Renewable Transport Fuel Obligations (Amendment) Order 2013

Baroness Worthington Excerpts

Wednesday 27th February 2013 Grand Committee

[Baroness Worthington]

My Lords, I am pleased to be here to talk to this order. I have to say, though, that it is rather a miserly order. I happen to be a great supporter of renewable energy of all forms, and we as the UK have got challenging, legally binding targets to significantly increase the amount of renewable energy we use in our energy systems. These are energy targets, not just electricity targets, which means that the 15% we have to reach applies to transport, heat and electricity. Currently we have one policy that supports renewable fuels in transport and that is the RTFO.

Currently the RTFO is asking for 5% of the fuel supply to be made up of renewable sources and the Government have frozen that level. We know that we are going to need more than 5% in order to hit our targets, yet we have a policy that is frozen in time, with no longevity or future certainty, stuck at 5%. Now we have an order in front of us that is reducing this market further—not increasing it, not providing growth for that industry, not supporting new jobs, not providing UK farmers with new opportunities for selling products—no, freezing it and reducing it.

What is going on? It is almost as if those legal obligations did not exist. Yet they do, so what are we going to do? We will have to scurry at the end to try to build an industry which is there at the moment but is at severe risk of being undermined, of jobs being lost and investors fleeing, because of this continual undermining through these miserly orders that reduce the size of the market for this industry. I am very disappointed to see this coming forward.

It has been said before that you have to think of this in terms of volumes of litres of fuel sold, not just in percentages. Overall, fuel sales in this country are going down, so the percentage is also going down. So when the Government say, “We have to reduce this to 4.7% so that there are not more biofuels being sold”, that is nonsense. Actually that 5% is less and less every time the total fuel sold in this country goes down. Can the Government please explain their logic? They are talking about reducing the size of this market, and I find it particularly objectionable that they would use so-called green credentials to do this.

Apparently, the Government are very concerned about the sustainability of these sources. Yes, that is a very valid concern, which we share. But the UK has the best standards for biofuels of any country; they are world class, yet we are providing only 12% of this market. Why is that? Because there is no certainty, there is no confidence and there is no backing from the Government. This is yet another nail in the coffin of this industry. It is truly regrettable.

The renewable heat incentive also prevents the use of liquid biofuels for the gaining of credits in that market. Are the Government seriously saying that they support this industry? Absolutely not, they are doing everything they can to shrink it and to prevent it from growing. Presumably this is because they are protecting vested interests, because I do not believe that the arguments put forward on sustainability criteria really hold water.

We have had other commentators here. My noble friend Lord Berkeley has raised issues, as has the noble Duke, the Duke of Montrose, and the noble Lord, Lord Bradshaw, has talked about the need to recycle cooking oil. I hope the Minister will come back with answers and, above all, I hope he will explain to us why the Government see fit to keep capping this industry, reducing its market share, and how they expect to generate investment, growth and jobs in the country if they carry on in this way.

[Earl Attlee]

My Lords, I thank all noble Lords who have contributed to this short debate. The noble Lord, Lord Berkeley, talked about non-road mobile machinery, particularly the railway industry and locomotives, and the emissions regulations. I would like to point out that this order deals with the carbon intensity of the fuel. His point is not actually directly relevant, although I had a very interesting discussion with the officials at the Department for Transport who are directly responsible for this issue. It is quite close but not exactly on the subject. I will write in detail to the noble Lord about where we are on the emissions regulations for railway locomotives.

[Earl Attlee]

My Lords, I should imagine that technically they are inextricably linked, but the order deals with the RTFO and carbon intensity. The noble Lord is more worried about the emissions regulations on oxides of nitrogen and particulate emissions from railway locomotives. I have to say that some railway locomotives can best be described as filthy.

The noble Lord also questioned whether the ILUC proposals will harm renewable energy investment, and the noble Baroness touched on the same point. We are keeping levels of biofuels the same due to the ongoing ILUC concerns. We are actively negotiating this issue in Europe, and when the ILUC problem is resolved, we will be able—

[Baroness Worthington]

I have heard this response before. Perhaps I can talk it through in simple terms. If the total volume of fuel sales is declining, the percentage in volume terms will also decline. Does the Minister accept that the market share in terms of the number of litres of renewable fuel that can be sold declines as fuel sales decline?

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[Earl Attlee]

Noble Lords opposite know perfectly well that a range of factors affect the demand for transport. Demand for the fuels which propel that transport will fall during a recession, but when we get back to a period of growth, demand for all forms of transport will rise, as will the demand for fuel. That is inevitable. This is not a change in government policy.

[Baroness Worthington]

Except that we have increasingly tight standards on vehicle efficiency, which is another contributing factor to the fall in overall fuel sales. Our fleet is becoming more efficient as vehicles become cleaner. The Minister says that volumes have to be kept steady because the Government are worried about the environmental impact, but what I am saying is that we want greater volume. The Minister’s logic suggests that the volume should be kept steady, but it is not remaining steady, it is declining, and as a result the environmental impacts are declining.

[Earl Attlee]

I accept the point about the improving fuel efficiency of all transport equipment, and that is desirable. I also accept that we want to increase the amount of biofuel in order to reduce CO₂ emissions. We have the same objectives. However, we also have to be careful not to do something that looks really good but gets us in a position where we are using very large amounts of biofuel while indirectly creating land use change in other parts of the world. I will come back to that in a moment.

The noble Lord, Lord Bradshaw, raised the point about used cooking oils, which now get two RTFCs. As he said, that does not equate to the 20 pence duty differential. The department recognises the importance of biodiesel made from UCO. We have committed to review the RTFO this year, but we cannot do so until we have had a full year of data on what is going on in the market. Because of the way that the market works, RTFCs can be issued quite late in the cycle. We must get the correct data.

At Question Time the noble Lord, Lord Kennedy of Southwark, raised with me a point regarding the dual obligation. A problem can arise whereby we might take a large import of ethanol and that adversely affects the used cooking oil market. I undertook to raise this issue with my right honourable friend the Secretary of State and I have done so. However, we cannot expect any changes until we have properly analysed the year’s trading.

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[Earl Attlee]

My Lords, I have spent a lot of time discussing this very issue with my officials. I will be honest: it will be necessary to make sure that the fuel is circulated in the tanks. If fuel has been in your tanks for several years, you will experience problems. However, I would expect boating magazines to write up what needs to be done. Technical advice will be available. I have to be honest and admit that this is an issue, but it is manageable.

The noble Baroness seems to be reluctant to accept my ILUC point. If we just want to look pretty and massively increase the amount of biodiesel that is produced just to look good—that is, increase the obligation level—and get our percentages right so that the graph goes straight to the desired end-state, we could change the rules on tallow and say, “Okay, all grades of tallow are waste and therefore will get double certification”. That would look great, but the only snag is that the better grades of tallow are also used for making soap. Therefore, there would be less high-grade tallow available for making soap, the people making soap would have to find something else with which to make it, and they would go for palm oil. An increased demand for palm oil would result in indirect land use change impacts. We would look wonderful—

[Baroness Worthington]

With all due respect, if there is a problem with the environmental impact of soap manufacturing, surely you should address that through regulations which directly affect soap manufacture. You cannot second-guess everything that will happen in a globally traded market in commodities.

[Earl Attlee]

My Lords, the noble Baroness has her views but the European Union takes this issue very seriously. We are trying to work out what the correct course of action is to avoid indirect land use changes. It is simply no good us increasing the demand for biofuels without having any regard to indirect land use changes in other parts of the world. I am surprised that the noble Baroness appears to be willing to ignore what is going on in the rest of the world just so that we can have good figures.

[Baroness Worthington]

I am not ignoring what goes on in the rest of the world. Clearly, criteria around the sustainability of biofuels are of the utmost importance. What I am concerned about is that the industry needs to reach its targets for 2020, which are legally binding, and the Government seem to have such disregard for that that they are not listening to its complaints. The Government do not seem to understand that the industry has had an increase in its market share up to April 2013, which is mere weeks away, but from that point on there is no future trajectory, no sign of when there will be a future trajectory, no clarity from the Government and no words of support, just order upon order that whittles away at the market. Of course the industry lacks confidence, and of course its investors are seriously concerned. What are the Government doing to address this? Are they consulting the industry? What can the Government do to reassure it?

[Earl Attlee]

My Lords, we remain very concerned that studies and impact assessments have demonstrated that some biofuels actually produce greater carbon emissions than fossil fuels when indirect land use change is factored in. The UK must in law comply with the EU renewable energy directive—RED—which contains a target for the UK to source 15% of its overall energy, and 10% of energy used in transport, from renewable sources by 2020. However, we are not prepared to move so fast that we create indirect land use change problems in the mean time. I am sorry that I have not been able to satisfy the noble Baroness. I am very disappointed; I will have to try harder in future.