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In answer to a Parliamentary Question I recently put to the Government, PQ 2107, the Minister of State, the noble Lord, Lord Rooker, was, to my amazement, still talking about making space for water, which is Defra shorthand for the organised flooding of our land. May I ask that Her Majesty’s Government abandon their present policy of allowing good farmland to be inundated by rising sea levels and substitute it with a policy of strengthening our flood defences against the rising water levels associated with global warming, thus not just maintaining but increasing the land available for food and fuel production?

Climate change is with us. It always has been and it always will be. The world is getting warmer, though there is legitimate reason to ask how much is due to natural solar activity and how much to man-made carbon dioxide. Is an increase of 10 per cent in CO2 levels from 300 parts per million to 330 ppm really the only cause of current warming? What is certain is that while we cannot predict the future, we can and should plan for possible alternatives; hence the importance of biofuels, whether they be first or second generation.

Professor Martin Parry, co-chairman of the Intergovernmental Panel on Climate Change, reported in the Daily Telegraph of 7 April that actions to adapt to climate change such as improved sea defences and new forms of agriculture should take priority over our efforts to reduce greenhouse gases which would take years to have any effect. Global warming for the world could mean cooling for the

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UK if the warming effects of the Gulf Stream slow, as indeed has happened before in times of global warming, which would give us a climate akin to that of the Hudson Bay. We simply do not know.

Biofuels have a legitimate role to play as alternatives to declining fossil fuels and, in the long term, to reducing atmospheric pollution and CO2 levels. In the context of this debate on the European strategy on biofuels, I ask that the United Kingdom takes a lead on developing a coherent EU policy. This House led the way in establishing the principle of a RTFO, now widely accepted within the European Union. We must do the same for land policies for our future food and indeed fuel needs.

I also ask that Her Majesty’s Government decide which department or Minister has overall responsibility for these matters. I know the noble Lord, Lord Ezra, feels very strongly about this, as he raised it at Question Time the other day. The last time I had a Question on biofuels, there was serious uncertainty about whether the Treasury, Defra, the DTI or the Department for Transport were responsible for the Answer. We need a dedicated department with overall responsibilities for these issues, as they will increasingly involve the adjustments to the UK economy, particularly our agriculture, to what could be very rapid changes to our climate. We must be prepared to adapt to what is almost certainly an unstoppable period of global warming allied to a declining supply to what has been our staple form of energy, fossil oil. That is the challenge.

Liquid biofuels have their part to play, along with other forms of sustainable energy, improved sea defences and worldwide changes to agriculture and marine husbandry. I hope the United Kingdom will lead on these important issues. We must not get left behind. I hope the Minister will give us that reassurance today.

5.32 pm

Lord Renton of Mount Harry: My Lords, it is a great pleasure to follow the noble Lord, Lord Palmer, in this debate. He was an early prophet of biofuels, and it was the fact that we were about to look into biofuels that made him eager to rejoin the EU sub-committee of which I had the pleasure of being chairman for a few years. I was also delighted that the noble Lord, Lord Sewel, who opened the debate today, was willing to succeed me as chairman of that sub-committee.

One of our problems during our inquiry was to remind ourselves all the time that we were an EU scrutiny committee. There was an obvious tendency to think about what we were doing in the UK, our problems and how we were tackling biofuels in the UK, but not enough about the EU. I shall come to that in the second half of my remarks.

It was a pleasure to be on the committee with so many people with agricultural experience; not only the noble Lord, Lord Palmer, but the noble Lord, Lord Cameron, who has already spoken, and my noble friend Lord Plumb, who is going to speak. The previous chairman of the committee was my noble friend Lord Selborne, who has also spoken already and has a great deal of agricultural knowledge. We

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brought a good deal of expertise to our subject, but the noble Lord, Lord Sewel, is right to say that our timing was interesting, at least. When we started looking at the whole question of biofuels and we had this rather gentle subtitle, “From Field to Fuel”, it was a relatively quiet matter; it was relatively shallow and calm. As others have said today, the six months since we produced our report have seen an almost hectic increase of interest in this matter, fired by the increasing certainty of scientists that climate change is a real danger and that one important way of dealing with it in the future will be to find alternative methods of producing energy that either are not dependent on coal or oil at all or have a very low carbon consequence. My noble friend Lord MacGregor said that this has taken us into some unforeseen consequences already; they were not seen when we wrote our report. This centres on the fact that, even at this stage, people look at other sources of biofuels and energy—sugar cane, palm oil, maize corn, rape seed oil and wheat—and consider how those can be used as quickly as possible.

One rather delightful result of that that I was told about the other day is that cars in Indianapolis, the home of motor racing in the United States, all have to run on ethanol rather than petrol. That means that the atmosphere is now a nice smell of corn fritters rather than petrol. That is a pleasant consequence. But the rush to create facilities to produce eco-friendly alternatives made from crops, plants and animal fats has had consequences that are clearly worrying or at best unclear. The noble Lord, Lord Palmer, mentioned how much prices have gone up. Wheat prices in the UK have increased by approximately one third from below £80 per tonne to above £100 in the course of the past eight months. In the United States, the maize corn price is at its highest for 10 years. In August, the price of a bushel of maize corn was $1.87. At the end of last week, the Chicago futures market quoted a price of $3.74—doubling in six months.

This has led to a lot of alarmist talk in the newspapers about the consequences. The Guardian and the Independent have been the leaders in that, but I was interested to see in last week’s Sunday Times a feature by Kathryn Cooper, which states:

The article goes on to quote an investor from a company called Invesco, saying that,

Such was the effect of that comment, that some of your Lordships will doubtless have noted that when Tesco produced its record profit for the past year of about £2.5 billion, one or two critics said, “Goodness, in the year ahead it is going to be even more, because food prices are going to go up and that will enable Tesco to have a higher profit margin on food”. I will

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not say horror of horrors, but I was interested that that was a reaction to the vast success of Tesco.

This is the other side of the story. I have been thinking about this debate and these worrying comments, and I am reminded of the remarks of Lord Melbourne on the subject of Catholic emancipation. He said,

There must be a great duty on us all to see that that is not the epitaph on the move into biofuels that we are talking about this afternoon. A real duty lies on the developed countries—the USA, Europe, Japan and ourselves—whose carbon emissions have created so much of the problem. We have a duty to see that the apocalyptic warnings that I have talked about are warnings only and not realised in practice.

In that context, I am delighted to see that Defra has created the National Non-Food Crops Centre in York, which is encouraging farmers—to pick up the point made by the noble Lord, Lord Palmer—to use the 1 million hectares of arable land that it considers available in the UK to grow oilseed rape and wheat that is needed to meet our RTFO obligation of 5 per cent of road transport. As noble Lords this afternoon have said, experts at that centre are also investigating the second generation of biofuels and how it must come from a wider range of biomass, straw and forestry residues, for example, than the first generation.

Finally, let us consider the position of the EU in this. The EU set a minimum of 10 per cent to come from biofuels by 2020—and then at the Council at the beginning of March proposed an overarching 20 per cent cut in greenhouse gas emissions by 2020. This led the Financial Times on 10 March to come out with a major article which started, almost in capitals, and with an exclamation mark:

For those of us on the European Scrutiny Committee, this is at the heart of the matter. There will be huge haggling in the EU as to how that 10 or 20 per cent is divided between the countries, but surely here is a leading role for the European Union to play. No nation can solve the problem of climate change and cutting greenhouse gas emissions by themselves, nor can the EU—but it can give an example. It can persuade other European countries to move in the right direction by a mixture of firmness, co-operation and wisdom and give a vital lead.

I very much hope that this is the challenge to which the EU Commission and Council will rise, as they are offering a carrot to the rest of the world by saying that in Europe we will cut emissions by 10 per cent more if others follow suit. It is in that context that the EU has to show muscle and the stick at times, too. EU action after 2020 will depend on others contributing as well.

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As worries about climate change increase, as they certainly will, the EU can in this context convince doubters of the Commission and Council of their usefulness and courage. This is not a challenge that can be avoided. The EU, in my judgment, as a coming together of 27 nations, is in the centre of the biofuels arena. That is where they have to stay—and the EU will be judged by what it achieves in this context.

5.43 pm

Lord Grantchester: My Lords, this report is to be commended for its valuable contribution to the debate on renewable energy, carbon emissions and climate change through the increasing participation of biofuels. I congratulate the committee on its inquiry. I declare an interest as a dairy farmer in Cheshire and a director of the farmers co-operative Dairy Farmers of Britain.

It is encouraging that Her Majesty's Government broadly agreed with and supported the conclusions and recommendations of the report. There is universal encouragement for sustainable renewable fuel supplies. However, we must be aware of target inflation, whereby political parties compete for the moral high ground, setting headline targets on a mound of soft aspirations. Targets must be tempered by critical and robust pathways with achievable milestones backed up by real, hard measures.

Since the report’s publication, the Government have taken forward many developments. They are to be commended on their commitment to develop reliable ways of ensuring that carbon and wider environmental aspects of biofuels are properly addressed with agreed international standards regarding calculation methodologies, reporting frameworks and sustainability. They are also to be commended for not having slowed down development on the pretext that these standards should be agreed first. However, it is vital that biofuels, especially imported ones, are fully traceable and can be demonstrated to deliver a net carbon saving to qualify for inclusion in the Renewable Transport Fuel Obligation. Biofuels serve no purpose if they do not contribute to reducing carbon emissions; for example, burning rainforest to grow palm oil for biodiesel makes no sense. Fuel produced by such activities should not obtain certificates for use in the UK.

Having recognised the Government’s achievement, I believe that they can be pressed to respond quicker and on a bigger scale; for example, they can be challenged to be bolder in the mixture of relative incentives—carrots and sticks. They must set out a clear strategy for the UK beyond 2010. They say that they are exploring the possibility that the level of the obligation could rise above 5 per cent after 2010. However, EU energy policy, through the biofuels directive of 10 January 2007, commits member states to levels of at least 10 per cent by 2020. Growing demand for biofuels will require significant expansion in production facilities. Clearly, investors need long-term security to reduce risk, spread costs and secure returns. The RTFO needs to be made for the same period as the renewable obligation for electricity to 2026. The Government must indicate quickly how they intend to implement this 10 per cent target to

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underpin investor confidence. Investment, especially in second-generation biofuels, cannot be assured.

Tax incentives could be critically reappraised to draw forward more realistic supplies. A 30p duty incentive—a combined package of fuel duty saving and buyout price—has been proposed. How near are the Government to confirming that figure? Discussions took place last summer with the Commission on the enhanced capital allowance scheme. This announcement in the budget was welcome, bringing uncertainty to an end.

The motor industry needs to be pressed to respond quicker. There has to be a buy-in to a rising percentage use of biofuels backed by manufacturers’ guarantees. It is to be noted that the motor industry was initially resistant to the introduction of lead-free petrol. The current 5 per cent limit for biofuel in conventional engines now lies well within safety tolerances and could be extended significantly. Reduced car tax incentives, reduced congestion charging and other innovative incentives could all play a part. Straight vegetable oil could be recognised as a biofuel and not classified as a fuel substitute. Her Majesty’s Revenue and Customs guidance needs clarification to remove this confusion.

With the changes to agriculture consequential on the reform of the CAP whereby farm payments are separated from production, land is currently available to meet the 5 per cent RTFO. It is incorrect to contend that the UK does not have the land availability to produce biofuels and food. In practical terms, after allowing for crop residues to be used for other purposes such as cattle feed, the net land requirement for biofuels is less than the area used to produce the current UK exportable surplus of wheat plus the area currently in set-aside. There are 560,000 hectares in set-aside. As part of the CAP, the scrapping of this anachronism with production subsidies needs to be addressed immediately.

The East of England Development Agency predicts that, based on UK current conditions, two to five farming jobs could be sustained or created for each 1,000 tonnes of biofuel production. A 100,000 tonne processing plant could therefore mean 60 jobs, plus 500 jobs in agriculture. The ability to produce renewable energy and feed the nation can only improve agriculture’s profitability and restore prosperity to the rural economy.

The report also draws comparisons between the UK and the rest of the European Union. It shows that in many areas the UK is lagging behind other countries, notably Germany, France and Scandinavia. That has primarily been through more aggressive tax policies. The Government are now addressing that competitive element, and I am confident that further strategic developments such as a mandatory reporting scheme and increasing transparency in the market, will help to put the UK at the forefront of the debate. I applaud the steps being taken, but renewable energy will remain a challenge for a long time ahead.

5.50 pm

Lord Plumb: My Lords, it is a great privilege to have served on EU Sub-Committee D over the past two years under the chairmanship of my noble friend

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Lord Renton of Mount Harry. I almost flinched when he said earlier that he had to remind some members of his committee on occasion that we were an EU committee and not just dealing with UK affairs. If I am a guilty party in that respect, I admit that it is perhaps because, having spent nearly 30 years in the European Union dealing with European affairs, I came home and found us so much a lame duck that I fought for the UK on those occasions and therefore referred perhaps more to UK affairs.

The baton has been handed over to the noble Lord, Lord Sewel. It is a pleasure to continue to serve on the committee under his chairmanship. The report refers specifically to the European Union strategy on biofuels, which forms the basis of the plan of action for dealing long term with renewable energy in the interests of reducing greenhouse gas emissions as we face climate change. The noble Lord, Lord Sewel, set it out so clearly that I need add nothing to what he said, but I have no hesitation in supporting fully the whole report, looking at it as we did in the longer term.

Since the report was written—a long time ago, as we were reminded by the noble Lord, Lord Palmer, in particular—much has happened. Targets have been set across Europe, and the European Union has declared that it has significant capacity for energy production from biomass. The European Environment Agency states that, by 2030, bioenergy could provide 15 per cent to 16 per cent—equal to 295 million tonnes of oil equivalent—of the requirements as opposed to only 4 per cent in 2003, without harming the environment. That is, of course, for all bioenergy, of which a substantial part could be feedstock for biofuels. We need, as others have stated, a clear strategy to give investor confidence to meet the mandatory 10 per cent biofuel target by 2020 and the 5.75 per cent target by 2010.

Biofuels, in terms of production from crops such as wheat, rape and sugar and all arable crops are, as we recognise, a new technology requiring a good deal of research, enabling further efficiency along the whole production chain. Changes are taking place far more rapidly than perhaps many of us realise. Plant breeding has to be targeted at improving extractable oil and starch yield. The agronomy has to be considered, and that is changing.

There are reduced inputs in various forms. In looking at processing efficiency, it is good news to hear that British Sugar is making considerable investment in a plant that will deal with a product about which we heard from my noble friend Lord MacGregor. Development is taking place. It requires new skills in marketing techniques and the exploitation of the synergy with bio-energy and food uses. Technology also has to apply to the production of biofuels from wood equivalent, which allows a much greater range of biomass to be used. Again, that requires essential long-term research, but it has an exciting future.

We have heard much of the great Brazilian experience on biofuels, which I have witnessed in that country over the past 30 years. It has shown an average efficiency gain of 4 per cent a year over the

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production chain. At what expense? We hear of the elimination of many forests, but nevertheless they have done it.

From the evidence and research we studied for the report, our conclusion is that, given sufficient support, there is no reason why the European Union and the United Kingdom cannot ultimately compete. It must be remembered that crops used in the production of biofuels are dual purpose. In wheat, one third of the crop for bio-ethanol is retained as distillers’ grains, a high quality animal feed. In oilseed rape biodiesel production, 50 per cent of the product is retained as high-protein animal feed. That can replace protein feed imports, not only to benefit the economy but to reduce carbon emissions.

An alternative is to generate further bioenergy for the United Kingdom. Biofuel co-products can be used to supply biomass for heat and power production, helping to reduce still further carbon emissions. The potential is there. The Minister said earlier that we do not want a lot of whingeing. There is no whingeing on this front; there are tremendous opportunities, and that is seen by those involved in longer-term production.

As stated, the projected area of land required to meet the targets is in the region of 900,000 hectares in the UK alone. We have an average exportable wheat surplus of over 3 million tonnes, as the noble Lord, Lord MacGregor, said, and mandatory set-aside of some 570,000 hectares of land. Those calculations take no account of the production of biodiesel from waste cooking oil or tallow, such as the 50 million litres used by Argent Energy in Motherwell, to which the noble Lord, Lord Palmer, referred.

A market is emerging in renewable energy that provides prudent carbon savings over fossil fuels, which can be supplied by sustainable agriculture. The estimates of that august body, the National Farmers’ Union, show that, in practical terms, if we remove the now outdated system of land set-aside and bring that land back into production, we can reach the target and make a real contribution on biofuels from field to fuel.

For years the European Union has been castigated for overproducing food, resulting in the control measures to which we have all been accustomed over those years, stifling potential. Now a new market is emerging in renewable energy that proves carbons savings over fossil fuel. It must not be seen as a threat to the ever-cheaper supply of raw materials that people have become used to under the common agricultural policy.

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