to 5.4 per cent. last year.
Before April this year, the renewables obligation offered a flat-rate support of one tradeable ROC per megawatt-hour of eligible renewable electricity generated. However, in response to changing circumstances and representations that were made to the Government, and in order to make the obligation a more effective and efficient mechanism, in April this year we made changes. The main change was the introduction of banding to provide differentiated levels of support to different technologies and to offer a greater incentive to those that are less well developed and further from the market. It is that mechanism which enables the hon. Lady to argue that we should differentiate for the technology we are discussing. At the same time, we introduced mandatory sustainability reporting for all generators above 50 kW that use biomass for electricity generation.
The mandatory reporting criteria for renewables are as follows. Generators have to report available data on a range of criteria, including the source and format of the biomass, the volume used and the country of origin, as well as details of any environmental standard that has been met and land use change. Those data will provide necessary information on the type of biomass being used in the UK and whether it comes from sustainable sources.
Secondly, I want to discuss the Government's main mechanism of support for renewable transport and biofuels-the renewable transport fuel obligation. The RTFO, which was launched in April 2008, places an obligation on fossil fuel suppliers to produce evidence that a specified percentage of their road transport fuel in the UK comes from renewable sources such as biodiesel and bioethanol. That annual obligation will increase in stages. The RTFO for 2009-10 is 3.25 per cent. of total fuel supplied. In light of Professor Gallagher's recommendations in his 2008 review, we have slowed down the planned rate of increase to 4 per cent. in 2011-12 and 5 per cent. in 2013-14. As the hon. Member for Cheadle has said, there were calls for support to that industry to stop completely because of concerns about sustainability. His Committee resisted those calls, and so did the Government, and I think that we responded proportionately to Professor Gallagher's concerns.
The RTFO includes mandatory reporting on carbon and sustainability, making the UK one of the first countries in the world to establish a reporting system for the sustainable performance of our biofuels. Current data show that 99 per cent. of British biofuels are meeting our voluntary sustainability standards and are achieving average greenhouse gas savings of 47 per cent. The UK was instrumental in successful agreement being reached on the renewable energy directive, with its challenging overall target for the whole EU of having 20 per cent. renewable energy by 2020. In particular, we played a significant role in setting mandatory sustainability criteria for biofuels and bioliquids in the directive. Those criteria include minimum greenhouse gas savings, good agricultural practices and controls on land use change.
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