Motor Fuel (Composition and Content) and the Biofuel (Labelling) (Amendment) (No. 2) Regulations 2021

Lord Rosser Excerpts

Monday 12th July 2021 Grand Committee

[Lord Rosser (Lab) [V]]

I once again thank the Minister for her explanation of the purpose and content of these regulations. As she said, to reduce greenhouse gas emissions, premium petrol in the UK is currently blended with up to 5% ethanol, known as E5 grade. These regulations require the ethanol content to be increased to up to 10%, E10 grade, with effect from 1 September this year, to meet future emissions targets. E10 petrol has been approved for sale in the UK since 2011 but no supplier has chosen to move above 5%.

The E10 petrol requirement will apply only to filling stations with an annual fuel throughput of over 1 million litres per annum. What percentage of petrol sales by litres is through filling stations with an annual fuel throughput of 1 million litres or less per annum?

The E10 requirement is that premium 95 grade petrol contains at least 5.5% ethanol all year round, but how does that help us reach blending of up to 10% in a meaningful way? What is the Government’s objective with these regulations as far as the E10 level of blending with ethanol is concerned, because 5.5% seems an inadequate increase from the current requirement?

As the Minister said, biofuel blending levels are generally driven by a separate government scheme, the renewable transport fuel obligation, with the next RTFO increases planned for 1 January next year. The Explanatory Memorandum indicates that during the period between these regulations taking effect on 1 September 2021 and the RTFO amendments in January 2022, the policy will cost the motorist around £87 million per year and decrease CO₂ savings. The Secondary Legislation Scrutiny Committee queried why the start of these regulations could not be aligned with the complementary increase in the RTFO targets from 1 January next year, or alternatively why the date of the RTFO target increase could not be changed.

The committee accepted that the Department for Transport’s response on these two points was persuasive but said it would have been even more convincing if the relative costs of the extra disruption to the industry

“were estimated for comparison with the impact on the consumer and on CO₂ savings.”

Can the Government now provide that estimate of the relative costs of the extra disruption to the industry if the existing schemes were synchronised for this changeover?

The SLSC commented that while the Explanatory Memorandum indicates a negative impact on consumers during the changeover period, the impact assessment indicates that, due to lead times, the effects of implementing the two regulations separately may not be as great as they first appear. The committee said that the reply on this point from the Department for Transport made the consequences of transition to E10 less clear, and suggested that this House might wish to ask the Minister for a clearer view of the effects of introducing the two sets of regulations three months apart. I am now asking the Minister for that clearer view.

The SLSC said that issues raised in the impact assessment, as the noble Baroness, Lady Randerson, has said, had been glossed over in the Explanatory Memorandum on the instrument—issues such as the role of E10 in propping up the UK’s struggling ethanol production sector, the comparative CO₂ savings from ethanol and other biofuels, and the long-term costs to motorists as E10 delivers lower miles per gallon.

On the UK’s ethanol production sector, capacity has regularly been seriously underutilised. Significant amounts of bioethanol supplied under the RTFO come from outside the UK. UK producers have said that if the UK does not introduce E10, it is likely that the domestic industry may not remain viable. Could the Government spell out in their response, with some specific facts and figures, the impact of E10 on the UK’s ethanol production sector?

The SLSC commented that the Explanatory Memorandum was based on the assumption that increased ethanol content by changing to E10 was the only way forward. However, the impact assessment indicates that the greenhouse gas savings from the additional ethanol are lower than the savings from other biofuels such as waste-derived biodiesel, but concludes that, provided that the RTFO target is suitably adjusted, E10 will result in longer-term reductions in greenhouse gas emissions. Could the Government explain why blending petrol with ethanol is perceived as the most effective way to reduce greenhouse gases, taking account of all the environmental considerations to which reference has been made?

The Explanatory Memorandum appears to suggest that the additional costs to motorists of the switch from E5 to E10 will be transitional, since those costs and the decrease in CO₂ savings will be only until the RTFO targets can be increased, yet the impact assessment indicates there will be significant long-term costs to consumers because E10 fuel is less efficient. The impact assessment concludes that fuel costs for petrol cars are estimated to increase by 2.3% as a result of moving from 5% to 10% ethanol content, meaning additional fuel-supply costs to consumers of E10 petrol of £701 million over 10 years because of the reduced miles per gallon. Further costs of £169 million over 10 years are estimated for consumers whose vehicles will accept only E5 petrol. Could the Government clarify what the position is? Are the additional costs to motorists transitional until RTFO targets can be increased, as per the Explanatory Memorandum, or are they long-term, as per the impact assessment?

Lastly, the SLSC concludes that the Explanatory Memorandum presents a rather sketchy view of the rationale for, and the consequences of, the proposed change to E10 petrol, and recommends that whenever the policy requires an impact assessment it should be made available alongside the published draft, which did not happen in respect of these regulations. What consideration have the Government given to this recommendation from the Secondary Legislation Scrutiny Committee?