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Lord Palmer: My Lords, I have put my name to the amendment because I believe that we have the opportunity to make a major step forward in achieving our national aims of cutting CO2, improving local air quality, increasing the sources of supply of road fuels and boosting the productivity of our farming sector at an affordable cost. I remind your Lordships that I am the unpaid president of the British Association for Bio Fuels and Oils, more commonly known as BABFO. I know how disappointed the noble Lord, Lord MacGregor, is not to be able to speak to the amendment.

The United Kingdom is moving towards a position of net imports of road fuels. World prices are also rising. Brent crude has been close to 30 dollars per barrel for some time. Political uncertainty in areas where we have to buy oil makes it sensible to build a domestic industry from our own sustainable resources. I cannot think how many times in this Chamber I have mentioned that North Sea oil will not last for ever.

In today's climate with world terrorism, a degree of self-sufficiency must be welcome. We still import 18 per cent of our petrol products. That figure is due to rise by 2 per cent this year.

As the noble Lord, Lord Carter, mentioned in Grand Committee, at present about half a million hectares of land lie idle under set aside—a scandalous waste of a natural resource. A similar area of land has been arable and could be brought back into cultivation for fuel. Such a move would be a major national gain in productivity, as the agricultural overhead costs relating to that land are effectively already being met by existing businesses. Such a productivity gain should be attractive to the Chancellor.

The Treasury has already provided a 20p per litre rebate for biodiesel and the same is promised for bioethanol by 2005. However, that is simply not enough to provide the kick-start to the industry that we need as biofuels cost twice as much as fossil fuels before VAT and duty.

I find that one of the most depressing things is how, once again, this country is being left behind by our European partners. Indeed, the noble Lord, Lord Ezra, mentioned what is happening in Brazil. Other countries are far and away advanced in technology, in usage and with a more relaxed tax regime than we are in this country.

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One of the reasons I feel so strongly about this is, as a farmer in Scotland, I discovered by chance that my oilseed rape was being exported to Austria and Germany and made into fuel. If they can do it, why cannot we?

Everybody I meet is lost as to why the Government will not embrace this with open arms; every countryside body supports it; every farming body supports it; every environmental body supports it; and all the farming press support it. Only last week, two well respected magazines mentioned this very amendment. One even had a half-page form for farmers to fill out and send to their MP.

All this leads one to believe that biofuels should no longer be left in the wilderness and just to confirm that, on 11 March the other place debated biofuels. It is one of the most interesting and informative debates I have ever read in the other place. I wish I had time to quote all 36 columns from Hansard. Every speaker, from all sides of the House, argued the case for biofuels in a most constructive manner. All speakers, without exception, were pro-biofuels. Indeed, the amendment we moved in Committee was even mentioned.

In the words of the honourable lady, Mrs Spelman,

    "no one has dissented on the matter under discussion. This is quite extraordinary".—[Official Report, Commons, 11/3/04; col. 1741.]

Indeed it is and I so wonder why. Yet it was sad to read at col. 1746 that the Minister said that the "case was persuasive" and yet the Government felt unable to support the amendment.

The amendment would ensure that all the benefits I have described would accrue to the nation as a matter of certainty. I commend it to the House and hope that the noble Lord, Lord Whitty, will accept it. After all the years of fighting for this cause, we are so nearly there.

I leave your Lordships with one final but perhaps vital thought. A tonne of fossil fuel not burned today is available for future use, but every tonne of biofuel not produced today is lost for ever.

Lord Dixon-Smith: My Lords, I hesitate to intervene in the debate not because I have any quarrel with the principle being enunciated but because I have something to say about the effectiveness of biofuels. There is no doubt that from an agricultural point of view the introduction of biofuels—be they bioethanol from wheat or sugar beet in this country or biodiesel from oilseed rape—is highly desirable. However, we should not assume that it will solve the nation's energy problems and that aspect concerns me.

I will not bore the House with all the arithmetic, but let us put the problem in perspective. If all the land that is set aside in this country were used for the production of biodiesel, it would produce only 3 per cent of our annual consumption of diesel oil. That is all. If all the land in the country were put into the production of biodiesel, we would still have the most enormous deficit in fuel.

That is not to say that such a contribution is not worth making. To the extent that biodiesel is carbon neutral, it is better than pure consumption of mineral hydrocarbon fuel,

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but we have a huge problem. The difficulty is that plants are inefficient converters of solar energy. If, for instance, one put the same area of land into photoelectrics—I know that the present economics make it impossible—we would produce 10 or 15 times as much energy. We need to think carefully about what we are doing when we are in the business of green energy.

I do not oppose the policy—it is completely supportable—but we should realise that it can make only a marginal contribution to our national energy problems. I speak in order to make apparent the scale of those problems. They will not be solved by any easy measures and it is important to realise that the scale of the difficulties we face nationally and globally are far more severe than anything most people have begun to think about.

6.45 p.m.

Baroness Carnegy of Lour: My Lords, my noble friend clearly believes that the people who advocate biofuels are over-egging the argument. Should all the set-aside land in the country be turned to that crop, and should we get 3 per cent of our energy from it, it would be wonderful because all that land is useless. In fact, it is a blot on the landscape and it depresses everyone.

As the Minister knows, there is a great problem for farmers: they do not know in what direction they should go because the problems of the CAP are by no means solved. Farmers throughout the country are trying to decide how to react and to respond and it is extremely difficult to know what to do.

From the agricultural point of view alone, to be able to produce a small amount of energy from crops grown for that purpose would be a great help. It would be an objective and eventually help us move away from our false position on funding. Doubtless, that funding will diminish in time if the EU can persuade its members thus. Therefore, the Minister should raise his head a little more when he goes sneaking into the DTI to be briefed on the Bill. It is not merely a question of how much energy can be produced.

I want to counterbalance what was said by my noble friend Lord Dixon-Smith. He knows all about farming and will appreciate my comments. However, he was right to point out that it is not a huge part of the whole, but it is an important element and we are being extremely sleepy about it. I speak as someone who lives in an area where a great deal of rape is going to Europe to be processed in the way described by the noble Lord, Lord Palmer. It is extremely depressing.

Lord Tombs: My Lords, I support the amendment partly on its own merits and partly on broader grounds to which I shall turn in a moment.

I would not write it off on the grounds of its limited contribution, as did the noble Lord, Lord Dixon-Smith. I believe that the contribution available from that amount of land from photovoltaic sources is far less accessible than what is proposed in the amendment. Therefore, I think it is worth doing.

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The broader aspect I wanted to tackle is that so far what is described as the Government's energy policy is really an electricity policy. It involves sources that substitute for conventional means of generating electricity. Electricity is a big polluter but it is not the biggest. The biggest polluters are transport and gas, to which no attention has been given. This is at least a toe in the door towards looking more broadly at other forms of energy which pollute. I commend that broader point to the Government's consideration. I would like to believe that they are thinking more broadly than the easy route that they have so far followed. I support the amendment.

Lord Carter: My Lords, in speaking to support this amendment I should also declare an interest as the unpaid vice-chairman of the British Association for Bio Fuels and Oils, or BABFO.

I will come clean. I phoned the Public Bill Office on Friday afternoon to add my name to the amendment to find out that I was too late to do so. Even former Chief Whips get the procedure wrong occasionally.

I will deal quickly with the points raised by the noble Lord, Lord Dixon-Smith. Nobody is suggesting that this is the answer to our energy problems. I wish to make two simple points. First, it would be useful if we could use land that is currently in set-aside. I will return to that point. Secondly, there is a proposal that all London taxis should run on biofuels. That would make a significant reduction to the rate of pollution in London.

I moved this amendment in Grand Committee. As we have heard from the noble Lords, Lord Ezra and Lord Palmer, the amendment refines the arguments that were expressed then, so there is no need to repeat them at length. There is a very strong case for biofuels on environmental grounds, as they contribute to the reduction of CO2 emissions. Recent figures show that emissions in the field of road transport are increasing. That is the one area of activity where they are doing so. On economic grounds, it is very efficient. We are quickly meeting our environmental objectives. It provides a viable agricultural alternative to the rural economy.

I will quote from the evidence that was given to the Environment and Agriculture Sub-Committee—EU Sub-Committee D—on which I sit. The committee is currently investigating climate change. We heard evidence from Sir David King, Chief Scientific Advisor to the Government. He said that we should support all sorts of technologies that will lead to reductions in carbon dioxide emissions. I said that the technology that he mentioned was for the long run, but a simple technology—the use of biofuels—is immediately available. He then said:

    "I do think, once again, that we need this broad menu approach. Biofuels across Europe is seen to be a big step forward in this way. We do have to recall just the one limitation here, and this is around the question of land use. If we are moving away from farming for food production, then biofuels might be a good way to move into land use".

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I said that very large areas of land with nothing growing on them at all which are in set-aside could be used for biofuels. He came up with a marvellous quote:

    "Biofuels are considerably smarter than set-aside, yes".

As we are discussing agricultural alternatives, I hope the Minister will not use the example of the biomass of the willow coppice. This argument is now completely exploded. The mid-term review had made the future uncertain for farmers. The idea that they will put land into willow coppice and wait from seven to 15 years for a return is not in accord with reality.

Since we met in Committee, there have been a number of developments. Friends of the Earth has had a meeting with interested parties. They produced some interesting ideas on tradable and levy-exemption certificates. Two members of BABFO, Wessex Biofuels and Wessex Grain, have done some extremely sophisticated modelling on the way that these might work. They point to the existing scheme in the electricity industry—renewable obligations certificates or ROCs. They have devised a simple mechanism that could be used.

The feedback from those involved in informal consultation with the departments involved in biofuels—Defra, the Treasury, The Department for Transport and the Regions and the DTI—suggests that the current reluctance to commit to an obligation centres around the belief that an operable mechanism is not yet available, and that any commitment would prejudice the subsequent setting of UK biofuels targets.

A simple obligation mechanism along the lines already operated in the electricity industry could be readily established and would allow a flexible and efficient incentive to future biofuels production and use across a range of future targets.

While mandates and obligations are often assumed to have a similar application, they vary in one significant area. Where mandate requires a set action, effectively with no exception, obligation allows for non-compliance, but at a price. Although mandatory inclusion of biofuels would be superficially attractive to the Government as it would not be state funded, those mandated would have no choice but to obtain supply and pass on the cost. There is no clear incentive to do this efficiently, and no control over the cost, which would be passed on as "hidden taxation". In the case of obligation, the financial impact in the market is limited to the penalty on those not complying, and the proceeds passed to those who do comply as an incentive to increase supply. An extremely sophisticated financial model has been produced which could be made available to officials.

There was a debate in the House of Commons in March where this was supported by all parties, and there was also an Early Day Motion which has had a substantial number of signatures.

I am sure that my noble friend the Minister has been briefed to say that biofuels are one of a number of possibilities but we must await the outcome of a consultation. When will this consultation finish? Indeed, has it even started? The Government have known since July 2003 that targets stated by July this year are to come into effect in 2005. They have been extremely slow in getting that consultation started: I

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am not sure that it has started yet. Can my noble friend tell the House whether he would expect the results of that consultation to be available before this Bill completes its progress through the House of Commons?

I understand the Government's difficulty in going all the way to support a mandatory obligation. There is another possibility, which is to have a permissive approach. This would put the principle of an obligation into the Bill, but allow the Government to determine the timing, percentages, and so on, by regulation—what might be called a "sunrise clause". As most of this will come from fields of rape, that is particularly apposite.

I am sure that all of us who support the principle of obligation would be willing to discuss a more permissive approach in an amendment for Third Reading with the Minister and his officials. I hope that my noble friend can make some encouraging noises to that effect in his reply. We want to see a renewable transport fuel obligation in the Bill, but we are willing to discuss ways of achieving that aim which the Government would find acceptable.

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