Renewable Transport Fuel Obligations (Amendment) Order 2011

Lord Reay Excerpts

Monday 5th December 2011 Grand Committee

[Lord Berkeley]

My Lords, I support the Government’s intention behind the order. However, the fact that it is 20 pages long and that a number of noble Lords have made some pretty wide-ranging comments about its effectiveness indicates just how difficult the system is. Clearly the Government’s heart is in the right place but I think there is a bumpy road ahead, and maybe not just on these regulations.

In transport, we all know that the intention, and the policy, is to reduce CO₂ emissions by 80 per cent in 40 years’ time, by 2050. We are a long way from that, as many noble Lords have said. It is very easy to say, “We should do this and we should not do that”, and come up with a black-and-white approach. We need to have a more rounded approach and do everything possible because otherwise there is no chance at all of meeting those targets.

I worry about whether there is any joined-up government going on here. I read last week that the UK was the only EU member state to oppose the Commission’s plan to put a premium on CO₂ emissions from the oil sands that are produced in Canada because of the additional CO₂ produced as a result of that process. If we are trying to balance what is produced and how it is produced with the CO₂ that comes from it, surely the Commission’s plans are very fair and reasonable. We can argue about the percentage but it appears to have a pretty disastrous effect on the environment there and if it is going to produce a great deal more CO₂ as well, that should be reflected. I know that that is some way away from these regulations, but it is an example of how one can get tripped up by a policy, possibly without realising it.

The noble Lord, Lord Palmer, talked about some of the other issues to do with the change in policy. We have seen a change in policy recently on solar panels and the grants available for those. Again, it is probably fair and reasonable given the reduction in the prices that the panels are sold for, but it does not help industry invest in the right equipment for reasonable long-term production of whatever we are trying to produce. Again, several noble Lords have mentioned this in respect of the various feedstocks that we are considering today.

I recently came across a plan in Cornwall, where I live, to export domestic waste in 1 metre cubed blocks to Sweden for incineration and creation of electricity. At the same time, there is a plan to build an incinerator in Cornwall. Whether it goes ahead or not does not really matter, but why export it to Sweden when it can be burnt locally? Apparently it is a different type of waste, but if we are going to have to have different types of processing plants for all the things listed in these regulations, and if Government, for whatever reason, are going to change their policies on subsidies or feed-in prices or whatever, it is going to be quite difficult to get companies to invest in it. I question why we want to encourage the burning of sustainable waste from fisheries. There are enough problems with overfishing at the moment and we should not encourage anybody to fish more than they need to and say, “We will make some money out of burning it”.

I fear there are going to be a lot of unintended consequences out of this order and other ones. I do not have a solution. We can try to burn less fuel by using electricity for those vehicles that can be powered electrically, if that is generated in a carbon-free manner. That cannot be done so easily for big trucks. My solution, as chairman of the Rail Freight Group, is to send much more long-distance stuff by rail. However, that is not the only answer. We must try all these different solutions. I plead with the Minister to try to end up with a policy that is as consistent across all the different modes of transport as possible and that will give the businesses that will do this work as much confidence as possible that their investment will get the rate of return that they were promised by government policy when they started down the road.

[Lord Reay]

My Lords, the two great drivers—to use modern administrative jargon, as the Minister did—of our ruinously expensive renewable energy policy, which is still subscribed to by the leadership of both the Government and the Opposition in this country, are the Climate Change Act 2008—which, it was estimated by the Government of the time, will cost more than £400 billion by 2050—and the EU renewable energy directive of 2009. The Climate Change Act deals with emission reductions; the renewable energy directive provides for increasing proportions of used energy to come from renewable sources. Of course, renewable excludes nuclear.

As was explained, under the directive the United Kingdom has a target of 15 per cent of its total energy and 10 per cent of its transport fuel to come from renewable sources by 2020. The renewable transport fuel obligation has been in place since 2008, and under it an increasing proportion of road transport fuel must take the form of biofuel. According to figures provided by the Department for Transport to the Merits Committee, this has now reached 3.1 per cent. This order amends the RTFO to bring into effect various requirements of the directive that were described by the Minister.

In the various impact assessments provided with the amendment order, there is no assessment of the costs hitherto of the obligation. I find this to be a sorry omission and would be grateful if the Minister will in due course supply the figure. As the Explanatory Memorandum makes plain, supplying biofuels is more expensive than supplying fossil fuels. As to the expected costs of the amendment order over and above the costs of the order unamended, the Explanatory Memorandum offers an estimate of £324 million for the years 2012 to 2030. However, the overarching impact assessment states that the figure falls in the range of £100 million to £800 million. In other words, the Government have very little idea of what the cost will be.

The amendment order will be popular with no one except the Greens. The Government state that of the 4,600 replies to the consultation from members of the public, the majority called for the biofuel targets to be scrapped. This is not surprising as the effect is to add to the cost to the motorist. Given that the Government have just felt the need to postpone an increase due in January on fuel duty amounting to an extra 2p a litre, they will not make their life any easier by increasing in this way the price of fuel. In the sustainability criteria impact assessment, it is assumed that the additional cost to the motorist will peak at 0.4p per litre in 2017 for diesel and 0.1p per litre for petrol. The assessment goes on to state that any further costs will be capped by the buyout price. However, this is set at 30p per litre. I wonder whether that is really the price at which the cost to the motorist will be capped. Perhaps I do not understand this and the Minister will explain how a buyout price set at that level will effectively cap the price to the motorist.