The renewable transport fuel obligation is due to come into effect in April 2008, providing a significant and secure market for biofuels in the UK. In advance of that, the Government continue to support biofuels mainly through fuel duty incentives. Sales of biofuels doubled between 2005 and 2006, reaching more than 250 million litres.
Is my hon. Friend aware that there has been a reversal in price differential between biodiesel and low sulphur diesel since the renewable transport fuel obligation was announced, and that it will take an increase in production of some 400 per cent. for the industry to meet the targets for 2008? Will he talk to colleagues in the Treasury to ensure both a supply and uptake of biofuels in time to ensure that those obligations can be met in 2008?
I can of course assure my hon. Friend that I talk to colleagues in the Treasury on those matters. As he rightly implies, incentives are a matter for the Chancellor. I am keen to see that the RTFO is a success and that we also support small renewable manufacturers. To that end, we have just published a consultation document that specifically asked some questions to which my hon. Friend might like to contribute some answers, so that we can inform the way in which the RTFO is developed to ensure that it is a success for everybody.
Is the Minister aware that throughout the country there are many micro-companies producing biofuels—or trying to—which are bamboozled by the tax regime that they suffer? Sad to say, they are often treated with a heavy hand by Her Majesty's Revenue and Customs. Will he please have a much more focused dialogue with his colleagues in the Treasury to stop them undermining the good work that his Department is doing?
I assure the hon. Gentleman that we are having good discussions with the Treasury. I do not believe that people are bamboozled by the rules and I am sure that the Revenue will do everything that it can to ensure that people are unbamboozled, if necessary. I encourage the hon. Gentleman and his constituents to respond to the consultation document, as it asks some specific questions about how we can best support micro-providers. It is important that we hear first-hand from them what they look to us to do.
As a supporter of the development of sustainable biofuels, I am sure that the Minister will be as aware as I am of the "Dispatches" programme last night, which pointed out that were the RTFO to be a success, the UK could end up importing biofuels in a way that was even more damaging than the polluting fuel base that we have now. Will he take a lead role in co-ordinating some of the major research establishments in the UK, especially those involved in marine research on the possibility of deriving biofuels from micro-algae, so that we can ensure that the UK demand for biofuels is met by UK sustainable supply?
The sustainability of the biomass used to produce renewable fuels is key to the success of the RTFO. If we do not produce the renewable fuels sustainably, there is no point doing it. There will be a reporting mechanism in the RTFO to ensure that biofuel is being derived from sustainable sources. We will also ensure that the RTFO is structured in a way that encourages the production ultimately of second generation biofuels and biofuels produced from other forms of biomass, as my hon. Friend has suggested. I also encourage him, and any contacts that he may have, to respond to the consultation document so that we may build those issues into the RTFO.
A 5 per cent. biofuel mix can, almost by definition, make only a small contribution to combating climate change. A year ago not a single car in the Government fleet had been converted to use an 85 per cent. biofuel blend. How many have been converted since then?
The Government car fleet does not use E85 technology. The hon. Gentleman says that 5 per cent. can make only a small contribution, but that 5 per cent. is over the entire country's land transport network, and that is the equivalent of taking 1 million cars off the road. We have also said that we will go beyond 5 per cent. as soon as we can guarantee that it can be done from sustainable sources, because—as I said in answer to the previous question—if we cannot produce the biomass sustainably, there is no point doing it. So we will go as far and as fast as we can, commensurate with it being done sustainably.