Clause 128 - Renewable transport fuel obligation
Energy Bill [Lords]
10:45 pm

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

I beg to move amendment No. 194, in

clause 128, page 101, line 19, leave out 'may' and insert 'shall'.

Mr Jonathan Sayeed (Mid Bedfordshire, Conservative)

With this it will be convenient to discuss the following:

Amendment No. 195, in

clause 128, page 101, line 21, leave out 'may' and insert 'shall'.

Amendment No. 196, in

clause 128, page 101, line 26, after 'meet', insert 'those'.

Amendment No. 197, in

clause 128, page 101, line 26, at end insert 'set under subsection (2)(b)'.

Clause 128 stand part.

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

The amendments are designed to strengthen clause 128, which introduces a renewable transport fuel obligation. The background is the EU biofuels directive 2003/30/EC, which was adopted on 8 May 2003 and which set a target of 2 per cent. of the market being accounted for by alternative fuels by 2005, and 5.75 per cent. by 2010. Climate change and security of supply are cited as key drivers. The Government must report their plan for targets to the European Union by July 2004. Whether one approves of things coming from Europe—some people do and some do not—the Government must respond to the directive. They also have to indicate how they will increase the targets for biofuel use.

Everybody is aware of the case for biofuels. It is important in terms of security of supply that we develop them as an alternative, as the last few weeks have demonstrated. Those members of the Committee with longer memories—that probably includes everybody—can remember the problems of the early 1970s that were caused by being over-reliant on one fuel. In electricity production, just as in fuel, we need a balanced energy policy that does not cause us to be over-dependent on any one source.

The clause provides that

''the Secretary of State may, by regulations, introduce a renewable transport fuel obligation.''

My amendments would change it slightly, providing that the Secretary of State ''shall'' introduce that obligation. The clause is strengthened by making the obligation a requirement rather than a possibility.

I have given the Committee the reasons why adopting such an approach is important in terms of security of supply and helping the environment. In addition, it would help farmers, who may be involved in providing the raw material. Given how things are, I am not so naive as to think that our own farmers would be the primary source. A lead time would be required, so quite a bit of the raw material could come from abroad, but takes no great leap of imagination to see an opportunity for our farmers while they continue to be paid not to produce on land.

In the age of joined-up government—I do not think we actually have it, but we were promised it and we all aspire to it—I am sure that the relevant Departments could arrange between themselves to ensure that the common agricultural policy was amended in a way that would help our farmers to benefit from the clause. I support the retention of clause 128, but think it would be strengthened by the obligation being made a requirement rather than an option.

Mr Paddy Tipping (Sherwood, Labour)

The hon. Gentleman is right to say that the clause needs to be amended. My recollection—perhaps the Minister will help us when he replies—is that the clause was inserted in the other place. The Government accepted the principle of the new clause, but our noble Friend Lord Whitty said that he would table tidying-up amendments. I agree that some work needs to be done on the clause.

I am not sure whether a change from a permissive power to a mandatory one is needed now, but we do need to make some progress. The EU's biofuel directive was published in April last year, and the Department for Transport is consulting on implementing it. It is interesting to note that that consultation has taken more than a year. The Department has to give the Commission indicative targets on how to meet the directive's requirements to by 1 July, but the consultation does not finish until 30 July. That is neither good policy making nor good management practice.

There is a strong view throughout both Houses and a partnership with industry that says that biofuels are the way forward. Carbon reductions are being made, but in the transport sector carbon emissions are increasing. It is possible to reduce emissions through better engine design, and there might be a prospect of hydrogen vehicles in future, but in the short to mid term biofuels are the only show in town. The technology is not new—it is used to a large extent in Brazil, and our partner countries in the EU, such as Germany and Spain, are developing biofuels. There is a real danger that we will be left out of the equation, so it is important that we make progress quickly.

Mr Brian White (North East Milton Keynes, Labour)

Is my hon. Friend aware that existing oil refineries could use biofuels if an agreement were reached with Customs and Excise on the amount of duty to be paid?

Mr Paddy Tipping (Sherwood, Labour)

That is correct. The Treasury has been helpful in reducing the rate of duty to 20p, but there is an argument about how much further it should be reduced. The interesting thing about the clause is that it is not dependent on duty reductions. It calls for a biofuels obligation—an idea that I first heard in a more refined version from my hon. Friend the Member for Southampton, Test. We need a biofuels escalator, because if we were to move to a 5 per cent. mix, most of the biofuel would come from Brazil. If the mandatory mix escalated from 1 to 5 to 10 per cent. over a number of years, the industry would have time to prepare. It is important that we produce biofuels in the UK using UK feed stock. The hon. Member for Tewkesbury made the point that that could help with the problems in farming and the agriculture sector.

I ask my hon. Friend the Minister when we might see more signs that the Government are considering a revised draft of the new clause. If we accept the principle of the clause, as I believe we should, some secondary legislation will be required. I have heard alarming stories about that not being introduced for two or three years, and I cannot understand why that should be. We have agreed the principle, albeit we have been very slow about it. Now is the time to make haste,

because an indigenous biofuels industry is good for the UK economy and environment. We must see the matter in a European context. I understand that the Prime Minister is battling for Britain at the moment. The Chancellor was battling for Britain earlier this week. Can we all not battle for Britain and ensure that progress is made on this important policy instrument?

Mr Andrew Stunell (Chief Whip; Hazel Grove, Liberal Democrat)

I am pleased to follow the hon. Gentleman. I support the argument that he has deployed this time, although I did not support his previous one. Unfortunately, when the Chancellor and the Prime Minister are ''battling for Britain'' in Europe, in reality that usually means that they are trying to slow things down, at which they are quite successful. I hope that if they accept the challenge thrown down by the hon. Gentleman they find a forward gear and urge their European colleagues to go further and faster on that aspect of energy policy.

I look forward to hearing what the Minister says and finding out whether he is as positive as the hon. Gentleman suggests he might be. The Bill has 180 or so clauses, yet only one deals with the quarter of carbon emissions that the transport sector puts into the atmosphere each year. That seems like far too little to deal with the problem. If the Minister insists on his Back Benchers voting like sheep to take that out, I will want to hear solid assurances from him that something will come back in its place and that the pressure for speed that has been so eloquently put forward by the hon. Gentleman is picked up on.

If we have a renewable transport fuel obligation, there will be obvious benefits for the environment and for security of supply—as the hon. Member for Tewkesbury said—and potential benefits for our domestic agricultural sector. I just put in a word of caution. I do not think that we should hold such an obligation out as something that will work exceptionally well for UK farmers. The truth is that, if a substantial requirement for a renewables obligation is introduced, most biomass will come from overseas sources, largely from tropical and subtropical countries where costs are comparatively low and production can be rapid.

Indeed, the best way of getting such fuel to this country is not to bring the biomass over for it to be processed, but for the biomass to be processed in the producing country and the resulting fuel imported to this country directly for use. One of the paradoxes is that such an obligation may not benefit our own agricultural sector, but it might be a way of promoting development and prosperity in some of the third world and developing countries.

I pick up a point made by the hon. Member for Sherwood. He said that we must make sure that we keep pace with our EU partners. Of course, in this House we sometimes regard them as partners and sometimes as competitors. We need to recognise that if we get behind the pace on the issue, the technology, the investment and, hence, the profitability and jobs that go with a biofuels industry will be based elsewhere in Europe rather than in the United Kingdom. That is another important reason to proceed rapidly on the issue.

Having an obligation such as that may fit better into the UK regulatory system than a system that relies excessively on duty rebates and fiscal measures. About those the public tend to be somewhat suspicious, detecting that—were there to be a large uptake in biofuel usage by members of the public—those fiscal rebates would almost certainly start to evaporate. So, a regulatory system based on obligations on manufacturers and suppliers is far more likely to drive forward the take-up of biofuels than is one based entirely on the fiscal route.

I believe that the principle of clause 128 is a good one. I have no difficulty in supporting the amendment proposed by the hon. Member for Tewkesbury, although I suspect that that is, in reality, a step too soon. Much more importantly, I want to hear from the Minister how he intends to implement the assurances that were given in the other place about taking the matter forward as Government policy in the shortest time possible.

Mrs Anne McIntosh (Shadow Minister, Environment & Transport; Vale of York, Conservative)

I shall not detain the Committee long. I do not wish to disappoint the hon. Member for Milton Keynes, North-East by not declaring any interests. The only interest that I declare is that I represent a deeply rural constituency in the Vale of York, where I see great potential for biofuels. I make a personal plea to the Minister to hear the arguments eloquently put by my hon. Friend the Member for Tewkesbury, which have gained a degree of support in the Committee, and keep clause 128.

In Selby, north Yorkshire, just across the border from the Vale of York, there was a plant that was proceeding apace, taking a lot of willow coppice, which grows quite quickly and has become a staple alternative crop for many cereal and arable growers. Regrettably, that plant ran into difficulties.

The Government have a commitment to renewables, under the EU directive and generally, and I believe that the Minister will see that clause 128 and amendments Nos. 194 to 197 will be helpful in that regard. I hope that the Minister will comply with the wish of the Committee, which is to ensure that clause 128 stands part of the Bill.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

I listened with interest to the hon. Lady. I visited the Arbre plant in Selby, to which she referred. She may be aware of a recent announcement that Drax power station will use some of that coppice willow in its co-firing activities. That has given the farmers in difficulties when Arbre hit its problems a way forward. We hope, of course, that the Arbre plant will start up again.

I will not, as the hon. Member for Hazel Grove suggested, ask the Committee to exclude the clause from the Bill; that would be the last thing that I would propose. My hon. Friend the Member for Sherwood has taken a very close interest in this matter over a long period and has worked with the British Association for Bio Fuels and Oils, which has been promoting biofuels. He made some important points. It is the case

that biofuels offer one of the relatively few options to save carbon in the transport sector in the short to medium term. It is important that we take up that opportunity.

My hon. Friend referred to action already taken, such as the duty reduction on biodiesel, and a similar reduction for bioethanol that is to be applied from January next year. A renewable transport fuel obligation is a serious possibility among the policy options for promoting renewable fuels in the longer term, using the renewables obligation, about which we have talked a good deal today, as the model.

The original clause, moved in the other place, sought to impose a duty on the Government to implement an obligation. There was a lot of constructive discussion and debate in the other place, and there was negotiation with BABFO and all the parties in the House. The outcome of all that was this permissive clause in the Bill, giving a power rather than a duty. That was agreed with cross-party support. I hope that the hon. Member for Tewkesbury will feel that it would be inappropriate to push his amendments to a Division. That would undermine the cross-party agreement secured on this matter in the other place.

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

I do not think that the Minister's argument should be that my amendments might go against the House of Lords. His argument should be based on why he may not proceed with the obligation.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

We need to consult industry, to weigh the merits of an obligation against the other options and to work through all sorts of practical measures that the policy would require. Who, for example, would administer that obligation? That is not clear at the moment. We also need to address EU issues such as state aid clearance and trade rules. All that needs to be worked through before we are in a position to commit the Government to introducing an obligation, as the hon. Gentleman's amendments would achieve. An obligation might be the right way forward, but I do not believe that we are yet in a position to make such a judgment.

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

Can the Minister help the Committee by giving us an approximate time scale for the consultation?

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

As my hon. Friend the Member for Sherwood said, we are currently consulting on our biofuel policy, as part of the implementation of the EU biofuels directive. We are consulting on appropriate targets for the United Kingdom for 2005 and 2010 and we are asking for views on appropriate mechanisms, including the idea of an obligation. The consultation document was launched on 26 April and the process is due to conclude at the end of July.

As my hon. Friend rightly said, some work needs to be done on the wording and some practical issues need to be covered. I intend to come forward on Report with a revised wording to deal with such problems and to achieve the intended effect of clause 128. I would have liked to introduce such wording in Committee, but hon. Members will be aware that such a form of words has appeared only in another place so there has

not been time to introduce it here. I will be tabling on Report an amended version of the measure and one that is fully in keeping with the principle of the clause. I regret that I cannot do so today.

The principle under the clause is potentially an important step forward on the path towards achieving a low carbon transport sector in the United Kingdom. We all share such a goal. I hope that the consensual approach that has been achieved so far will be maintained in Committee and the House.

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

I am grateful to the Minister for his explanation. I do not necessarily hold him entirely responsible for such action, but I would have expected such an amendment to be tabled in Committee. While discussing other clauses during the past few days, the Minister said that he would table amendments on Report. That is not out of order as such, but it would have been better if the amendments had been tabled in Committee so that we could consider them in detail and perhaps consider them further on Report. I am rather disappointed with that aspect of his response. That said, he agreed than an obligation might be a way forward and he recognised the current problems, as well as the fact that transport contributes a huge

amount of emissions. That must be tackled. The Minister said that taking action was the only way to solve the problem. However, a tax incentive could be more attractive, which could be one way of dealing with the problem.

We frequently criticise the United States for its approach to emissions. About six years ago, I visited Detroit—I think that you were on the same trip, Mr. Sayeed—when we considered how the USA was developing clean car technology. Frankly, it left us standing still. To my knowledge, there is nothing comparable in this country to what we saw then. I notice that you are seeking to bring me back to order, Mr. Sayeed. Although I am a little disappointed that the Minister has not tabled such an amendment in Committee, I am encouraged in general by his words, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 128 ordered to stand part of the Bill.

It being twenty-five minutes past Eleven o'clock, the chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Two o'clock.