Renewable Transport Fuel Obligations (Amendment) Order 2011

Baroness Worthington Excerpts

Monday 5th December 2011 Grand Committee

[Lord Palmer]

My Lords, I thank the noble Earl very much for his, dare I say, easy-to-understand introduction of this order. This subject is becoming more and more complicated, and when the original band of four—the late Lord Carter, the noble Lord, Lord Ezra, the noble Lord, Lord MacGregor, and myself—persuaded the Government to accept the original RTFO, little did we think that the waters would become so muddied, and the UK biodiesel industry would be in such limbo.

This is such a complex subject, covering three different government departments and, of course, not to be forgotten, the Treasury. The noble Lord, Lord Teverson, made the point about used cooking oil, so I shall not repeat that by saying what I intended to say. But it must not be forgotten that investment in manufacturing for UK biofuels has been well over £500 million in the past five years. I declare an interest as a grower of industrial oilseed rape, albeit that my wife is a fossil-fuel explorator.

Investors are ready and waiting to invest a further £200 million at least in the next year, and more thereafter, if they can get clarity on the pathway to reach the renewable energy directive target of 10 per cent by 2020. This is private sector money, and the industry does not, and will not, rely on government subsidies. It must not be forgotten that UK biofuels are among the most sustainable in the world and provide a vast array of jobs for United Kingdom citizens, most especially in the deprived area of the north-east of England.

The lack of clarity in policy—in particular, a dead stop in the UK’s renewable transport targets at 5 per cent by April 2014—is sending a negative signal to investors and I strongly believe that we must get a commitment beyond 2014. We know that we can supply up to 80 per cent of the 10 per cent target and it is incredibly important that these are all from home-made biofuels that are sustainable. I hope the noble Earl will take this on board. If we turn investors away, we will condemn the UK road transport sector to be the greatest carbon emitter in the country for the next 20 years. Is this really what we want? I urge the Government most strongly to confirm the 10 per cent target and the pathway to reach it before investors disappear completely and the RTFO is in utter shreds.

[Baroness Worthington]

My Lords, it is a great pleasure to speak on this subject. I also want to make a general comment about how this order was introduced. I worked for Friends of the Earth when the original Bill was being promoted in the House of Lords, and the reason that Friends of the Earth supported this Bill then was because we could see that the overriding priority was climate change and that we needed to seek renewable energy use in all forms of energy, not just electricity but heat and transport. So this was an important part of a suite of measures to address climate change.

In general, the order put forward today is very welcome. It is necessary to have sustainability criteria. I echo the noble Lord’s comments that when we started out on this track no one could anticipate the degree of complexity that would come from this order, but measures are being taken to address problems as they arise. One way to address problems more easily could be by focusing more on indigenous use, growth and production of renewable fuels in the UK, where we can control the sustainability far more clearly. I would like to see more from the Government about how we can promote UK-grown biofuels.

The great weakness in the order at the moment is, as has been mentioned, the cliff face where we have no trajectory beyond 2014. It was interesting to note that the noble Earl seemed to be presenting it as something to be proud of that we have not committed to a trajectory. That is questionable and really damages investor confidence. The obligation is phrased as a percentage of overall fossil fuels sold. This means that not only do we have no growth in the percentage but we could have a declining volume of fuels being provided from this order because vehicles are getting more efficient and we are seeing a reduction in overall fuel use in this sector, especially as we move towards electrification of vehicles.

The Government’s own modelling should show declining use of fossil fuels, which therefore means that the percentage in this order is also declining. We are not even standing still. This is a really serious issue and I would like the noble Earl to address this when he responds. All the reasons given for not committing to a trajectory are to do with the volume of fuels expected because of concerns about sustainability impacts. However, because it is a percentage, you could have the same volume but just growing in percentage terms. That does not really work and we need to see more clarity on why there is no trajectory and the damaging effect that this has on the investment community and UK business. I really want to see something from the Government to put these fears to rest at a time when we should be seeking to encourage all investment into renewable and sustainable forms of energy.

[Viscount Eccles]

My Lords, this is a very difficult subject, as the noble Lord, Lord Palmer, said. It is of interest that the department has not produced its statistics up to April 2011—although we are in December. I also have a perception that the department has come to this instrument with a certain amount of reluctance—I do not think it likes it very much. The reason why it does not like it is absolutely understandable. The information upon which the order is based is very sketchy indeed. I used to be on the Merits Committee, and I probably spoke on another order on this subject some time ago. When I was on the Merits Committee I do not remember there being five impact assessments—all done during the summer holidays, I notice. That must be close to a record.

Before getting on to the instrument itself I wanted to make two points. The first one is about a holistic approach. It does not make sense, in the context of climate change, to talk only about fuel, and not about fuel consumption or about emission control coming out of modern cars. There needs to be a much more rounded approach. The European instruments which have been put into place, no doubt agreed by ourselves in a Council of Ministers, are not at all fit for purpose. In fact, I am pretty sure that they are completely unfit for purpose. There needs to be a much more radical look at how we look at the whole picture.

My second point follows up what the noble Lord, Lord Palmer, said about UK production. I think I am right in saying that at the moment, of the biofuels that we use in this country, 90 per cent is imported and only 10 per cent is produced in the United Kingdom. Those are the Department for Transport’s own statistics. The great majority of that is produced from tallow and waste cooking oil. On Teesside—I come from the north-east and reject the description of it being “deprived”, which is not right—there is a quarter of a million tonne plant—

--- Later in debate ---

[Earl Attlee]

My Lords, the noble Viscount is asking me searching questions of great detail, and I will have to write to him.

I am just going through the questions asked by the noble Viscount. He says that we do not know where 16 per cent comes from. These are the latest published statistics for April 2010 to April 2011. He asked how we can trace biofuels and ensure that they are sustainable. Currently the RTFO has voluntary reporting in place. This reporting has enabled many suppliers to demonstrate that they can trace the production of biofuels, and that they are sustainable. This verification work has been taking place since the RTFO was introduced in 2008. It is carried out by independent, reputable companies, as I have previously mentioned.

The noble Viscount, Lord Eccles, and the noble Lord, Lord Reay, asked why the Government are supporting biofuels when doing so can push food prices up. The analysis by Her Majesty’s Government concludes that biofuels were not a particularly significant driver of the 2008 food price spike, with other factors such as the price of oil and adverse weather conditions being greater contributors. However, some biofuels will put upward pressure on prices for those agricultural commodities used in biofuel production.

My noble friend Viscount Eccles also asked what the Government are doing now to ensure that the promotion of biofuels does not result in land grabs in developing countries. The Government agree that biofuel production must be socially and environmentally sustainable and should not adversely impact on food prices and availability or on local people’s access to land and other natural resources in developing countries. The scale and complexity of this issue mean that it is most effectively addressed at the EU level. He also asked about the impact of biofuels on food availability. Under the RED, the European Commission must monitor and report every two years on the impact of biofuel policy and the increased demand for biofuel on social sustainability. This will include reporting on the availability of foodstuffs at affordable prices, particularly for people living in developing countries.

Many noble Lords have asked why there is no target after 2014. We need to await the conclusions of a number of pieces of work before we can set biofuel targets beyond 2014. The research we are waiting for is the report of the Committee on Climate Change on renewable energy, and the Government’s bioenergy review. We expect to consult on targets for 2014 to 2020 next year. There have been shifts in biofuel policy in the past. We need to ensure that policy decisions going forward are robust and stable. This is an important point for industry, as many noble Lords have pointed out during our debate.

[Baroness Worthington]

My Lords, the point I was trying to make was that this is a percentage-based target that actually translates into volumes of litres of product. The modelling for the total volume of litres of petrol to be sold suggests that that there could be a declining volume of renewable fuels. I want the Government to acknowledge that we might not be maintaining the volumes of sales but might actually be decreasing them if we stay as we are. The important factor is that if you write a target as a percentage, you have got to think about the litres of product to enable the industry to plan. Perhaps I could have an answer on that.

[Earl Attlee]

My Lords, I confess that I do not fully understand the point made by the noble Baroness, but I will undertake to discuss it with my honourable friend Mr Norman Baker, the Parliamentary Under-Secretary of State for Transport.

Many noble Lords are concerned about ethanol from the United States, and what support exists for British ethanol producers. UK farmers and biofuel producers have historically been able to demonstrate strong sustainability performance for their products, which should put them in good stead once the mandatory sustainability criteria of the RED come into effect. This should help their competitiveness. Ethanol producers in the UK have also had concerns that US imports are exploiting a tariff loophole. A European Commission draft regulation addressing the loophole was considered and agreed by the EU Customs Code Committee on 12 October, and should be published soon. The mandatory sustainability criteria will allow only sustainable biofuels to be financially rewarded in the UK.

The noble Lord, Lord Berkeley, asked about oil sands. The fuel quality directive seeks to reduce the life cycle of greenhouse gas emissions of fuels used in land-based transport. We want a methodology that is able to account for the greenhouse gas emissions of all crudes, including oil sands and oil shale, and which is based on robust and objective criteria. The evidence is that fuel derived from oil sands has a high intensity of greenhouse gas emissions. However, the same is true of a number of other crude sources, such as Nigerian and Angolan crude, with their associated flaring, and Venezuelan heavy crude oil.