Renewable Transport Fuel Obligations (Amendment) Order 2011

Lord Grantchester Excerpts

Monday 5th December 2011 Grand Committee

[Lord Bradshaw]

I will concentrate my remarks on the used cooking oil industry, which gets a rather raw deal from the Government under these proposals. We have to remember that the business is sustainable, which even my noble friend Lord Reay would admit. Basically, it uses waste products from the cooking industry to make biodiesel. It is a new business—it only really began in about 2007—so is not an industry with any great roots. It is made up mostly of SMEs—small and medium-sized enterprises—and is not dominated by big corporations. There is a real threat that the growth of the industry will be not only stopped but reversed by the passage of this legislation.

Used cooking oil is actually very green compared with fossil fuels—and with many grown crops, particularly if we are not certain of their source. One of the biggest problems in judging whether a crop has been grown in a sustainable way is that the certificates of origin provided by many suppliers are highly suspect. I ask noble Lords to reflect on the last time they bought a piece of teak garden furniture with a label on it saying, “Sourced from sustainable forests”. I would say, “How do you know what went on in Indonesia?”—and I am sure that the suppliers do not, either.

We are talking about recycling a waste product, and the industry works on very tight margins. It is not an industry that has any room for manoeuvre. The Minister replied to a Written Question of mine about the price of a road transport fuel obligation certificate. I believe that the prices he quoted in his Answer were from a few big dealers, whereas most of the trading takes place between small industries, which we do not know anything about. However, the figures that he quoted, which indicated a doubling of the price of certificates, should be contrasted with the fact that on some occasions the certificates are worth nothing. Twice nothing is nothing, so doubling the price has not had a great effect.

This is a retrograde piece of legislation in respect of the treatment of the used cooking oil industry. I say to my noble friend that we are going to risk more unemployment and less expansion of the industry, which has the capability of expanding because there is still plenty of used cooking oil to collect and refine. I have one last question for him and I would be very interested to hear his answer. In view of the withdrawal of the tax differential and the uncertainty over the value of the tradable certificates, would he put his own money into this industry?

[Lord Grantchester]

I recognise the importance of this order for transport and meeting our climate change obligations. Its sustainability provisions are entirely to be welcomed. However, the lengthening of the timescale from 2011 to 2014 is a further example of the Government dissipating the momentum of the last Labour Government. This is impacting further on the confidence of the investor market, as has been identified across the renewable industry in its relationship with this Government.

I have one specific query. I understand that elements of the sustainability criteria are currently being consulted on. The consultation is set to end on 15 December, the date the order becomes operable. I understand that the UK Petroleum Industry Association has lobbied on the penalty of 30p a litre for non-compliance, stating that there is not sufficient time for its supply chains to meet the standards. The association asks that any fines should not apply before 1 April 2012, to allow supply chain purchases and contracts to catch up with the certification process for the biofuel products. The UKPIA states that it does not know whether biofuel products already contracted will meet the certification process and standards. This seems an understandable request. Can the Minister clarify his department’s position?

[Lord Davies of Oldham]

My Lords, this has been a fascinating debate. The Minister has quite enough on his plate in terms of issues to tackle without me adding a great deal to his burden. I have some sympathy for him; he is well aware of the fact that the Merits Committee of the House expressed some criticism of the amendment order. Clearly there is also, among those in the affected industries who are directly interested in the issues, a belief that a considerable amount of backsliding by the Government is going on. This is a pretty modest measure against the background of the Chancellor's denial of environmental issues last week, and the clear indication that the Government are going to soft-pedal on planning issues, reduce subsidies to the solar panel industry and offer subsidies to some of the most polluting industries. The measure must be seen in that context. Therefore, I will give an element of reassurance to the Minister; we on this side support the measure, inadequate though it is. We hope that it will be the basis on which in due course something more constructive can be developed.

The Minister must know about the concerns of the industry. The issues raised by the order around verification and reporting are complex, and there is a danger that if people get it wrong and biofuels prove not to conform to the requirements, the industry will get into further trouble. However, we should look at how little notice the industry has from the period of consultation to the implementation of the order, which is only a week and a half from being part of the requirements.

The industry also indicated that there are areas to which it seems no consideration at all has been given. For example, the development of hydrogen fuel with regard to motor transport is not considered in relation to the order. From what we can see, the Minister's general perspective is that the Government will keep the issues under review. That is a long way off definitive policy, which is what the order is meant to represent. The industry deserves better from the Government. As the noble Lord, Lord Bradshaw, indicated with regard to the production of biodiesel, it is important that people know the parameters within which they will work. How can we expect them to invest, particularly in these very difficult times, against a very uncertain perspective?

I heard what the noble Lord, Lord Reay, said and I hope that the Minister will give some response. When 97 per cent of the world's scientists who are interested in this area regard climate change as moving apace and as a threat to the world, the concept of deindustrialisation may be emotive but we certainly have to change. Without change, we will face a catastrophic future.