Renewable Transport Fuel Obligations (Amendment) Order 2011

Lord Palmer Excerpts

Monday 5th December 2011 Grand Committee

This may be a piece of secondary legislation, but it is of the utmost importance. It is very difficult to see how we will meet our targets in this area; I welcome the fact that we have this order before us, but we have real challenges.

[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—

[Lord Palmer]

I am sorry; I did not mean that in any derogatory way. I know that unemployment in the north-east is a good deal higher than in other parts of the country, which is why I was urging for more investment in the north-east. I hope the noble Viscount does not take my comments in any derogatory way, because they were not intended as such.

[Viscount Eccles]

I thank the noble Lord for that, but there are some people in the north-east who are very good at making the most of the difficulties that we have in the economy. It does not do us any good to overplay our hand.

There is a very large plant, which I know. It was engineered in large part by somebody with whom I used to work, and it is extremely well engineered. The company that was going to operate it went out of business. It is now owned, and, to a certain extent—I do not know quite how much—operated by Harvest, which is one of the suppliers of biofuels. It was designed to process rapeseed oil. My information is that it is not processing any rapeseed at all. I really question the whole future of the United Kingdom’s own production from the standard feedstock in temperate climates, which is rapeseed. I do not know what the position is.

It is notable that in the instrument and the impact assessments there is hardly a mention of rapeseed, and no references are made to United Kingdom production from rapeseed. Of course, rapeseed is a food; you can buy rapeseed oil in any supermarket, and it is very good for cooking. However, so is soya bean. The three principle feedstocks for biofuels—two for diesel—are soya bean, palm oil, and of course, rapeseed.

The soya bean is responsible for 50 per cent of the world’s supplies of vegetable oil. How will you determine whether a particular lot of soya comes from a sustainable source? I should declare a past interest: an organisation I was involved with used to grow soya beans in Zambia. We grew about 40 per cent of Zambia’s vegetable oil supplies in that area of the country—it was a very big operation. I have also been a palm oil grower. As for bioethanol, I have also been a sugar cane grower. I could volunteer to be a verifier; I would know what I was looking at. I have seen all sorts of land transferred, for example, from growing coconut trees to oil palms—but what was the land before coconuts were grown on it? My goodness, it was forest until somebody thought, “We need some food”. So they cleared the land and grew coconuts. Then the coconut industry became unremunerative and the coconut trees were replaced by oil palms.

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[Earl Attlee]

My Lords, I will write in detail to the noble Lord on the issue of used cooking oil and see if I can draft a letter that will meet his concerns. At the moment I am convinced that this is a sensible policy.

[Lord Palmer]

My Lords, the point made by the noble Lord, Lord Bradshaw, emphasises what a complex issue this is, because it goes back to the Treasury. When the noble Earl writes to the noble Lord, Lord Bradshaw, perhaps he could kindly copy us all in so we can be kept abreast of the situation.

[Earl Attlee]

My Lords, it is standard procedure to write to all noble Lords who have taken part in any of these debates.

The noble Lord, Lord Reay, asked me several interesting questions. First, he asked if there were any suggestions that adding biofuel to fossil fuel reduces fuel efficiency. Yes, biofuel is less energy-dense but we are blending only low volumes. He asked about the proportion of biofuels supplied today under the RTFO that comes from crops. The latest published figures indicate that two-thirds comes from crops. He also asked about the cost to the motorist to date, which has been between £300 million and £400 million per year at current market prices. He asked whether, after consulting on a number of options, we are keeping the buyout mechanism. The answer is yes. For those who are unfamiliar with the system, the buyout mechanism is in place to provide a safety valve that will protect both industry and the consumer from spikes in the cost of supplying biofuel. It will allow obligated suppliers to buy up part or all of their obligation, rather than meeting it by redeeming the RTFCs that are issued to those supplying sustainable biofuels. The cost of buying out is 30p per litre of fuel that the supplier would otherwise have been obligated to supply.

The noble Lord also asked about the efficiency and effectiveness of biofuels, and whether there were any problems. He will recall that I recently answered an Oral Question in the Chamber about ethanol and petrol, which can cause some problems. However, they are not insurmountable.

The noble Lord, Lord Grantchester, asked me what I would say in response to industry concerns that there has been inadequate time to prepare for this and that consultation on the RTFO guidance has been very brief. We have no intention of delaying transposition and implementation. The renewable energy directive was published in 2009 and set mandatory sustainability criteria for biofuels. The implementation of the criteria should not come as a surprise to industry. Those companies that have taken the opportunity to report on a voluntary basis and to establish a sustainable biofuel supply chain will be well placed to meet the requirements of an amended RTFO.