Renewable Transport Fuel Obligations (Amendment) Order 2011

Viscount Eccles Excerpts

Monday 5th December 2011 Grand Committee

[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.

--- Later in debate ---

[Earl Attlee]

My Lords, this has been a useful discussion on a subject that generates a wide variety of views. I will try to address some of the key points that have been raised. The number of noble Lords addressing the Committee clearly shows the importance of this order.

The noble Lord, Lord Teverson, asked me if I would agree that not one litre of biofuel should come from the United States. He tempted me but I remind the noble Lord that of course we have the 35 per cent reduction in greenhouse gas emissions test. Although I cannot meet his aspiration, the effect of the order will be very beneficial. The noble Lord, Lord Bradshaw, teased me about whether I would invest my own money in a biofuel plant. The Committee will know that I am a classic impoverished earl and I have no money. However, I am convinced that the order, as amended, will provide a good commercial and environmental incentive.

It is recognised that greater assurance of the sustainability of biofuels will help to address some of the uncertainties in this policy area. This improved auditing will simultaneously address a number of concerns about the potentially negative impact of some biofuels, while providing industry and investors with increased reassurance that the instruments to incentivise sustainable biofuels will be in place for the foreseeable future, providing the certainty needed to plan ahead. In response to the noble Lord, Lord Davies of Oldham, we are building on the work of the previous Administration, as I am sure he would accept.

Double rewards for biofuels from wastes and advanced biofuels will replace the 20p duty differential for used cooking oil, or UCO, which will expire at the end of March next year. This will mean that industry has an incentive to explore ways of delivering any of the fuels with the very best sustainability credentials, rather than incentivising it to focus on a single feedstock. This amendment will allow us to meet our EU obligations in this area and is needed to set in law the sustainability criteria required by the renewable energy directive. As an EU obligation, the same criteria will apply in all other European member states.

We recognise that the issue of ILUC is not currently addressed by the RED and are working both within Government and at a European level to ensure that proportionate and robust action is taken to address this. However, I remind noble Lords that this amendment is a continuation of our current trajectory towards increasingly sustainable biofuels. That trajectory was set out following the Gallagher review of biofuels in 2008, which highlighted the potential impact of ILUC and recommended that the rate of increase of the targeted volume of biofuels in place at the time should be reduced. It said that higher targets should only be implemented beyond 2014 if biofuels are shown to be demonstrably sustainable, including avoiding indirect land use change.

I have a number of points to cover in answer to noble Lords. Some touched on fuels other than biofuels; for example, hydrogen and the use of electricity. The Committee will forgive me if I just cover biofuels. A recurring question from many noble Lords was how industry will prove its fuels meet the new criteria. The answer is that independent verifiers will check the claims made by suppliers that recognised voluntary schemes that certify fuels as RED-compliant are in place. Suppliers will need to have the information that they supply to the scheme's administrator independently verified to the internationally recognised standard known as limited assurance. It is expected that many will provide evidence through certification from one of a number of voluntary schemes set up by private organisations and recognised by the European Commission. Verification has taken place since the RTFO was launched in 2008. The schemes involve companies such as Ernst & Young and PricewaterhouseCoopers.

[Viscount Eccles]

Does my noble friend have any information about the cost of verification? It must be enormous if it is being done properly.

[Earl Attlee]

My Lords, I would not imagine that it impacts greatly on pump prices. I will see if inspiration comes to me in due course. However, the cost is in the impact assessment.

The noble Lord, Lord Palmer, asked how we could support UK production. The RTFO seeks to increase biofuel use. We want sustainable biofuels. The RTFO allows sustainable biofuels to count. We cannot exclude biofuels because they come from outside the UK. If we did, we would face competition issues from the WTO and no doubt from the European Commission as well. Also, such anti-competitive behaviour would be against the interests of UK consumers. The key is sustainable feedstock.

[Earl Attlee]

My Lords, it is up to the supplier to convince the authorities that their fuel is sustainable.

Many noble Lords asked about advanced biofuels. A number of commercial activities are developing advanced biofuels. BP is involved in a joint venture to develop biobutanol. Double counting of waste-derived biofuels and advanced biofuels will increase the financial incentive to invest in advanced biofuels.

My noble friend Lord Eccles asked number of questions. Many of them are key to the debate, so I will go through them and I hope that the answers will cover many other noble Lords’ concerns. He asked about UK production. The UK is currently the largest single supplier to our market. Volumes from the UK have increased over the years. The market share is currently around 23 per cent. The detail is on the department’s website. The noble Viscount asked whether our 10 per cent was not all tallow, et cetera. Tallow and used cooking oil account for a significant proportion of UK feedstocks. Some fuel comes from agricultural feedstocks. Again, the detail is on the website. He asked what happens to our oilseed rape production. We do not have the figures to hand. The statistical data are on our website.

[Viscount Eccles]

How will my noble friend deal with the fact that the website is madly out of date?

[Earl Attlee]

My Lords, I will have to write to the noble Viscount on that point. I confess to my shame that I have not personally studied the website.

The noble Viscount suggested that sustainability was immeasurable. Some sustainability is relatively easy to track. That is what we are mandating today. The issue of ILUC is unresolved and we are pushing to have it addressed.

[Viscount Eccles]

Perhaps I might have one more go. One of the problems is primary forest. That is forest or other wooded land of native species where at any point in time, in or after January 2008, there has been no clearly visible indication of human activity, and where the ecological processes have not been significantly disturbed. Is my noble friend suggesting that there is anywhere, in any forest, where nobody has ever been?

[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.