CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1850-i

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

Energy and Climate Change Committee

Bioenergy

Tuesday 21 February 2012

David Kennedy, Harry Huyton, Duncan MacQueen and Dr Alena BuyX

Dr David Clarke, Dr Jeremy Tomkinson, David Knibbs and James Primrose

Evidence heard in Public Questions 1 - 78

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Energy and Climate Change Committee

on Tuesday 21 February 2012

Members present:

Mr Tim Yeo (Chair)

Dan Byles

Barry Gardiner

Ian Lavery

Albert Owen

Christopher Pincher

John Robertson

Sir Robert Smith

Dr Alan Whitehead

________________

Examination of Witnesses

Witnesses: David Kennedy, Chief Executive, Committee on Climate Change, Harry Huyton, Head of Climate Change and Campaigns, Royal Society for the Protection of Birds, Duncan MacQueen, Principal Researcher, International Institute for Environment and Development, and Dr Alena Buyx, Assistant Director, Nuffield Council on Bioethics, gave evidence.

Q1 Chair: Good morning, and thank you very much for coming in. David, I know you have to go at 11 am. Is that right, roughly?

David Kennedy: 11.15 am.

Chair: That is fine. We have another panel of witnesses, so I think we will aim to finish this first session at 11.15 am anyway. You all know who we are and, although we know who you are, apparently for the webcast it is helpful if you say your names out loud, so if you wouldn’t mind, please do that.

Dr Buyx: Alena Buyx, Assistant Director of the Nuffield Council on Bioethics.

Harry Huyton: Harry Huyton, Head of Climate Change at the RSPB.

Duncan MacQueen: I am Duncan MacQueen, Head of Forestry at the International Institute for Environment and Development.

David Kennedy: David Kennedy, Chief Executive of the Committee on Climate Change.

Chair: I should draw attention to my entry in the Register of Interests as chairman of, and an option holder in, TMO Renewables, which is developing a second-generation biofuel, ethanol derived from waste products, and although our research is carried out in the UK, we have no commercial activities inside the European Union.

Q2 Sir Robert Smith: I should mention my entry in the Register of Members’ Interests as a shareholder in Shell, given the energy aspect. The UK has a target for 15% of energy consumption to come from renewable sources by 2020. How reliant is this on bioenergy, do you think?

David Kennedy: Certainly the 15% renewable energy target is achievable through a range of things, including, but not limited to, bioenergy. Within it, if you look at the Government’s renewable energy strategy and the action plan, there is an important role for bioenergy: it is for biofuels to get to about 10% penetration by 2020. There is an important role for biomass in power generation and heat generation, and there is an important role for waste as well. In our Bioenergy Review at the Committee on Climate Change, which we published in November last year, we raised questions about whether the levels of those various things-the biofuels and the biomass for power generation and heat generation-targeted by the Government would be achievable within sustainability constraints. We did not say they would not be achievable, but I think it is highly uncertain what the sustainable supply is. There is not very good evidence around sustainable supply, and the safeguards in place as regards biofuels and biomass for use in power and heat generation, do not make you feel confident that what will come forward under the current arrangements will be sustainable.

There is an important role, as seen by the Government. We do not disagree that there could be an important role, but there is a question about sustainability, and I think we can’t be confident that everything coming forward will be sustainable under the current arrangements.

Duncan MacQueen: I too believe that bioenergy will play an important role. I have some qualms over liquid biofuels. I have fewer concerns about the sustainability of biomass energy, and I think that is a very important component of the likely target. The development of dedicated biomass energy plants requires supply contracts that, by their very nature, have to take sustainability into account. I also think that the British Government have been pushing very hard for the development of legality in procurement of timber, which would be applicable to biomass pellets and so on, from countries where sustainability issues are more problematic. That would need to be rigorously looked at, but I think ultimately it is potentially a win-win for development and environment.

Dr Buyx: I would like to add to the issue of uncertainty around sustainable production and availability of biomass, because there is a unique chance now to implement strict sustainability criteria and policy. We believe that there can be a robust framework. We have set out five criteria for sustainable and ethical production in our report on biofuels, but these can be used to inform policy on bioenergy as well. We believe that they should be implemented through a good certification scheme. In order to take bioenergy production forward, good social sustainability criteria, in particular, are vital; then we can circumvent the problem of uncertainties to some degree, because industry has a very clear idea of what sustainable production looks like.

Harry Huyton: The RSPB are deeply concerned that the bioenergy ambition-by that I mean both biofuels and biomass heat and power-in the UK and Europe will be unsustainable, because it will lead to large levels of imported biomass and biofuels that will not necessarily meet the standards that we all hope they will. Towards the end of last year, we published a review of current planning permission applications for biomass power plants around the country. There are about 44 biomass electricity plants that are either proposed or in the planning system, which, combined, add up to a total demand for wood of well over 40 million tonnes. To compare that to current UK production of wood, the Forestry Commission say that we produce just under 10 million tonnes a year. It is a huge level of demand and, perhaps unlike others, we are not complacent about that, both from a climate perspective and from a biodiversity perspective.

We are concerned about the level, but also the sustainability standards that have been proposed for biomass and for biofuels, which we see as inadequate. Why? Mostly because while they say quite good stuff, sadly it is rarely what happens on the ground. If you look at the biofuel sustainability standards that were introduced at the EU level a few years ago, we are now working with our partners in Africa and South America on various biofuel schemes that quite clearly contravene those standards, yet are meant for import into Europe. The problem is implementation. We can all say nice stuff but, sadly, it is often not what happens on the ground, and that is not going to be good for the climate, and it is not going to be good for wildlife.

Having said that, we do believe that there is an important role for bioenergy. It is just that the role is on a slightly different scale from that envisaged-it is more on a local and regional scale-and it is slightly different technology. Rather than large biomass electricity plant and refineries at ports, we think that the role should be around heat, and smaller combined heat and power, though commensurate with the domestic and sustainable available resource.

Q3 Sir Robert Smith: DECC anticipate that biomass heat could contribute more than a fifth of the UK’s renewable energy target. Do any of you have views on what sort of challenges would be posed in trying to achieve that?

David Kennedy: I think a challenge in both biomass power generation, which is also a significant contributor, and biomass heat generation is: where do you get the biomass from? If you do not just look at the UK ambition, but add that to the ambition for the rest of Europe under the renewable energy directive, look at the plans that the other countries have submitted, and compare the demand for biomass with estimates of supply of sustainable biomass globally, you can see that the European demand is much greater than the estimated sustainable supply globally. That raises the question of where we are going to get the biomass from. What you worry about is that we start to pull in biomass from unsustainable sources-chop down forests in Russia, for example, where you can question the governance framework for forestry, and don’t replant the trees. If we don’t manage those forests in a sustainable way, that is not helping from a carbon perspective. That is a real risk.

Q4 Sir Robert Smith: We are going to explore sustainability further on as well. Are there any other challenges?

Harry Huyton: Within the UK, we have a pretty good wood resource. If you look at woodlands in England, for example, about half of our woodlands are not managed at all. We could put them back into management; we could be harvesting them and fuelling a local wood supply. I think the heat sector provides a great opportunity to do that, because necessarily the heat sector is dispersed smaller units with smaller demand. We would like to see a focus on unlocking the domestic supply for biomass, but we do accept that there are challenges associated with that; because of the dispersed nature of the resource, it is easier to import very large amounts of woodchip from all around the world than it is to get our own woodlands back into management.

Q5 Sir Robert Smith: The big positive selling point early on was the management of woodlands. A lot of the actual timber that is ready for construction use and other uses also seems to be becoming fuel. Is that not a slightly disappointing outcome?

Harry Huyton: It is, and perhaps we need to review what we are doing, in terms of enabling local forestry projects and bringing those woodlands back into production, because as you say, at the moment there are concerns that we are just stimulating demand that conflicts with other industry uses for wood, which may not have a good outcome for the climate anyway. Clearly, the subsidies alone are not doing enough to stimulate additional UK production of biomass, and the same applies to domestic energy crops; the schemes we have in place have not really succeeded in large-scale uptake of domestic energy crops.

David Kennedy: Can we just say, though, that it is great if we can have domestic supplies both of biomass and energy crops? If you look at the ambition that the Government has over the next 10 years, it is much more in terms of biomass than estimates of biomass from sustainably managed forests here in the UK. We do need to import, and that is where you start to get worried about the sustainability standards elsewhere.

Dr Buyx: Could I take up that point? UK policies, of course, are to some extent intertwined with and bound by European policy, and the renewable energy directive in particular. While there are some environmental and emission savings criteria in that policy-we think they do not go far enough, but they are a first step-there is a real gap with regard to social criteria. We will have imports. There is no way the UK could produce all the renewable energy in the nation; that is absolutely impossible. If we have imports from outside the UK, there is a real gap in oversight, in terms of impacts on local food availability, global food prices, and land tenure. Land grabs have taken place in other countries, and these are things that must be addressed. For example, there is no real land use policy available so far at all in the UK or internationally, and this is something that, while very demanding, will be necessary in the future, because the land is there not only for bioenergy crops, of course; those crops are in competition with food production and other demands on land. This is something that unfortunately will not get better and probably will get worse. Now is the moment to get a policy off the ground that can help.

To pick up the other difficult issue of putting policy on the ground-of helping those, for example, in developing countries to adhere to these quite strict criteria, which these countries might find difficult-we believe that there should be some support, with the UK helping countries from which it imports commodities to produce these in a sustainable manner.

Q6 John Robertson: A simple question, I think, is: why is Europe so into biomass, compared to other areas of the world?

Harry Huyton: I am not sure whether Europe is so into biomass compared to other countries. Two weeks ago, there was a report published by a number of US NGOs reviewing plans for biomass electricity in South-East USA. They have a very similar situation, with lots of interest now in biomass power generation. Why? Because it is simpler. We know how to burn stuff and make electricity. It is not too far dissimilar from coal, it is easy to manage, and it is a constant load.

Q7 John Robertson: Somebody-I am not sure which one of you it was-said that Europe was having a greater demand on biomass.

David Kennedy: I talked about the actual ambition for the use of biomass-wood, for example-in power and heat generation. I think that is a response to the very ambitious renewable energy targets within the package at the European level, but also if you look at the longer term and you go back again to our Bioenergy Review, it is very hard to see how you can meet the 80% target in our Climate Change Act unless you have some bioenergy. There are things that you can’t decarbonise through electrification; industry high-grade heat is one, and aviation biofuels is another. There is a very important role for bioenergy. The question is how much bioenergy can we plan for within sustainability limits-certainly, it will be pretty scarce, we think-and where you should best use that scarce bioenergy.

Q8 John Robertson: Will it ultimately be value for money? Working with the view that if there is a great demand for it, will it be worth while, or will it just become too expensive?

David Kennedy: No, it won’t become too expensive. Without it, we won’t be able to meet the targets.

Q9 John Robertson: What will be the effects on the nations that we are taking the fuels from? What happens to them as we demand more from them? We have already heard that there are certain crops that they used to grow that they are not growing any more, and they are moving to other crops that sustain the sort of hunger for this fuel.

David Kennedy: There is a potential benefit there. Certainly, in developing countries you do not want to be growing bioenergy crops on land that they could be using for food and having starvation as a result of that, but if you find land that cannot be used for food-abandoned agricultural land, for example-that will be extremely valuable. If you think of a world in the future where the carbon price is £200, £300 and £400 a tonne, that will feed through into the price of energy crops, which will give a very good return for anybody who has the land that you can grow them on. There is a good opportunity there.

Q10 John Robertson: Should something like biofuels be governed by a body like the UN to ensure that there is protection for the lesser countries?

Duncan MacQueen: Biofuel crops are a particularly problematic one, because they tend to grow on agricultural land and they have some conversion inefficiencies that mean they are not terribly good from an emissions perspective. We have seen the impact of the new EU legislation on food prices and so on, which is at least partly attributed to the expansion in biofuel crops. I think biomass crops are less problematic, have less competition with agricultural crops, and have much better returns in terms of efficiency. The emissions reductions of forested crops are often not adequately drawn attention to in reports such as the review, and I think they offer substantial advantages.

Q11 Chair: The Nuffield Council’s six principles seem to me to be completely beyond argument. I do not see how anyone could resist them. Has there been any resistance since you published that document?

Dr Buyx: I think that people found it very surprising that we said something that was a little controversial. What we were very aware of is the difficulty of implementing these criteria. All of them are part of policy somehow already, so we did not pluck them from thin air, but we believe that they need to be implemented in a stricter way, and that there needs to be some support for this implementation.

What I would like to say, and one of our main messages-this goes back to the sustainability issue and how to take things forward-is that there are approaches, both in biofuel crops but also in other bioenergy applications, where there are new technologies being developed that might be better than some in current production. Both for biofuels and biomass, there are very many different feedstocks and very many different production pathways, and they differ vastly. However, there are certain development bottlenecks that several of these technologies need to go through in order to be able to be scaled up to a size that makes a proper difference. We believe that if there is a chance to fulfil the targets in a sustainable manner, it lies in these new approaches. These are rather costly to implement, in particular in developing countries of course, and there should be a bit more in the way of incentives for having these produced, because the easier way is the current production. It is much easier to put something on a field and produce it in an unsustainable manner and then to have that count towards the target than to go to the trouble of implementing a sustainable way of production.

We urge the Government to incentivise these new approaches. We believe there is a long way to go. We have heard from some industries some very encouraging data and some very encouraging examples of what could be done to help protect the environment and help implement these social sustainability criteria.

Q12 Barry Gardiner: I have two quick follow-ons. Mr MacQueen, you spoke of the legality and sustainability of the import supply. Do you believe that the new European regulations on the prohibition of first placement on the market for wood and wood products has had any effect whatsoever in improving the supply chain?

Duncan MacQueen: Yes, I think it has had a significant impact, because it is not just that prohibition, and it is not just the insistence on legal timber entering Europe. It is the additional development support that is being pumped into developing countries to develop legality and definitions of legality, broadly negotiated with civil society and marginalised groups, and legality assurance systems.

Q13 Barry Gardiner: FLEGT was doing that already though, wasn’t it? That does not come about from the new European regulations on first placement.

Duncan MacQueen: I think they toughen up the perception among suppliers of timber.

Q14 Barry Gardiner: Which countries have actually put in place any enforcement?

Duncan MacQueen: This is early days in the FLEGT debate, and I think you are seeing-

Q15 Barry Gardiner: Which countries have actually put in place, or even announced, what the penalties will be for infringing?

Duncan MacQueen: I think you have countries such as Ghana, Cameroon, and Indonesia where these things are under negotiation, but it is not-

Q16 Barry Gardiner: No, again you are going on the bilateral route. It is not about that. It is about the European countries putting in place penalties for first placement on the market, and it has not happened.

Duncan MacQueen: No.

Q17 Barry Gardiner: Mr Huyton, in relation to the Woodfuel Strategy for England, I think the sums in the original Woodfuel Strategy in 2006 were paltry. They were about £10 million to get that supply chain working at both ends. Why hasn’t it happened, do you think?

Harry Huyton: Since the Woodfuel Strategy, what have we seen to bring that wood on to the market? We know that bringing those woodlands back into production cannot compete economically with importing wood from other countries, and there is just not enough support perhaps at the supply side, rather than just the pool from the subsidy.

Q18 Barry Gardiner: My question to you is: why do you believe that support from Government has failed?

Harry Huyton: I can comment on the energy crops side. We think that-

Q19 Barry Gardiner: No, it is specifically on the Woodfuel Strategy that I wanted your comments, because that is about the improved biodiversity of broadleaf woodland.

Harry Huyton: I am not sure I can give you an informed opinion as to why it has failed on the ground. I would have to consult with my colleagues, but I would be happy to get back to you.

Q20 Barry Gardiner: Thank you. Is 90% an appropriate threshold for the percentage of biomass that must be derived from animal and plant matter for it to be identified as biomass? Why shouldn’t that be higher, Dr Kennedy?

David Kennedy: It is not something that I can answer. This is a very technical question, I have been advised by my team, and it is not one we have considered in detail.

Q21 Barry Gardiner: Anybody? Thank you. Will one ROC per MWh be sufficient to incentivise the conversion of coal-fired power plants to biomass?

David Kennedy: I can answer that one: probably. In our Bioenergy Review, we did not make recommendations on the ROC banding, but we did a very detailed assessment of the various options for biomass power generation. What we found was the focus certainly should be on conversion and co-firing. It should not be on new dedicated, which is a very expensive option and one that offers limited emissions reductions. Is one ROC about right? It is. Should it be exactly one, should it be 1.1, should it be 0.9? I think we have not gone into those details, but one or thereabouts is the right level of support.

Q22 Barry Gardiner: Given that enhanced co-firing requires at least 15% of a coal-fired plant’s energy to come from biomass and could receive one ROC, and that standard co-firing at less than 15% biomass could receive half a ROC, is DECC’s proposed difference of that 0.5 of a ROC enough to encourage a coal-fired power plant to burn more than 15%?

David Kennedy: Yes. We think the support is okay, in terms of encouraging enhanced co-firing, which is what you want in a plant with co-firing. There are not many plants that we want to co-fire on the system in the UK, so ideally they will convert from coal fully to biomass power generation, and there is potential to do that for pretty much all the coal plants on the system. I think the one we would expect not to convert fully in the initial phase is Drax, which is a newer plant and which has some value as a coal plant. Enhanced co-firing is the way forward there, and the level of support proposed under the ROC consultation is about right.

Q23 Barry Gardiner: ARUP said that the EU’s large combustion plant directive and the IED could spell the end for coal-fired power stations in the UK, and for co-firing with biomass along with it. Why do you think they are wrong?

David Kennedy: Sorry, can you say that one again?

Barry Gardiner: ARUP said that the EU’s LCPD-large combustion plant directive-and the industrial emissions directive could spell the end for coal-fired power stations in the UK, and co-firing with biomass along with it. Given what you have said, why do you think that they are wrong?

David Kennedy: If we do not have any coal-fired power stations left on the system, you cannot co-fire with coal. Under the European legislation-not just the LCPD, but the IED as well-pretty much all of the plant, apart from Drax and maybe one or two others, will come off the system in the next decade or so, so there is not scope for co-firing, apart from in a few plants that you would expect to stay on the system. The point is, though, that there is an opportunity to convert those coal plants and to use them beyond 2020 when they would otherwise come off the system. There is an opportunity to convert those and run them right through to, say, 2030 as biomass plants. That is a very cost-effective opportunity, and it is a very useful contribution to meeting the renewable energy target that we have here. The focus again should be on conversion rather than co-firing. The fact that you cannot do a lot of co-firing in the longer term is not a problem; we should be focusing on conversion.

Q24 Barry Gardiner: In terms of the challenge that you see the future biomass supply chain having for dedicated biomass plants and converted coal plants, how severe is that challenge for the supply chain if it is going to follow that trajectory that you outlined?

David Kennedy: If we were to convert all the coal plant on the system to biomass and to run it as base load, that would create a significant demand for biomass in the UK. We would have to import, and this raises questions around sustainability. That takes you to saying: what are the sustainability standards for biomass in this country and at the European level? The one we have for biomass in power generation at the moment under the renewables obligation makes you a little bit worried. The standard there is that it has to save a little bit relative to burning gas in a power station. What we have recommended there is that should be tightened to make us confident that you are getting a very significant emissions reduction. Whatever we do in the UK is a small part of the picture. Ideally, just as Europe has sustainability standards for biofuels-you can question whether they are stringent enough; probably they are not-it ought to have sustainability standards for biomass, not at the levels we have here at the moment, but at a tightened level. We need to look at both tightening our sustainability framework for biomass so we can be confident that the conversion is bringing us carbon benefits and exporting that sustainability framework at the European level.

Q25 Barry Gardiner: Dr Buyx, did you want to add to that? You were nodding.

Dr Buyx: I agree with the last statement very much.

Harry Huyton: Can I add a point on the carbon side? The Climate Change Committee report recommended that the standard for biomass electricity be brought to 200 grams of CO2 per KWh from 285, which is just below gas. We agree with that, but there is a problem here that no one appears to have looked at yet-the Climate Change Committee was not able to do so in its report-which is carbon debt. A lot of this biomass will come from existing forestry. When you harvest that forest and burn it, you have a release of CO2 into the atmosphere that is paid back over time as the forest regrows. There have been a number of studies of this that suggest that it can take very many years for it to reabsorb that carbon, so you effectively get a spike in emissions when you burn this that then decreases over time. The most recent report, which was published two weeks ago, suggested that it is 35 to 50 years until forest in the US regrows to make it carbon neutral. On the face of it, that suggests that this is in conflict with our carbon targets, which are to reduce emissions now and for global emissions to peak by 2020. We are suggesting that this be reviewed fairly urgently, because it can undermine the climate case for biomass. It might not. There is yet to be an independent review of it and we believe that is critical.

Duncan MacQueen: I would like to chip in there. I do not think the idea of carbon debt holds up scientifically. If you look at a standing forest, at any one point in a completely sustainable forest there will be trees that are dying as they come to the end of their lives; they will be releasing carbon in a continuous spike. We have two options. We either let that carbon be released, or we convert it into energy. I do not think in a sustainably managed forest system there is any carbon debt at all.

Harry Huyton: I think in an ideal sustainable forest management system you can manage out carbon debt, but there remain a number of scientific studies, including the one that was published two weeks ago, that show that it is an issue because forests simply are not managed like that. As a result of the demand from the bioenergy sector, you are getting increased harvesting of those forests and it will take longer for it to regrow. What you said might be true in some cases, but I am afraid that we cannot be confident that it is true in most.

Dr Buyx: Can I chip in and say that it is just evidence? There is a lot of debate still ongoing on how to calculate emissions that can be saved by the different technologies. One important task ahead is to have an international unified methodology, and there are some efforts ongoing. The Global Partnership for Bioenergy, for example, has a working group and they are putting out principles. This is something that we highly support, because it will allow us to compare different technologies across the field to see which ones are really sustainable in terms of their emission savings, and which are worse.

Q26 Barry Gardiner: It is also about the sequestration capacity of different types of forest, the growth potential, and the growth rate for the different forests. I do not see how you are going to standardise it across an industry, as it were, because it will be very specific to the growing areas and the particular land usage.

Dr Buyx: I cannot speak to those details, but I believe that a methodology that answers these questions is vital.

Q27 Dr Whitehead: At the risk of inflaming this debate still further, the Scientific Committee of the European Environment Agency put forward an opinion about the unlikely carbon neutrality of biomass. One of the grounds for that opinion was that if you were specifically setting aside land to produce energy from, say, short rotation crops, there is actually a carbon calculation about the alternative use for that land. It therefore concluded that there is not carbon neutrality from that point of view. There is a separate issue, which appears to be the guidelines on accounting for carbon on the basis of where wood is harvested, as opposed to combusted. This country might well say it was zero-carbon, but unless you have accounted for it properly down the line-particularly where countries have produced it but have not signed up for Kyoto, for example-you could have a complete vaporisation of the carbon along the accounting line. Do you think either of those are serious issues in terms of how we eventually account for carbon in the bioenergy process, or do you think they are resolvable?

David Kennedy: I will come back on the first of those points. On whether you can have carbon-neutral, or close to carbon-neutral, energy crops, I think the answer is yes, you can. You can find land that is not growing anything on it-land of low productivity. You put certain types of crop on it-woody crops, for example. They need very little fertiliser; they will absorb carbon; and you can harvest those crops. They do not need much in terms of processing, so there are not many emissions at that stage, and then you can burn them, for example to generate heat. If you go through that process, you have absorbed carbon and you have released it. You have not injected much carbon through the process, either in fertiliser or production, so then you have something either zero-carbon or close to zero-carbon, whereas if you are displacing production that is absorbing carbon, you have a different argument. It means you have to be careful about what crops you are growing, what land you are growing it on, and what the inputs are through the production process in terms of fertiliser. Then, if you are making biofuels, what are the emissions associated with the biofuels plant and the production process? You have to do a very careful calculation.

There are situations where you can be carbon-neutral. We think that you can get to 10% penetration of primary energy with bioenergy, and about half of that through energy crops, through stuff that is low-carbon rather than unsustainable, in the sense that it is not low-carbon or is displacing food production.

Duncan MacQueen: I would very much agree with that. I think it depends, crucially, on the crop choice-on what that crop replaces. Obviously if you chop down tropical rainforest and plant a jatropha or something, you have a very negative emissions footprint. If you take abandoned land and plant up a tree crop, you have greatly increased sequestration. There has been a lot of talk about the threat of expanding biomass use on deforestation but, of course, one of the best ways of encouraging the establishment of forest crops, as we all know, is to create a strong, stable market for them. It could lead to the expansion of forest crops in ways that sequester carbon if we invest heavily in biomass energy. The trick is doing it in the right way and making sure that the sorts of tree crops that are established, and who they are established by, meets development ends and does not compete with food and so on, but I do not see why we should take away the opportunity for developing countries to make use of their natural resources. Poor people’s involvement in supply chains for biomass is something that is very readily achievable. Indeed, if you look at the expansion in plantation area in South-East Asia-in Java, for example-you will find that a lot of the expansion in timber has come from smallholder farmers who see an expanding market for timber, as it happens because of the cutting down of the forest elsewhere, and they are filling it by planting trees on the farm. They are making a good income and they are contributing to carbon sequestration.

We have been working in the forest sector for a very long time, and we know how to bring this about. Some of the processes that the British Government have been supporting in the forest sector have been doing that sort of work, but it does crucially depend on how it is done, and the concerns over sustainability and damage to biodiversity are very real and need to be considered.

Harry Huyton: Very quickly, on carbon accounting, there are three issues there. First, there is accounting as part of the sustainability standard, which will require, from 2013, that biomass meets the 205 standard. That fails to account for carbon debt, and it fails to account for alternative land use and indirect effects on other industries. It might be better, for example, to use wood in construction, as the Climate Change Committee’s report suggested. None of that is captured in that greenhouse gas standard.

The second part to your question was about international accounting: where will emissions from bioenergy be captured? Under the energy part of the inventory, emissions from bioenergy are accounted as zero. They are instead captured under the land use change and forestry part of our greenhouse gas inventories. The problem there is that if you are importing from countries that are not party to the Kyoto protocol, those emissions will not be captured anywhere, so it will be a loophole. They will be emitted to the atmosphere but no one will have ever accounted for them. If you import from developing countries where accounting for those emissions is optional, again that will be a loophole. Even if you import from countries that are signed up to the Kyoto protocol and are accounting for their forest management emissions, you may well miss them because, unlike emissions from all the other sectors, which are baselined against the 1990 baseline, emissions from land use from forestry management are baselined against a projection into the future. That effectively means you have a loophole there and emissions might well not be captured. If a country projects large-scale harvesting of its forestry resource, it will just never be captured in emissions inventories.

Q28 Dr Whitehead: You have said in your report that the UK should remove public subsidies from unsustainable supplies of bioenergy, presumably a large number of which would be defined under the sort of heading that you have set out. How would you go about that, were you developing it? What would you put in place in terms of who gets a subsidy and who does not, and how would that be defined?

Harry Huyton: Our view is that, ideally, support for bioenergy should be restricted to domestic feedstocks where we can be very confident of their greenhouse gas and sustainability balance. If there are problems with that, and we accept that that is hard to implement, our second-best option is that the sustainability standards are tightened significantly, and we would expect that to include compliance with Forest Stewardship Council compliant schemes, which we see as the only kind of forest certification scheme out there that can give a relatively high level of guarantee that the forests are sustainably managed. That, coupled with tighter greenhouse gas emission standards-for biomass that means the 200 grams recommended by the CCC; for biofuels that means indirect land use change factors-we have a system that should give us a relatively high level of confidence that what we are subsidising is not causing serious environmental harm.

Q29 Dr Whitehead: You have also suggested that the Government effectively insist that plants are CHP. I note in your report that you have recorded that the majority of plants that are going ahead at the moment are not CHP-ready or CHP-operational. Would that be in addition to the sustainability guidelines?

Harry Huyton: That would have to be in addition. There are others who are far better able to comment on why CHP is still not perhaps coming forward on the ground as much as everybody would like it to, and what we need to do to unlock that, but we think that new, dedicated biomass electricity plants are an inefficient use of our resource, particularly given that there are other options for low-carbon electricity. They pose significant environmental risks, so it is not appropriate to give them public subsidy.

Q30 Dr Whitehead: As a supplementary, do you think the de minimis level on the requirement to have CHP attached to a plant that is being pursued by the British Government in relation to the energy efficiency directive would actually exempt most of the biomass plants from CHP compliance in future, even under the energy efficiency directive?

Harry Huyton: That is interesting. I am not aware of that. David, are you able to comment? I am afraid I am not aware of that.

Q31 Dr Whitehead: If it were true, what would you say?

Harry Huyton: That sounds quite good.

Q32 Dan Byles: Dr Buyx, I am quite interested in your suggestion that perhaps we ought to establish some international standards on just what emission savings are in these different technologies. Do you not think it would have been sensible to have done that before putting these targets into law and not afterwards?

Dr Buyx: I couldn’t agree more. Yes, very much so. This is a field that has been driven by policy that was probably developed sooner than many of the unintended consequences were foreseen, and that established some markets that are sort of artificial. We see some of that because there are fluctuations in production that are challenging now that we are talking about targets that we would like to have. I couldn’t agree more, but since that is not the situation we are in, we have to try to rectify this mistake now.

Q33 Dan Byles: In the interests of doing that, would the panel agree that it is wrong to think of this as a single homogenous industry or a single homogenous product, and that there is a huge difference between different types of biomass and different types of biofuel? If you take into account all the emissions involved in cultivation, transport, direct land use change, and indirect land use change, are there any sources of bioenergy that could be worse than fossil fuel?

Dr Buyx: Can I continue? First of all, you are absolutely right. I think I said before that there is great variation, in terms of what savings and what sustainability these different technology pathways exhibit. There are some that are very bad indeed; for example, corn ethanol requires a lot of water-far more than we would be comfortable with. There are some that have been described as having carbon production that is much worse than fossil fuels. The fact that all these technologies are broadly in this field shows that good and consistent sustainability criteria can and should be applied to all the technologies. For that, we need methodologies that cut across the sectors, of course, but we will need those anyway. If we are really serious about climate change, we need a good methodology to do carbon accounting. There is no question about that. If we have that, we can compare the different areas. There might be some-for example, algae-that are very much still experimental, but in five or 10 years they might provide a real avenue. They might be one of the technologies that could take us to a whole different place. Lignocellulosics might mature and get to a scalable state. What we are adamant on is that for all the products and for all the energy technologies, what we need to do is have good and well implemented sustainability criteria that apply to them all. Then we can point out the good ones and the bad ones, invest in the good ones, and try to discourage the bad ones.

David Kennedy: I agree with that. On biofuels, there are things you can do that are worse than fossil fuels, and there are things you can do that are a lot better. Biomass is the same. If you chop a tree down and burn it instead of burning gas in a power station, the emissions will be higher from burning the tree rather than the gas. It does come down to sustainability standards.

Q34 Dan Byles: Is there a danger, though, that this whole industry has been driven by looking at the best practice, and that in fact we are going to get somewhere in the middle? We are going to get a sort of smearing of a bit of all this, and we should be looking more to the middle for the sorts of carbon footprints we are going to be seeing, not the best-case scenario. You have talked a lot about this wonderful abandoned agricultural land. I am very curious to know what sort of estimate you have made of how much of this stuff there is around the world, and where it is.

David Kennedy: We think there is about 500 million hectares of abandoned agricultural land in the world, compared to, I think, about 1,700 million hectares that is used for food production at the moment-a significant amount of abandoned agricultural land. It is thought to be low-productivity but could grow certain types of bioenergy crops, maybe in the future rather than now, because these crops are at an early stage of development. As for what you should plan for, in terms of the carbon footprint of the kind of things that will be pulled through under the directive, it depends on the sustainability standard. Rather than planning for something and seeing what happens, which might be good or bad from a carbon perspective, we should be focused on tightening the sustainability criteria. That leads you to say, "Well, okay, we’ve got a target; we’ve got sustainability criteria. We are not sure if they are compatible. They might be; they might not be." What gives in that situation? Is the target the thing that has primacy, or is the sustainability standard the thing with primacy? Certainly for us, thinking about carbon, it is silly to have a target that is binding if it is not achieving the thing that you wanted it to achieve, which is carbon reduction.

Q35 Dan Byles: Hasn’t your committee stated that, for example, if you take indirect land use change emissions into account, we might need to adjust our targets for biofuels downwards?

David Kennedy: It is possible. We have not said you would have to.

Q36 Dan Byles: We should be prepared to.

David Kennedy: We should be prepared to, if that were the case. If you had the right sustainability standard and the industry response was, "We cannot meet the 10% target for biofuels; we can only get to the 8.6%"-that was suggested by the Gallagher Review as being the sustainable level for 2020-then you would want to be flexible with the target. The industry may be able to tell you a story about why they can get to 10% and more through sustainable ways, and that is great if they can do it. Put tighter sustainability in place and then bring forward that supply. That is the challenge to the industry.

Harry Huyton: I think anaerobic digestion, biomass heat, biomass CHP, and using domestically available resource can all offer significant greenhouse gas savings relative to fossil fuel equivalents. As for biofuels, we are absolutely not confident at all. Indirect land use change is potentially very large, given the size of the industry. At the European level, a review of national plans on biofuels suggested that indirect land use change will be approximately 4.7 million to 7.9 million hectares, responsible for 50 million to 83 million tonnes of CO2 equivalent. It is a huge amount of emissions and quite clearly puts biofuels in a worse-than-fossil-fuel category.

I just wanted to pick up on the idea of abandoned land and the fact that it comes down to sustainability standards. Abandoned land is often abandoned for a reason. The RSPB has a 181-hectare arable farm. We are quite proud of our farming there. It brings in a neat profit and it is good for wildlife as well. We planted a load of short rotation coppice on some of the poorer grade land. I was there last week; it is not looking very good at all. The reason why it is not farmed is often because it is not very good for farming. If you look at the Arbour Project, which was the first biomass power plant that was proposed in Yorkshire, the short rotation coppice that was grown for that was all on relatively high-grade arable land. Why? Because it gives you better yields. While we can speculate from here on how much abandoned land there is in the world and hope that biomass is growing there, and that it will not affect the wildlife or the people who live there, it seems unlikely that that will happen on the ground.

Again, I come back to the fact that sustainability criteria are great, but you have to look at how they are implemented, as well as what it says on the tin. We are increasingly seeing quite bad practices taking place to fuel the UK biofuel market. The biomass sustainability standards are based on exactly the same approach, and we do not see it being any different. The biomass sustainability standards in the UK will depend on existing forestry certification skills, and that includes ones other than FSE, which we say is the gold standard. If you look PEFC, which will be compliant with the sustainability standard, a recent review showed 32 case studies across the world of clear felling in natural habitats that still have PEFC certification. There is a big gap between what we are saying we are doing and what is actually happening, and that is going to have big impacts on emissions and the environment.

Duncan MacQueen: I would like to come back on the abandoned land debate. Our research shows that a lot of so-called abandoned land actually has claims to it. The question is more whether it is optimally used-whether its potential biocapacity is being optimally used. There are lots of reasons why people who have claims on land do not optimally use that land-why people do not plant trees. Often the reason people do not plant trees, when it could be a perfectly good source of income for them, is because trees take a long while to grow and you need a very high degree of tenurial security to make you want to invest in a long-term crop. That is often absent in some of the places we are talking about. I think we have to be careful in projecting this abandoned land thing, because it does give the impression that large companies could go and annex very large contiguous areas of land and put them down to plantation. That is a trend, and it is often done with the complicity of government agencies in these countries. It can lead to the land grab phenomenon.

We need to work hard in our development of our supply chains to make sure that the right incentives are created for local people to optimise the use of biocapacity by working hard on tenure security in these places, and again there are programmes in Government that are doing this. The FLEGT process that Britain has invested in so heavily is about the only show in town that is pushing for this. I think that is very important.

Dr Buyx: Very quickly, first of all, I agree with that last point very much. One additional point to keep in mind is that there is an arsenal of biotechnology tools at our disposal. When we consulted with researchers, and also with some industry, they told us they believed that it would be possible to push the crops that there are towards being able to be grown on truly abandoned, degraded, or marginal-or whatever it is called-land. That might be very interesting, first in the UK of course, but it could also maybe be applied abroad.

Secondly, on ILUC, I am going to throw in something controversial, because we did say something controversial, and that is that we do not think that implementing some sort of ILUC factor into bioenergy and biofuel policy is a very good idea, because it, to some degree, penalises a particular agricultural activity, when other areas of agriculture might displace other activities too, because there is overlap in activities everywhere. What we believe would be better and more effective, although more demanding-I am being aspirational here-is to avoid land use where it happens and to have good international agreements on the protection of land, with high carbon stock at source, and good monitoring in place as part of the international agreements on climate change, so that this harmful land use change does not happen, and the land is protected no matter which activity is eyeing that land.

Q37 Dan Byles: Is that really feasible, given that this is indirect land use change? We are not talking about direct land use change. How can you possibly legislate it out?

Dr Buyx: I do know that this is a difficult proposal. In the end, it does not matter if it is indirect or direct land use change, does it? It just matters that it is land use change, and there is the destruction of carbon stock; that is what it is about. We are aware that this goes against pretty much what the Commission is currently trying to figure out and what everybody is saying. It is about the protection of the land. We believe that coming up with what will be a contentious ILUC factor for this one activity penalises a development that might in very many aspects have some positive sides. We believe that the more demanding, more important and better way would be to have a land use and land protection policy, both national and international, to protect land and to designate the land to particular use. Then you do not have to calculate indirect effects if you protect the land.

Q38 Dan Byles: Being very cynical, I think we have been trying to do that for years and years in all sorts of other policy areas, such as deforestation, and that has singularly failed, but it is a laudable aim.

Dr Buyx: We are an ethics body.

Duncan MacQueen: There are dangers of over-legislating. For example, we have all noted the absolutely critical importance of getting more wood into construction, because that is just a no-brainer. It is an easy way of locking up carbon compared to comparable materials, yet for years, because of concerns over the sustainability of timber and the insistence on very high sustainability standards for timber, the competitor industries in the plastics and cement lobbies have pointed at the forest sector and said, "You are not sustainable. There is deforestation-everything", which has had the perverse effect that we have buildings made of concrete and plastic, not timber as we wanted. You have to be careful about over-legislating for sustainability and ILUC and things like that, because it can create some rather unwanted outcomes. You kill the baby you are trying to nurture.

Q39 Chair: David, on your calculation about the proportion of abandoned land, do you envisage that that might have to be revised if improved agricultural techniques and technologies like genetic engineering and so on make the productive potential land that has been abandoned very different from what it is at the moment?

David Kennedy: The 500 million hectares is what is abandoned at the moment. That is highly uncertain, and there are questions about how productive it is. I should say that when we came up with the estimate that that could give rise to a 10% share of bioenergy, we assumed very low yields to reflect the low productivity on that land. Various things will happen over the next four decades: the population of the world will grow very significantly, and diet will change to a more carbon-intense diet, and that, other things being equal, would require more land for agricultural production. If you look at the FAO analysis, that says we can expect some productivity improvement in agriculture, and they will broadly offset each other, so the abandoned land now will still be abandoned then and we can use it. Depending on productivity growth, if you had a much faster rate of productivity growth, there would be more land that you could use for bioenergy, but I do not think you would hold your breath for higher rates of productivity growth than we have assumed at the moment. They could happen, and we could have breakthroughs, but without breakthroughs it is hard to see how there will be much more abandoned agricultural land. There may be less that is actually usable in practice.

Dr Buyx: Can I just say that there are no real, good incentives in policy to develop such technologies currently? In terms of sustainability criteria, there is a lot now, and we welcome that, but there is very little in terms of incentivising these bottlenecks I was talking about.

Q40 Chair: I do not want to get too sidetracked on this, but if the agricultural industry comes under more scrutiny in terms of its carbon impacts-it has largely escaped, albeit not quite so much as the shipping and aviation industries; we are catching up with those slowly-if there was pressure to have less carbon-intensive agriculture, might it need more land rather than less in order to achieve that?

David Kennedy: What we have assumed is that you could meet the increasing demand for food production through productivity growth as catch-up, rather than an increase in carbon intensity in countries like the UK. If other countries were at our levels of productivity, with our levels of carbon intensity, then we could feed this bigger population with more carbon-intense food. I do not think we necessarily need to make massive changes in the amount of fertiliser, for example, used in arable crops here-we cannot see massive changes in that-so we expect the rest of the world to be at our levels, but not at much higher levels. There is not room for significantly increased use of fertiliser that might reduce the demand for land for food; that cannot happen within a carbon constraint.

Chair: David, if you need to slip away we understand. We have one more quite important group of questions for this panel, so we have another few minutes.

Q41 Christopher Pincher: Dr Kennedy, you said earlier that bioenergy is going to be an important component of us meeting our 80% greenhouse gas emission targets by 2050, but you have also said, or the CCC has said, that the application of CCS to bioenergy is fundamental to it being able to generate electricity. Does that mean that there is a reliance on CCS to ensure that bioenergy can meet the 10% target demand that you are suggesting it should?

David Kennedy: I should say it is not a 10% target. It is indicative of what the contribution might be. Certainly, in the longer term you would not expect to use power generation, burning biomass, unless it has CCS, so we have better ways to decarbonise the power sector. We should be using that biomass to decarbonise things where we do not have a solution, like industry, aviation biofuels, and shipping; there could possibly be some use in surface transport as well. In the near term, do we have to have CCS and power generation together in order to justify using biomass? The answer is no, because we do have this opportunity to convert the coal plant and use that for a limited time period-for about 10 or 15 years, out to 2030. That is a very sensible use of biomass in the medium term, but in the longer term, certainly you would want CCS.

It is not just CCS you want with power generation, by the way. You can use CCS with heat generation, and with production of biofuels for different forms of transport. It points to the importance of demonstrating CCS, which we have known all along, but I think in the past we have thought it crucial to demonstrate it with coal-fired power generation. Actually, the story has changed over time. We think it is now important to demonstrate with gas-fired power generation but more recently to demonstrate across a whole range of bioenergy applications, which says we need to get on with our demonstration programme, which has stalled, but which I hope will move forward over the next months.

Q42 Christopher Pincher: But we have not done that yet?

David Kennedy: No. We do not have a demonstration project at scale here. We have aspirations, and we have commitments in the coalition agreement, but we have to make good on those commitments and get something happening. If we get something happening, I think-I hope-there will be a positive story to tell, but it is crucial to move on now and to get on with it, rather than to carry on delaying.

Q43 Christopher Pincher: Have you done any work, or is there any work done that you know of, that estimates the quantification of the cost of generation if you apply CCS to bioenergy?

David Kennedy: What we have learned is that people had very precise estimates of what CCS generation was going to cost five years ago, and over the time the range for cost estimates has got bigger and bigger. It is something that is very uncertain, which is why we have to demonstrate it. Once we demonstrate it we will understand more. Then we can say sensibly what the appropriate role is.

Q44 Christopher Pincher: What do you think the time frame for that demonstration needs to be in order to make bioenergy a useful component of the emission reduction targets that we have set?

David Kennedy: The time frame that the Government have been working with was to get demonstration plants on the system in 2017; it probably will not be that now. It will be 2018-no later than that. That allows a second round of investments in the 2020s. Whether it is in coal-fired generation in the 2020s, or gas or bio in different applications, that is what we should be working for. I think the longer we leave it, the more you lose the investment opportunity going through the 2020s, when that will be a very valuable opportunity.

Q45 Christopher Pincher: Do you have any confidence that that target will be met-that no later than 2018 we will have those demonstrations under way?

David Kennedy: I think it is still possible, but the longer we leave it, the more it becomes much more uncertain, and we should do something or see an announcement in the next several months. There are the four demonstration projects that the coalition agreement says will be funded. If we do not see something concrete on that competition moving forward in the next months, you would have to be a bit worried about 2018. The challenge is for the Government to make an announcement and to get on with this process.

Q46 Christopher Pincher: You said that of the bioenergy, half should be produced by biofuels. I think that was correct, wasn’t it?

David Kennedy: From energy crops. Of a 10% total, 5% would be from energy crops and the rest, almost in equal proportion, from wastes, agricultural residues and biomass from forests.

Q47 Sir Robert Smith: Is there any different perceived technical challenge to CCS for biocrops than there is for traditional fossil fuel plants?

David Kennedy: I do not think so. I think the big technical challenges in CCS are not related to the capturing from the plant. It is more the getting it to the storage stage-taking it away from the plant, piping it and getting it underground. Those challenges are across the range of applications, whether it is bio, coal or gas, so no, I do not think so.

Q48 Christopher Pincher: Back to biofuels, CCC has said that anything less than 10% biofuels penetration requires unforeseen technology breakthroughs or radical behaviour change. What sort of radical behaviour change are you thinking of?

David Kennedy: This is bioenergy rather than biofuels-in the long term, a 10% penetration of bioenergy, which we did not envisage being used as biofuels. There will some used as biofuels and some used as biomass, in heat generation in industry, for example. If you did not have that-the combination of 10% and CCS-it takes you into looking at things like the big opportunity for waste reduction in the food supply chain, for example. If we could unlock the potential there, globally it is thought that we could reduce the food production required to meet demand by 30% if we eradicated all waste. There is a big opportunity there. Going beyond that, what are the technology breakthroughs that you might have? People have talked about algae; that could be part of the solution. Going beyond that, you start to look at possible modification of diet, which is a very tricky issue. Those are things that you do not really want to get into if you can help it, and that will be very difficult to get people to embrace. That is why it is so important to have the combination of bioenergy and CCS.

Duncan MacQueen: I am not sure I understand the tying of bioenergy to CCS. I can see that if you had coal or gas-fired, where you are effectively taking stored carbon from under the ground and pumping it into the atmosphere, you would want to do CCS to reduce their emissions, but where you have a forest crop that is soaking up the carbon from the atmosphere in its growing phase and that is to be released, I do not see why CCS should be necessarily a prerequisite for emissions reductions. You get the emissions reductions-

David Kennedy: It is not a prerequisite, but you get a double bang for the buck. If you absorb something and you release it, then it is carbon-neutral; if you absorb something and you sequester it-you mentioned using wood for construction-that is a great thing to do.

Duncan MacQueen: Saying that CCS is in general a good thing, which I entirely agree with, is very different from saying that the prospect of biomass acting as a major source of emissions reductions is contingent on CCS, which is not the case.

David Kennedy: No, I agree. What we have said is the combination of those two is required to meet the 80% target. Without them, okay, bioenergy can still make a useful contribution. It can make a much more useful contribution if you can sequester the carbon. If you did not have CCS, you would still want bioenergy, but it leaves you short on meeting the target, and you have to do other things then, which are very challenging to do, so you need those two things together. It is not just our analysis. If you look across the range of models-those from the Energy Technologies Institute and the MARKAL model-they end up saying, "If you have CCS, use it together with bioenergy; that is the best way to meet the target."

Q49 Christopher Pincher: On feedstock, you have mentioned wood a good deal. I think the proportion of imported wood that we are going to need to fire bioenergy is a five–fold increase, taking us from 13% to 68% of imported wood. Does that not represent a significant energy security risk?

Duncan MacQueen: I do not believe so, because I believe that if you are building a dedicated biomass energy plant, as various people are trying to do, your financiers will look very hard at your sustainable supply contracts. Indeed, it is nailing down the sustainability of those supply contracts to satisfy financiers that is the constraint on dedicated biomass energy development. I do not believe that there is some sort of other constraint there. I personally believe there is enough biomass out there, and I believe that Keith Openshaw’s calculations about the availability of biomass suggest that there is plenty of biomass out there to meet our energy needs-not all with strict sustainability standards, but in order to be developed for a dedicated biomass power plant you have to have sustainability in place.

Harry Huyton: Just to add to that, the analysis that we have done of available biomass supply so far has been fairly limited, in that it has taken quite a UK perspective: "This is our projected demand; what is out there in the world?" What we haven’t said is, "What are other countries doing, and what will the effect of their increased demand for biomass be on the world biomass market?" The reason why I raised the South-East US study earlier is that when we looked through the planning application documents for the 44 biomass power plants that are currently being developed, most-a lot-cite North America and Canada as sources for their wood, yet that study shows they barely have enough capacity or additional wood resource to meet their own biomass demand there, so I do wonder whether we have given this the analysis it deserves.

Q50 Christopher Pincher: Where will it come from? If we ourselves need a fivefold increase, other countries may do the same; where are we going to get the wood from? We have heard there are 500 million hectares of abandoned land but I think you all individually said that abandoned land had claims upon it; it can be unproductive, and that is why it has been abandoned; the crops have not necessarily been produced yet that can grow effectively upon it. So where is the wood going to come from?

Harry Huyton: Again, the best evidence we have is what companies are already doing, and what developers plan on doing in the future. At the moment there is relatively large use of biomass waste-palm kernels from Indonesia, olive pits from Spain and such like. Obviously, that resource is limited, though. As it expands, developers intend on importing from the whole range of countries, as I said, our review of the stated ambitions from all of these developers is that they most frequently cite the US, Canada, Brazil and Russia as countries that they will be importing their wood from, and my comments previously about our ability to ensure that that is from a sustainable supply regardless of our sustainable standards are very limited.

Duncan MacQueen: My feeling is that the initial way-as Harry said-will be in areas where the sustainability is certain, and the supply is there or thereabouts. That will limit, to some extent, the expansion of biomass energy. As biomass energy takes off, there will be plenty of other places that are looking to develop supply capability. It is managing that and ensuring that the same sustainability criteria apply. These things will happen organically if there is a huge market clearly developing.

Christopher Pincher: We will forgive the pun.

Chair: We have had a good full session. Thank you very much for coming in. It is very useful for our inquiry.

Examination of Witnesses

Witnesses: Dr David Clarke, Chief Executive, Energy Technologies Institute, Dr Jeremy Tomkinson, Chief Executive, National Non-Food Crops Centre, David Knibbs, Chief Executive, Vireol, and James Primrose, Global Strategy Manager, Biofuels, BP, gave evidence.

Q51 Chair: Thank you very much for coming in. As with the previous panel, we know who you are, but for the purposes of this process, could you just say your names and job titles, please?

James Primrose: I will start. My name is James Primrose. I am the Strategy Manager sitting in BP’s biofuels business.

David Knibbs: Dave Knibbs. I am Chief Executive of Vireol. We are a bioethanol company.

Dr Tomkinson: Jeremy Tomkinson, Chief Executive of the NNFCC, the National Centre for Biorenewable Energy, Fuels and Materials.

Dr Clarke: David Clarke, Chief Executive, the Energy Technologies Institute-the ETI.

Q52 Chair: Would you like to tell us what your experiences have been with the Renewable Transport Fuel Obligation?

James Primrose: Shall I start? I think the RTFO was a novel piece of biofuel regulation. It was useful to move biofuels away from being directly subsidised by the taxpayer, and hence the RTFO were copied to a large extent by other countries within Europe. The challenge the RTFO had, I think, was almost because it was at the leading edge; certainly, in the area of sustainability and the voluntary sustainability standards, there were not sufficient sustainability schemes that were available at the time that the RTFO was introduced that allowed fuel suppliers easily to demonstrate that they were sourcing from verifiable sustainable sources. For example, an obvious omission was that at that time there was no sustainability scheme covering Brazilian sugar cane ethanol, and the UK on its own was not large enough to start changing the practices in the global agricultural commodities system. I think that has now changed; I think the RTFO did initiate the creation of a number of biofuel sustainability schemes.

I am actually on the board of one of those schemes. I am on the board of Bonsucro, which is the Better Sugar Cane Initiative, an international scheme looking at the sustainability scheme covering sugar and ethanol produced from sugar cane. The Bonsucro standard was initiated by the RTFO. I think now that we have implemented the renewable energy directive, and these voluntary standards have become mandatory, that is the paradigm shift that is required really to move this agenda forward and to give the fuel supplier the tools to demonstrate they are sourcing from verifiable sources.

David Knibbs: I would probably say I was around at the initial creation of the RTFO, and we as an industry broadly welcomed it because it did create the market. On the introduction of the RTFO, it was probably quite debatable until the RED came in whether we would actually have biofuel here in the UK. I think the Government should be applauded for its introduction. It was very leading edge. We were right at the development edge of sustainability and sustainability criteria. That in and of itself was a challenging place to be and it did set itself up for lots of challenges. It has responded to that, and I think it has created a lot of the debate that is going on in biofuel at the moment.

If there is one thing that I think perhaps could have been done differently-it would have been better to have done it differently-it was about mandating sustainability standards. The fact that you could report unknown and source feedstocks from lots of different places probably did not help some of the credibility, and we would welcome the RED, which now has mandated sustainability criteria contained in it. So as with all leading edge things, there was some good and some bad, but if you absent it, there would not be a market for biofuel and some of the things that have happened in terms of leading development.

Dr Tomkinson: I would agree. If you look back to when the RTFO was first launched, the UK was one of the first to do this. It stimulated the marketplace. I absolutely agree that the issue was that we were slow in bringing in sustainability standards, but we have learned by doing a lot of the issues that we have encountered over the years; we have encountered them because we have uncovered them while we have been discovering this new process. Moreover, I think the other issue is we really need a stronger trajectory going forward. The issue, as we stand now, is we have become very stultified in biofuel development because the RTFO does have this terminus point of 2014. We have to look beyond that and look at a more robust trajectory.

In the round, the RTFO is a very useful instrument to start to stimulate the marketplace. Yes, we were somewhat tardy in bringing in sustainability but I think we are doing a good job now, and looking forward really to making the trajectory a lot more robust, so that we give evidence and incentive to the investors to get on board; otherwise, we will stall.

Dr Clarke: I think I support most of those comments. Frankly it has been a valuable mechanism for positioning and developing the market in the first instance, and I think there have been a lot of lessons learned about policy development from it. The key message for any biofuels production that we see is that it has to be sustainable. Wherever it comes from in the world, we have to have sensible sustainability practices to ensure that it is a long-term benefit.

Q53 Chair: How can the savings in greenhouse gas emissions from biofuels actually be measured and verified?

James Primrose: If I can start, in terms of the direct emissions-the emissions that are directly under the control of the biofuels producer-it is reasonably straightforward. In the renewable energy directive, there is a fairly clear methodology that allows those calculations. If I put my Bonsucro hat on, Bonsucro has a stand-alone sustainability standard. It also has a greenhouse emissions methodology that allows you to determine the emissions over the full lifecycle of production of ethanol from sugar cane, and other standards have similar approaches.

That is for direct emissions. If we are talking about indirect effects, that is a different discussion. You may want to come back to that at a later point but, very briefly, I think we are broadly in agreement with the Nuffield bioethics position. I do not think that introducing an indirect land use change factor or an ILUC factor is necessarily a very useful way forward and this could actually add more complexity than is actually beneficial. It may not impact or seek to avoid indirect effects, and there are more pragmatic and more practical ways of tackling that issue.

David Knibbs: It all comes down to a robust methodology, and while it is an evolving science, as James says, on direct things and things that the producer controls, I think there is a fairly well documented way of accounting for things. It does come down to the standards and knowing where the feedstock comes from. The absolute fundamental of sustainability does relate back to the feedstocks. It is very easy to see how those feedstocks are processed in a plant. Ours will use-at least in the first instance-gas CHP, so you can measure that; it is known. Knowing where the feedstock came from in the first place and what sort of land use change was there and all those factors-that for me is the absolute fundamental.

We are lucky here in the UK because we have had assured food standards for a long time-the red tractor symbol. We have to track our feedstocks; we have done it, arguably, for food safety reasons, but we know where our feedstocks come from. We have very good track-and-trace systems, and if we can have that in other places, and be sure that you knew where the feedstock came from, I think a lot of the debate around sustainability would actually go away. It came up in the earlier session around biomass; knowing where it came from in the first place is the fundamental for me. I think we are lucky here in the UK because we can do that.

Dr Tomkinson: I very much agree with the former session. They gave a good robust response regarding the ILUC and I think the way forward is perhaps to look to develop more sustainable biofuels, rather than try to inhibit not just the bad, but all the good and the bad together. Direct measurements we can take. Direct land use change is a physical methodology. We have a regulation standard in the RED and measurements can be taken and comparisons made.

Indirect land use change-as you have seen this morning-is a lot more complicated and I think our view on the Ernst & Young report perspective is to probably go with the EY, and to suggest that we need to be looking at methods where we can develop better, more sustainable, biofuels, rather than putting targets in there that will suppress all. If you have a greenhouse gas target you have to meet, as soon as you meet it, that is it. You have no great driver then to improve yourself beyond that, whereas if we had an opening and were looking at different materials, you might say, "Let’s look at how we could reward the use of residues, or the increase of yield." I know this issue of use of degraded land is quite a complex one because, intuitively, if it is degraded it is degraded. It is not going to be very good for growing things, but a lot of those comparisons that have been done are primary agriculture, and we are comparing yields there to what we have in Europe, and we are very good. We are very good at agriculture and we are very good in the UK. I do think there is an awful lot of mileage in the use of energy crops on degraded land, on the use of residues, and on the use of energy crops and that should help to drive more sustainable biofuels rather than looking really to put in place a cap and suppress the growth of all.

Dr Clarke: I think it is usually complicated, frankly, and I look mostly at the UK clearly because that is our remit. We are currently investing something of the order of £5 million in bioenergy projects in the UK, the single biggest one of which is looking at the effects of carbon flux and carbon release in soils as you go through land use change practices. We have 110 test sites across the UK where we are making measurements, along with BBSRC and a number of the research institutes. I think what we will learn from that is that it is very, very dependent in the UK on the specific crop types, the exact soil types and the exact agricultural practices. So my summary answer is in a "controlled environment", such as we can engineer perhaps in local policy in the UK, I think we can probably find a way of measuring these kinds of things effectively and controlling them effectively. How we handle that in a much broader global environment I think is hugely challenging-hugely.

Q54 Chair: Has the implementation of the renewable energy and fuel quality directives improved the situation at all?

David Knibbs: I think it has and I refer you back perhaps to the first answer I gave-the fact that we have actually made things mandatory in terms of sustainability criteria so people cannot move forward and put biofuels out into the marketplace that are unsustainable. We are going to have a much greater degree of certainty as we look forward, now that biofuels coming into this country can be badged as truly sustainable. So in that regard it has been a huge help. From an industry point of view the signal of a 10% target and making it mandated has been a big step forward as well. Many of us here would remember the days before mandation, and application across member states was quite patchy; people were not embracing it; some people were doing it; some countries were doing it and others weren’t. The introduction of mandation has created a market. It has got everybody to get very serious about it and start to put in place a lot of the measurement systems, and start to upgrade them to be able to produce sustainable biofuels. I, for one, think it is a big step forward.

On the fuel quality directive, the introduction of E10 and being able to do ethanol at a higher grade will have positive benefits, and that has been done in lots of other markets as well, so there are a number of associated benefits that the European legislation has clearly helped with.

Q55 Albert Owen: Can I just push a bit further on the renewable energy directive? You say it is a good thing and is mandatory, but how do you ensure that the criteria are met on sustainability? What practical steps do you take? I am talking about country of origin with food for instance. There is an issue there; although they have some EU-level directives, there are some backdoor ways. How do you ensure that that does not happen in Europe?

David Knibbs: My background is nearly all food industry, so-

Albert Owen: Yes, I know. I remember meeting you before.

David Knibbs: I do have quite a lot of experience, and you are right: you need to have very, very tight controls over where product is sourced. It is relatively straightforward within the EU to know what feedstocks are getting processed, and people are introducing-a bit like Bonsucro-voluntary schemes that will become the norm, frankly, throughout Europe for how we decide where something came from and whether it was sustainable or not. I am perhaps a little nervous about the idea of bilateral agreements. They trouble me a little bit; you could maybe nod through a whole industry on the basis of a top-tier deal, rather than going right down to the producer unit level. I think that would be a lot better if we went down to that level. But I go back to this: knowing where your feedstock came from, implementing it, measuring it-it is all there in the RED. If it is verified well enough, you should be able to get sustainability.

Q56 Albert Owen: Anybody else? Okay. We talk about the EU; for bioenergy feedstocks sourced outside the EU, how do you ensure that those countries have implemented international labour conventions, for example?

James Primrose: I will answer that. This is a difficult one, because you start getting into WTO issues, and I think that is a challenge that the-

Albert Owen: We are here to ask difficult questions, though.

James Primrose: Sure. Good. I think the challenge that the RED has is that it has problems, or WTO constraints prevented it from mandating on social and labour issues. Again, I think this is where sustainability standards come in. Again, take the example of the Bonsucro standard: the Bonsucro standard goes far wider than the sustainability criteria in the RED. It covers labour aspects, and it goes into other environmental aspects, such as the use of fertiliser, pesticides, water use, and so on. I can go on. So when a sugar mill in Brazil certifies against the Bonsucro standard, it certifies against all those criteria, only a portion of which are relevant or are the necessary qualifying criteria.

Q57 Albert Owen: As a practical step, would you as a large organisation send somebody out there without notice and see for yourself how things are? That is the only way, isn’t it?

James Primrose: Yes.

Albert Owen: So you do that as a company?

James Primrose: The mills are audited by independent auditors.

Q58 Albert Owen: To what standard?

James Primrose: For the Bonsucro standard, specifically to the Bonsucro standard.

Albert Owen: Okay. Anybody else?

Dr Tomkinson: I would just like to go along with James. It is down to the robustness of the auditing; the requirements are there. If you mean, "Can people be nefarious and get around that?" Of course, we have to police that and make it very clear that certainly in the UK we just will not accept any unsustainable biofuels. It is not good for the environment and it is not good for the industry, so it is not in anybody’s interest really to do this. I cannot see there is really an issue. Yes, they can be developed and made more acute, but it is a process. There are regulations. There is an audit system. There are a number of certifications that you go by that include the metrics that you were discussing. I feel we follow those and we build.

Q59 Ian Lavery: The previous panel discussed the development of CCS with biomass. I think the majority of you were in here. It would be interesting to see how essential this panel believes the development of CCS is to the future of co-firing with biomass and coal.

Dr Clarke: I will start. It is worth prefacing what I say by noting that we are looking, through all our analysis and modelling, at what we do out to 2050 for the UK, and we search for what is the lowest cost energy design for the UK, across power, heat, transport and infrastructure. Then we have a mix of technologies in there that we have costs for and so on. When you look at the results of that, out to 2050-I shall paraphrase-there are three big-ticket items at the top of the list for us that come out in developing the lowest cost system for 2050. One is efficiency, which is probably no surprise, both efficiency in transport and efficiency in power and heat, particularly used in the home and buildings. Two is bioenergy, and if we take bioenergy out of the equation, we see the costs for 2050 for the power system rise by about £40 billion a year in 2050. That is in a world where the power system costs about £300 billion. That is currently the number two ticket. The number three ticket is CCS, and the cost implications of not having CCS available are another £40 billion on top.

I stress that because from the point of view of what you have asked-is CCS important in terms of co-firing?-the answer is yes and no. It depends how much importance you place on the cost of the energy system in 2050. If you place the level of importance I have just put on it, in the sense of we are looking at something that is going to increase costs by more than 10% if we do not have it available, I would class it as essential. At this point, I would say we have to have CCS available. In terms of the co-firing of, biomass, and fossil fuel, it makes sense to run CCS on large power plant, and that is where we could run the heavy biomass-type materials through those kinds of systems. In the context of developing an energy system out into the future, I would concur on some of the comments we heard from the Committee on Energy and Climate Change earlier: we need to progress the demonstration of CCS quickly. The critical issue actually is in demonstrating storage capacity, because that is the longest lead-time item in CCS development. It is not developing the separation technology or the piping system; the lead time is on storage, because we have to appraise and license stores in the North Sea and they will take in the order of nine to 10 years to appraise and license, in the main. In the context of co–firing, I would say, yes, it is essential that we consider CCS from a cost point of view. A system could be built without it, but it would be a lot more expensive.

James Primrose: I agree with all that. The only other additional perspective I would add is that specifically when you are looking at CCS in conjunction with biofuels, some of the discussions I have had internally with our CCS experts is that in biological biofuels processes-those processes involving use of fermentation and advanced enzymes that produce biogenic CO2-that CO2 is a very high-concentration, high-purity-source CO2 that is, in terms of carbon sequestration, a very good source of CO2 to sequester. It does not require as much clean-up as other sources of CO2. I agree I think, with David Kennedy’s point that the fundamental challenge with CCS remains in finding the sinks and establishing the storage.

Q60 Ian Lavery: With regards the Energy Technologies Institute, what has the technology programme on bioenergy revealed to date?

Dr Clarke: The summary view is we are seeing bioenergy-as I just said, ignoring efficiency, which is the whole spectrum of improvements-as the No. 1 most important thing for the UK. In terms of the immediate results from the programmes, the biggest programme, as I say, which is ongoing, is the land use modelling programme, where we are actually taking carbon flux measurements from 110 sites across the UK. That will not complete until next year because clearly it has to run over multiple years to give us a viable set of data in terms of seasonal change and crop management and so on. We will see the results from that next year, but everything that we are seeing so far, from both that, our projects around value chain modelling across the spectrum of biomass production in the UK, utilisation in the UK, and in bio-to-CCS plant design, is telling us that UK-sourced biomass, should be an important part of a future UK energy system. In the context of land that could be used in the UK, we should be seeking to look at in the order of 1 million-plus hectares of land in the UK being used for UK bioenergy. That land, going back to the earlier discussion, is land that is currently underutilised and has significant potential.

In summary the results are starting to come out. The most important results we will not get for nearly another 12 months, because we have to wait for crops to grow and be harvested.

Q61 Ian Lavery: How do you ensure that this will accelerate the innovation from a diverse range of stakeholders?

Dr Clarke: Across all those projects, I think we have around about 20 different organisations involved: research institutes, big industrial companies, and power plant companies, including Drax. They are involved in our bioenergy projects, and I think what we see is this is the first time when that diverse spread of companies have come together focused around this complete set of projects, which goes right from the soil science through to the plant design at the far end in a number of projects. By virtue of having those groups together, they are sharing information, technology and knowledge between themselves, and they are very clearly starting to articulate their ideas as to what that system-across the complete soil-to-plant position, including CO2 storage, should start to look like in the future. I think they would say they are getting a much clearer view as to both the technology they need for the future and the value chain and the business model that would enable them to put that into commercial practice earlier than they would have done otherwise.

Q62 Ian Lavery: Finally, with regard to the ETI, does it work in partnership with the small-scale companies?

Dr Clarke: Yes. I can happily submit a separate note that has a list of the companies we work with, but if you look at our general portfolio of projects at the moment, roughly 50% of our project partners are big industry, and the other 50% is split roughly equally between SMEs and university and academic groups. The majority of groups working with us on bioenergy are either universities or SMEs. There are a few big companies working with us at this stage on bioenergy.

Q63 Dr Whitehead: I have questions particularly for Dr Tomkinson. Do you consider that the overwhelmingly likely future of bioenergy is going to reside with industrial processes rather than the domestic sector? I imagine you do.

Dr Tomkinson: On the whole, yes. There will be some niche applications off-gas-grid, and I would hope at a small community level. The challenge, of course, is the heat. You mentioned this in the first session-the utilisation of heat and the disappointment that we have with that. I think that is actually mirrored by the industry. It is trying to find a solution to where we can take the heat-from which source of generation-which typically isn’t in the centre of a large conurbation, and how you get heat from A to B. That, I think, is a big blocker. Our analysis has shown the cost variance if you are on the gas grid. This is for a domestic situation; to take out your existing heating apparatus and put in one based on biomass, the capital expenditure is four to fivefold more expensive. We hope that in the genesis of the RHI, those costs might flush out, but you have that initial up-front cap ex; you are basically asking somebody for £12,000, or you are asking for £2,000 or £3,000 for conventional. That is a big show-stopper, whereas the scale and also the infrastructure for large industry are there to bring the solutions. You mentioned Drax earlier; look at the way that that is developing in South Yorkshire as one of the largest biomass logistic hubs. These things will develop but will develop around big industry, I think.

Q64 Dr Whitehead: Assuming that is the case, you have done quite a lot of work with INEOS on developing next-generation road fuels based on digestion of waste.

Dr Tomkinson: Correct.

Dr Whitehead: Could you set out how that is going? Do you think that is likely to be a substantial contribution in future? What are the ups and downs of it?

Dr Tomkinson: It depends how we come across this. It is really a very all-encompassing project. It takes in difficult waste streams. This isn’t just INEOS-it is all of that system-but we will use it as an example. There are very difficult waste streams, be they green waste or municipal solid waste. They are converted to a heat power, a biofuel. They can basically ring the changes to which product they want, as and where. It is very efficient-a high-efficiency process.

The problem at the moment is investor risk. The technology has been developed on a smaller scale. It was looking to go to demonstration. It was developed primarily in the UK with acquisitions from the US from a technology perspective, and I am afraid the first plant is probably going to be in Florida, primarily because we just cannot leverage the investment. The investment risk is just too high. One of the greatest reasons cited to me for this-okay, this technology has not yet been proven, but with all new technologies there are typically ways through this. The problem we have is the investors have little faith at the moment in our policy on biofuels. They don’t know which way this is going to turn. If we had a final investment decision today, you are reasonably looking at two years before you go through to plant build. You are then in a position where we might decide against biofuels as a country. From an investor point of view, that is just way too much risk.

The direction that is coming out from the US is very clear. They are looking very specifically and strategically at technologies that are going to be able to use underutilised but highly beneficial environmentally friendly feedstocks, and at highly efficient processes. They will then invest either through grants or loan guarantees. Either mechanism in the UK we are finding very difficult at the moment, and attracting investors to put the capital-through debt or equity share-into the project is extremely challenging. That is one of our biggest hang-ups at the moment. It is not that the technology isn’t working; we have all indications that it is going to. I have the greenhouse gas balances that show this against alternative technologies, and it is better on food waste for AD, even.

Q65 Dr Whitehead: You anticipated precisely what I was going to ask next. In terms of going in different directions, is it clear that that does actually get you a better carbon balance than, say, AD, landfill gas or pyrolysis-other methods of use?

Dr Tomkinson: As we go down that chain it gets more challenging, but certainly from the first ones, landfill gas most certainly. We are still getting anywhere from about 15% to sometimes 50% leakage from landfill sites, and remember that methane is 23 times more potent than CO2. For every kilo we lose, we have to subsequently save another 23 kilos of CO2 to get the balance back. That is extremely risky. AD is basically what is going on in a landfill. It is like another digestion process. It is inherently inefficient, but I must say that I am very much for AD. I think AD is effective for dealing with food waste, and for deriving energy it is superb, but when we compare that against alternative technologies such as gasification, they are inherently stronger. They are more efficient. You can create two or three energy vectors. Yes, they are very good.

Once you start getting down to the more advanced processes-you mentioned pyrolysis-it does depend on the feedstock and what product you want to get from that process, because as you move down that technology chain efficiencies tend to increase. Against the ones that we are up against now, such as incineration, AD and landfill, the answer is: most certainly. I have the evidence I can give to the panel.

Q66 Dr Whitehead: You are also doing some work for British Airways on their jet fuel project.

Dr Tomkinson: Yes.

Q67 Dr Whitehead: Does the same apply there?

Dr Tomkinson: Even more challenging. There, the process that INEOS is operating is relatively new, but it has been proven. Sorry if I am getting too technical, but the process produces a thing called syngas, which is carbon monoxide and hydrogen, and the bacteria in the INEOS process consume the syngas and excrete ethanol as a by-product of their lifecycle. BA is going through a more traditional process called Fischer-Tropsch that is rather expensive and very technically challenging. The trick here is the actual gasification of the waste or the resource, because as soon as we have a clean cold syngas we can give it to the industry and they can take this downstream. They have been doing that for many years. Syngas from bio is identical to syngas from gas or coal. The challenge is being able to get a front-end system that can deal with the variations we see in waste and residues to be able to get a commercially valid volume of syngas that we can then subsequently transform into heat, power or a biofuel.

The additional challenge that we have for aviation is it is not yet part of the RTFO or the RED. There are no RTFCs, and when we were doing our financial analysis-and we did this as part of a bit of work we did for DfT-we found that it was seriously disadvantaged just against road transport fuel and even against power. So if you are looking at this purely from a non-technical perspective-from a financial perspective-you have to look at power, road transport, diesel and aviation. I am afraid aviation would be at the bottom. We see this as one of the greatest political aspirations that we are looking for, and for potentially good reasons, but I am afraid we are a long way out from achieving that.

Q68 Dr Whitehead: I assume the clue as far as the aviation fuel is concerned is in the title-it is the Road Transport Fuel Obligation

Dr Tomkinson: Indeed, but it is accounted for in the RED.

Q69 Dr Whitehead: If you did have an air transport fuel obligation you would actually be talking about a very tiny proportion of the fleet cost. I think that British Airways is aiming to have about half of its City Airport fuel cost.

Dr Tomkinson: Yes, at this stage that is absolutely correct. At this stage it is nascent; it is a growing area, and when you look at the financial risks that one has to take just to get one plant off the ground, even the most outrageous investor would want to see quite a lot of evidence before they put their money there. I don’t think you can judge now, on the basis of what current plans are, if this is successful and could be rolled out. I think the regulatory challenges are far greater, because it is an international business; there is the issue of where one would do this. I think if we are committed to developing sustainable fuels, and certainly developing sustainable aviation fuel, we have to look at this in its own right, as we do for all advanced fuel options. It is a different selling point, but as a proponent of advanced biofuels, I must stress that all our analysis has shown that we need what we call the first generation fuels to get there first. Unless we are willing to put huge policy measures in place, with huge financial incentives, we must go through the first-generation journey to get the investors, the infrastructure, and cash flow to get these far more technically challenging and financially challenging projects on the ground.

Q70 Dr Whitehead: On the same criteria as the previous question on INEOS work, and on the particular win for the area of biofuels or the area of low-carbon fuel, which has previously been grounded as quite unapproachable, how can you decarbonise your aircraft fleet? What kind of premium does that represent against, as you say, taking perfectly compatible gas and sticking it in a tank or putting it in the mains as an alternative to an energy gas supply?

Dr Tomkinson: That is a very good question. A lot of this will ultimately depend on the carbon price. We would have to talk about the specifics, because the cost variation is so wide, dependent on the different technologies and the routes and paths that we follow. If you mean the premium, because it is low-carbon into the marketplace, no, it is not that great. If you look at the price of biofuels compared to the synthetic, it is virtually the bio to an RTFC and it is very carefully controlled. Therefore, you are quite right to say that these markets are regulated and there are distortions in there; it is true, but they are very necessary. If we don’t have these distortions and incentives in place, as we discussed, we would never get off the ground and we will certainly never achieve the sustainable bioenergy production that we can see is possible if we go through this journey.

Q71 Sir Robert Smith: Earlier, in the opening questions, Mr Primrose, you raised the issue of indirect land use change and concerns that that was not being tackled in the right way. Is that something that is shared by the rest of the panel?

David Knibbs: For me personally, on indirect land use change, I don’t think the science is going to be exact on it for a number of years. It is quite an ephemeral concept; it is quite difficult to get your head round, but I think most people accept there are indirect land use change effects somewhere in the system. The biggest problem we have today is that it has become a reason for non-action, and a lot of us are sort of stuck in spaces a little bit waiting for people to make some decisions, one way or the other, on policy actions on indirect land use change. We are well over a year late waiting for something to come out of the Commission for the moment on indirect land use change, and I think we would say-within the UK industry certainly-it is probably time to act. The UK industry is very confident that with the sort of proposals that are being talked about UK biofuels will come up with a clean bill of health against indirect land use change. We benefit from the fact that all of the protein in UK feed wheat gets saved and fed into animal feed systems, and that is a huge help in terms of mitigating land use change elsewhere. So I think we would be supportive of action now, rather than just having a continued debate and malaise, frankly; it has become a little bit of an excuse for non-action.

Q72 Sir Robert Smith: Any other views? No. So do you share the view of a recent report by Ernst & Young that the current proposals being considered by the European Commission are unlikely to reduce the risk of indirect land use change?

David Knibbs: It is a really good question, insofar as one man’s indirect is another man’s direct, and we have always been of the view that you would be better off trying to look at land use change-I think somebody from Nuffield said it in the earlier session-right across every system, than trying to look at one specific area and say, "You’re the one that is creating the indirect land use change". I think is a bit difficult. It would be great if land use change mitigation-let us call it that-was rewarded, and if there were actions that biofuels producers could take that would have positive effects. If I choose to sell that animal feed or that protein product into the animal feed sector, as opposed to putting it into a biomass CHP and burning it, I am going to mitigate land use change. What Ernst & Young talk about-the idea of incentivising people to do the right thing-I think is probably a good thing.

James Primrose: My comments expand on my previous response, and I absolutely agree with David that we have to get beyond this policy status. We need a solution on indirect land use change. We have to accept that the science is very uncertain and will probably remain very uncertain for a considerable length of time. The models that are being used to try and model this are highly complex-you get a very wide range of results-and I am not sure, or we are certainly not convinced, that you get a stability of results that allow you reliably to bring this into regulation. I think you have to separate what is appropriate before regulation and how that is used to inform policy. We agree wholeheartedly with the Nuffield bioethics study that the best way to regulate indirect land use change is to regulate direct land use change. Don’t try to solve this in the biofuels space; try and solve this holistically. It is a challenge, admittedly, but you can point to examples of Brazil’s agro-zoning regulation that forbids cultivation of sugar cane in the Amazon and the Amazon basin as an example of that.

I think we would accept there is a need for a solution in the biofuels space. Again, I agree absolutely with David that cereal crops that have produced high protein coproducts have far lower indirect land use change risks than other biofuels, most notably first generation biodiesel from vegetable oil. You don’t need to go anywhere near a partial or a general economic evaluation model to see that the global supply base of vegetable oil is 120 million tonnes per annum, whereas the global supply base of cereals and sugars has been 3.3 billion tonnes. On top of that, you have the potential to grow full cellulosic feedstocks.

I think the most pragmatic way is to place some kind of cap on those feedstocks that have high indirect land use change risks. Incidentally, the US has done that in the RFS-the Renewable Fuels Standard-and has placed a cap of 1 billion gallons on biomass space biodiesel, soy biodiesel. In conjunction with that, you bring in more incentives to drive the development and deployment of advanced biofuels. If I compare Europe with the US, Europe in terms of biofuels sustainability criteria has far more stringent criteria than the US, but where the RED falls down is in its support for advanced biofuels and driving the biofuels agenda forward. I think that sort of consideration needs to be played into this debate.

Q73 Sir Robert Smith: I think there is a relatively big question on whether you could go beyond 10% sustainably of biofuels and transport. Do you think you can get beyond 10% and do you think there are grounds for trying to on energy security?

Dr Tomkinson: I think if you look at the growing volume of first generation biofuels, now coupled with the sustainability criteria, there is enough potential that we can get an awful long way there. I think the missing bit of the jigsaw is, exactly as James has pointed out, that when we analyse this point, we analyse it from a first-generation point of view. We have thought and hoped that by 2020 we would have quite a bit of advanced biofuel in the mix. Therefore, if we are going to look realistically at it being an amalgam of first and second generation, there is absolutely no reason why we can’t hit the 10%, but we do have this quite obvious hiatus at the moment that James has enunciated, in that we have no policy for advanced biofuels. How are we going to bring demand? To me this is the ultimate question. I am quite happy and convinced that the sustainability criteria in place will only get more robust.

The ILUC question you touched on earlier is very, very complicated, and I don’t think I need to say any more given what colleagues have already said, but we have this missing piece in the policy at the moment that says, "Where do we go from here? How do we bring in the more sustainable biofuels that use residues and wastes?". All the projects we are working with at the moment are struggling hugely because there is no support. I don’t necessarily mean financial support; I am talking about policy support. The risk is just too great. That is, I think, the largest problem I have when I gaze forward and look at the 2020, 2030 and 2050 pictures. We tend to model it on where we are now, and extrapolate that forward, and you see the rough edges develop. Well, rarely is it like this. We need a far smoother evolution and the missing piece at the moment is the advanced biofuels policy-both the requirements and the mechanism as to how we are going to do this.

Do we reward people for saving carbon? Surely one of the logical ways forward-and this might be a little bit like saying, "Start again", but I am not suggesting that at all-is to start to link rewards to savings. Instead of looking at this from a technology perspective, why can’t we look at actually basing the rewards that we see from biofuel and bioenergy on the carbon savings that we make? That would automatically start to look and push the more sustainable fuels and the more sustainable feedstocks, because the producer is going to get rewarded more, as they are using a more efficient process. It chimes very well with what David is saying now about looking about high efficiency processes. Surely that is where we have to be thinking in the future, and it will only drive the greater production of more sustainable, more efficient systems.

David Knibbs: A couple of thoughts from me: it would be great to be talking about bigger targets in some respects. We are struggling here in the UK with not having a target beyond 2014 at the moment, and that is probably the single biggest issue. I am trying to raise-hopefully concluding raising-£200 million this year so I can build our biorefinery in Grimsby and employ 100 people and 750 construction jobs, and it is a challenge in this environment at the moment because we don’t have that target that goes out beyond 2014. Energy security for me has become the sort of forgotten man in the policy debate here a little bit. If you go and talk to anybody in America or Brazil or even Sweden, who have stated they want energy independence, energy security is a much bigger issue. I think it would be great to have the debate, but I am probably in a camp that says, "Can we have 2014 sorted first, please?"

A lot of the debate about what in the UK is possible needs to go back to productivity, and I have not heard enough of the debate talking about, "How do we get more out of every hectare of land?" rather than just additional land. I hear a lot about, "Let’s not plant additional land". A lot of the farmers I talk to produce to demand, and they would say, "Do you know what, wheat demand has not been growing here in the UK very much at all. I haven’t really striven as hard as I might to produce for that marketplace. On rape I have; I have doubled my output of rape during the course of the last 20 years because the market wanted rape". So part of the debate about what we can produce here in the UK, and how we can bolster our energy security, is re–engaging farmers on productivity, and whether you can produce more from each hectare of land.

There are some great reports-Sylvester-Bradley did one for John Beddington-talking about the capability to double yield of UK wheat and oilseed rape, and I think that will help with the energy security debate as we focus not on additional land, but the same land; I think that is part of where the answer lies.

James Primrose: I agree with David that the pyramid of needs going beyond 2014 is the first step. As I indicated before, the UK has previously taken a lead in thought-leadership, certainly within Europe, in terms of biofuels policy development and indeed in technology development. We now have an operating biobutanol demonstration plant up in Hull. There are the activities of INEOS. Our ethanol plant, Vivergo, where we have a joint venture with Associated British Foods and DuPont, is about to start operation later this year. That is 70 direct jobs, and maybe up to 1,000 indirect jobs during the construction phase of that project. After the Olympics, it was the second biggest construction project in the UK.

So there is a tremendous opportunity for wealth generation here in the UK where we can leverage our knowledge, our resources. The danger is that, through this process of indecision, the UK loses its position to influence the policy debate globally going forward, and I think that will be a shame because the UK has powerfully contributed to that debate in the past, and I think we also fail to leverage our resources and the knowledge base that we have in this country.

Q74 Chair: In the light of what you are saying, would it be better here if it was DECC who lead on these issues rather than the Department for Transport?

Dr Tomkinson: That is a good question. With hindsight you would probably say yes, that it would make more sense to have one Department with the three main pillars; it could basically pull horizontal policy levers to optimise each route. From that perspective I think yes, that would be quite a no-brainer, wouldn’t it? Let’s put all the responsibility of the RED into one Department. If you analyse that a little more and you think, well, if we are going to take those biofuels away from the DfT, the DfT are going to be left with the basic transport policy. So it has a transport fuel policy with no biofuels. What do we do with the FQD? Does the FQD go with it? I think intuitively you would say yes to that question: "Yes, of course. You have DECC responsible for the RED, yet the biofuels sits over here in the DfT. It would make sense to bring it across". But when you actually analyse the detail of that, it is not so simple. I am not too certain that if we did it we would end up with a better situation. Perhaps what we need is more formal cross–departmental mechanisms-not just discussions but mechanisms with teeth in place, where we can ensure that the policies get driven forward. Both Departments tend to have very good reasons for acting as they do and I do not think, they stand there for the sake of it and just block things. They do try their best to move these things forward, but maybe the cross-departmental group would be a better facilitation of that than it would be simply to move it across to DECC. At face value, it might seem to be a sensible thing to do. The devil could be in the detail.

Dr Clarke: To follow on from that, from the perspective of ETI, we work with most of these Departments in one form or another. When you look at this question around bioenergy, not just biofuels but bioenergy for the future, the big issues are how you elect to use bioenergy full stop across the energy system, which you could probably argue is a DECC question in the context of a future UK energy system design for the long term.

The other critical piece, which was alluded to in some of the previous comments, is where is the UK going to generate wealth out of this? There is a piece about the fundamentals of the transport network and the power network and keeping those moving in a low carbon world, but from a science and technology point of view I think it is critical to realise the extent of the R and D capacity in the UK to address these fuel issues and the technology that you need to develop and manufacture and process these kinds of fuels. There is a huge strength across the UK today, not just in the big companies but in organisations like CPI-the Centre for Process Innovation up on Teesside-and then in some of the bigger groups like Johnson Matthey in the catalyst world and Doosan Babcock in the power world, in handling these kinds of materials, and Syngenta in their labs. The UK has a very strong R and D capacity.

You could argue, "Do not just get hooked up on the fuel policy piece; it is how we are going to generate the greater wealth and lock some of the R and D capacity here in the UK", because that is the real long-term technical and financial value as well. In that sense, you would say, "Worry about BIS as well. Do not just get hooked up on DfT and DECC". That was not meant as a disrespectful comment.

James Primrose: To that list I think I would also add DEFRA, obviously, and also the Foreign Office because of the trade implications.

Dr Clarke: Hence the comment about a cross-departmental approach being absolutely critical.

James Primrose: Absolutely.

Q75 Albert Owen: Could I just direct some questions at BP? You have touched on most of it. Again Mr Knibbs said that what drives many other countries is energy security. Is that BP’s main driver in biofuels in Britain?

James Primrose: It is fundamentally both. It is energy security and indeed climate change, and when we started our journey on biofuels-this is going back to 2003-we were looking at our fuel strategy over the next 20 to 30 years and the challenges that we saw in supplying sustainable mobility solutions. What we saw there was a paradigm shift in terms of policy development in the transport space. Up until that point, the primary policy driver had been air quality, and this had all been about reducing regulated emissions, tailpipe emissions, NOx, SOx and so on, and that had been the policy driver that had brought us to the stage of sulphur-free fuels. We saw effectively that policy driver playing itself out, particularly in OECD countries. What we saw going forwards was a paradigm shift of climate change and energy security now coming in and influencing and driving policy in the space going forward. Clearly, they play out differently country by country, but they play a role in almost every policy construct.

In terms of the lenses that we have used to select the biofuel investment choices that we have, we have four lenses. Firstly, they have to be low carbon. They have to be low cost. The technologies that we are investing in cannot be forever dependent on regulatory support. They have to be, either now or in the foreseeable future, competitive versus conventional fuels. They have to be sustainable and they have to be scalable. By that, I mean they have to be of sufficient materiality to certainly be an interesting investment opportunity for a company the size of BP, but also in terms of trying to address the challenges that we see in the transport sector, in terms of climate change and in terms of energy security, you are looking for scalable solutions. There are some interesting niche opportunities that may well be very valuable from a commercial sense and valuable from an environmental sense but they do not really tick the need, as it were.

Q76 Albert Owen: One final point. I saw you nodding your head in agreement when colleagues mentioned that the barrier to the industry developing in the UK is a lack of a coherent policy. Does that inhibit the advanced biofuels you are involved in? Do you see the lack of a coherent policy as the main barrier?

James Primrose: If you are talking specifically to the UK, I think the lack of targets beyond 2014, absolutely. Also, for a broader point in Europe, I repeat my point about a lack of tangible support for driving advanced biofuels. Again, I would contrast what we are doing in the US, where we are in the process of constructing what will be one of the first cellulosic ethanol plants in the US. The first one we are looking at will be in Highlands in Florida. We now have 1,500 acres of energy grass currently under cultivation and we are in the process of bulking those out.

Albert Owen: A clear policy would put the UK back on track?

James Primrose: Yes, absolutely.

Q77 Ian Lavery: With regards to Vireol, they stated that ethanol consumption is expected to increase to a minimum of 23 billion litres by 2020 and grow incrementally over the next decade. Is the demand for bioethanol being driven purely by the EU policies?

David Knibbs: To an extent, the answer to that has to be yes because, when we had a directive in 2003, without the mandate there-I think I said it earlier-we really did not get scale adoption of biofuel across Europe, and some member states did not do anything at all. The UK was not one of those. The UK adopted the RTFO, but it put in a 5% target, not a 5.75% target that was in place at the time. I think there has been an explicit needle for some sort of mandate, and therefore our business is driven by that mandate. Even in the most developed ethanol markets in the world, and I am talking about the US and Brazil here, you still have mandates and minimum inclusion levels to give some stability to the marketplace, but in those marketplaces they are still growing up. I think that would be the fairest thing to say. There were tax incentives in the US and that has now been withdrawn. There are similar things in Brazil. Over time, and James has just said it, we recognise the need to be competitive and to be involved.

I think the one thing I would say is that we talk a lot about developing low carbon fuels, and the fuels that we are competing against are inherently not low carbon. They are fossil fuels; they are not low carbon. I am not entirely sure that that price effect, if you like, is fed into the business model. Do we truly value the carbon? If you were just doing it on a free market basis, you have to compare the extra benefit you are getting from a biofuel to that fossil fuel that it is replacing, and that probably equates to some sort of carbon price. I think we were talking earlier about £200 or £300 a tonne. If that was factored in, you would find it would be much more competitive.

Q78 Ian Lavery: The wheat that you would normally use, obviously it is thousands of tonnes, would normally have been exported to the EU. Now it will not be exported to the EU, where will the EU get that wheat from?

David Knibbs: I have a couple of thoughts on it. I go back to the point I said earlier. Demand for wheat has not been growing very much and farmers are great at producing to the marketplace, so the idea that farmers will not respond to additional demand in their markets, I do not see, and we do believe very strongly that farmers will expand their crop to continue to export to Europe as well as to meet the needs of the likes of Vivergo and Vireol and Ensus, which are the three big biorefineries. Farmers are not necessarily going to plant more land to do that. They are going to focus on yield and productivity, and there are countless statistics that show wheat has grown over the course of the last 20 or 30 years by expanding its yield, not by expanding the amount of land it is grown on. I think fundamentally we will see farmers produce more crops.

Interestingly, that product that is going into Europe at the moment is going to countries like Belgium and Spain and is being turned into ethanol in those countries by indigenous producers there, so it is quite ironic, given that we have one of the most competitive feedstocks, our yields here in the UK are higher than anywhere else in Europe, so we are really good at producing wheat. One of the things that made us want to put our biorefinery where it is is because we are so good and can be so cost-competitive compared to other European producers, so it will still be going into bioenergy.

Dr Tomkinson: Can I just follow up on two points? The first is the yield increase. We were debating this back in the office just today, and I had a ring around to check and found that one of the bioethanol producers for sugar beet have actually reduced their land by 60,000 hectares, yet still provides the same amount of sugar. It is simply nothing but a yield increase. David is right, the demand on wheat is nowhere near as great as you think. When wheat spiked last year, we had record wheat acreages across the country. When the price came down, so the amount of wheat grown came down. It is elastic. There is an elastic mechanism in there.

The other point I want to make is regarding the alternative uses. The type of wheat that is used in an ethanol process is typically feed wheat; it is animal wheat. What the farmer actually wants from this is the protein. The ethanol process removes a portion of that wheat grain that causes a lot of digestive problems. You have probably heard about ruminants belching methane. They tend to do this a lot from the carbohydrate portion. The ethanol process takes out that carbohydrate and gives a far richer protein meal that can then go for ruminant feed, so it sounds like you are getting something for nothing, but in truth because you are taking the process whereby you are extracting a portion of that grain to provide a fuel that otherwise-I will not say "did not have a use"; that would be crass, but the real use of the feed is in the protein level. It is quite important that we understand this, and David touched on this earlier in respect to indirect land use change. If one modelled this, you could probably get a positive indirect land use change out of it.

David Knibbs: Many have modelled it, and it does-

Dr Tomkinson: You are going to knock soy. Soy meal is the predominant material that we use for protein meal for cattle, and if we now produce this from wheat that we also get ethanol from that did not have an industrial use beforehand, whereas the protein goes into building protein in animals, we are now displacing soy from South America by generating our own protein. It is very intertwined. It is not easy, this. It is not an easy message, but as I said right at the very start, we are finding out these processes and these answers by doing. If we sat back and simply hypothesised, we would get to many different outcomes and we would not know what to do. We would be blinded by the data. This is one of the problems we have now with biofuels. We really need to act, because we have a lot of data. I do not think any of us have an issue regarding indirect land use change. We have questions about how one would regulate it, improve it and police it. The key message is, "Please decide. Whatever you are going to do, please decide quickly, because the catharsis we have at the moment is far more disastrous than the consequence of any of these factors".

As I just explained to you, many benefits can come out of this which we are not going to know until we actually get there and we do it.

Dr Clarke: I think that is absolutely right. We need to carry out the experiments, if you want to call it that, and test it, because it is interesting that I do not think many people would have predicted that soy effect.

Dr Tomkinson: The DDGS one, absolutely.

Dr Clarke: That is now being seen as a piece of genuine evidence. The question was asked earlier, what are we seeing out of our projects at |ETI at the moment? Just returning to that point about carbon prices, I have heard twice now this morning prices of £200 to £300 per tonne being bandied around. Everything we are seeing from our projects suggests UK-sourced biomass with CCS running through power plants to make that viable requires a carbon price of around £70 per tonne, which clearly is a much more tractable challenge, frankly, than the order of £200 to £300, where it is difficult to see people investing at those levels.

Mr Yeo: All right, thank you very much.