With permission, Mr. Speaker, I would like to make a statement on biofuels.
There is widespread agreement in the House and the country that we must step up efforts to tackle climate change through dramatic and global cuts in greenhouse gas emissions.
One of the most difficult challenges that we face is the use of fossil fuels for transport. Our cars and other forms of transport are the third largest source of carbon dioxide emissions in the UK. That is why the use of a clean, renewable energy, which can partly replace carbon-based fuels, was seen by experts, environmental campaigners and Governments around the world as a welcome and practical way of slowing emissions growth.
In March 2007, after four years of encouraging biofuel use, the EU went further and set an ambitious target of 10 per cent. of transport fuel from renewable sources by 2020. In the UK, the Government introduced the renewable transport fuel obligation, which came into force earlier this year. That requires biofuels to make up 2.5 per cent. by volume of road transport fuel sales in the UK, increasing by 1.25 per cent. a year to 5 per cent. by 2010-11.
The UK has also been at the forefront of global efforts to develop robust, and workable, sustainability standards for biofuels. As part of the RTFO, we introduced a requirement that transport fuel suppliers should report on the environmental performance of their biofuels. That will give us evidence on the impact of biofuels, as well as creating an incentive for suppliers to source the best biofuels.
We also made a commitment to introducing at the earliest opportunity legally enforceable standards, which will ensure that biofuels are produced sustainably. However, in recent months questions have been asked about the more intangible, indirect effects of biofuels on food supplies and prices and on deforestation, and their overall impact on greenhouse gas emissions.
I am sure the House will agree that our policy on biofuels should be based on the best possible science. So in February, I asked Professor Ed Gallagher, the chair of the Renewable Fuels Agency, to examine the latest available evidence. I welcome the publication of his report today and want to thank Professor Gallagher and his team for their thorough work on a highly complex matter.
Let me outline Professor Gallagher's main findings. Overall, the report confirms that biofuels can play a role in tackling climate change and that
"there is a future for a sustainable biofuels industry".
It finds that by 2020
"biofuels have the potential to deliver annual global greenhouse gas savings of approximately 338 to 371 million tonnes of carbon dioxide".
But Professor Gallagher also concludes that there is a risk that the uncontrolled expansion and use of biofuels could lead to unsustainable changes in land use, such as the destruction of rainforest to make way for the production of crops. That might, in turn, increase greenhouse gas emissions, as well as contributing to higher food prices and shortages. The Gallagher report therefore concludes that the introduction of biofuels should be slowed until policies are in place to direct biofuel production on to marginal or idle land and until these are demonstrated to be effective. The detail of these control mechanisms would need to be agreed internationally.
However, the report rejects calls for a moratorium on biofuels. It concludes that
"a moratorium will reduce the ability of the biofuels industry to invest in new technologies" and
"will make it significantly more difficult for the potential of biofuels to be realised".
In short, the report concludes that
"the Government should amend but not abandon its biofuel policy".
The report recommends that the rate of increase in the RTFO in the UK should be slowed to 0.5 per cent. per annum, so that the RTFO reaches 5 per cent. in 2013-14, rather than in 2010-11 as currently planned.
At the EU level, the report concludes that a mandatory 10 per cent. renewable transport fuel target is not currently justified by the scientific evidence, but that a target of 10 per cent. by 2020 could be possible if a number of important conditions are met. Those conditions include sufficient controls on land use change being enforced globally, as part of a new climate agreement, and new evidence providing further confidence that the target can be met sustainably. In the meantime, Professor Gallagher says that a more appropriate range for the 2020 biofuel target would be around 5 to 8 per cent. by energy.
I agree with those key findings. Given the uncertainty and the potential concerns that Professor Gallagher sets out, it is right to adopt a more cautious approach until the evidence is clearer about the wider environmental and social effects of biofuels. We also need to allow time for more sustainable biofuel technologies to emerge. I therefore intend to consult formally on slowing down the rate of increase in the RTFO, taking the level to 5 per cent., as Gallagher recommends, by 2013-14, which would be subject to further confirmation in 2011-12.
Professor Gallagher's findings are particularly significant in the context of ongoing debates about biofuel targets across the EU. To help to ensure that sustainability is put at the heart of those debates, the Environment Secretary and I are today jointly sending a copy of the Gallagher report to the relevant European Commissioners and to all EU Environment and Transport Ministers. In response to those concerns, including over rising global food prices, the Prime Minister has today been pushing for the G8 to work to develop new global benchmarks for sustainable biofuel production and use.
The Government believe that the EU target of 10 per cent. renewable transport fuels by 2020 can remain an overall objective, but subject to clear conditions. I would like to set those out. First, the EU-level sustainability criteria currently being negotiated must address indirect, as well as direct, effects on land use. Secondly, the 10 per cent. target must be subject to rigorous review in the light of the emerging evidence, so that we can make an informed decision at EU level in 2013-14 about whether the target can continue. As Professor Gallagher also suggests, I agree that we should aim to target support on the development of lower carbon and other so-called "second generation" biofuels.
Looking ahead, we will continue to work with our international partners and the scientific community to decide what further work needs to be done to reduce the uncertainties in the science and ensure that the right biofuels are supported. We will also continue to investigate other technological solutions that have the potential to deliver a low-carbon transport system, such as hybrid and electric vehicles.
I believe that the approach that I have set out today is the responsible one. It acknowledges that biofuels can have an important role in reducing carbon emissions and combating climate change, but also recognises that we need to proceed cautiously until we can be certain that their expanded growth and use maximises the benefits and minimises the risks to our world. As I have demonstrated today, I will not hesitate to alter our policy if that is what the science suggests is appropriate. I commend this statement to the House.
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I thank the Secretary of State for advance notice of her statement. The Opposition have been telling the Government for months to think again on their biofuels policy. The Conservatives were the only political party to vote against the renewable transport fuel obligation. Although we believe that biofuels can have a role to play in tackling climate change, there must be safeguards to ensure that they come from sustainable sources and we must address the impact of biofuel production on land use and fuel prices. Frankly, the RTFO does neither of those things, and the statement provides only limited reassurance. The RTFO has come under sustained attack from groups such as Friends of the Earth, Oxfam, the Royal Society for the Protection of Birds, the Royal Society and the Environmental Audit Committee, and today the Government's own Gallagher report confirms that biofuel targets set by the Government could lead to unsustainable changes in land use, higher food prices and a net increase in greenhouse gas emissions.
I welcome the fact that the Secretary of State has acknowledged today that there is a serious problem with her biofuels policy, but what have we actually got from her statement? We have got another consultation, and a review of the 5 per cent. target in 2011-12. I certainly welcome the slowdown that the Government have suggested they might undertake in relation to the 5 per cent. target, but a partial retreat is not enough. I repeat today the question that I asked the Secretary of State in January: will she now suspend the RTFO, in the light of the serious problems revealed by the pressure groups and confirmed in many respects by the Gallagher report?
The fact is that a mere slowing down of the targets will not address the problems that are occurring today. The rain forest is under threat right now, and the habitat of orang-utans is being wiped out right now by palm oil plantations. When will the Secretary of State introduce the vital binding rules on sustainability? Why were they not in her statement to the House this afternoon? Why did she not commission and publish this report before designing the RTFO and bringing it into operation? Why did she steam ahead without carrying out a thorough investigation of the facts?
Will the Secretary of State tell us how many litres of biofuel covered by the RTFO have been imported since its inception in April, and from which countries? What can she tell us about the source of those imports? Were any of them instrumental in deforestation? How many of them are made up of palm oil, a substance that Friends of the Earth says has been responsible for 87 per cent. of the recent destruction of the rain forest in Malaysia and Indonesia? Why did she introduce the RTFO before conducting a thorough assessment of the impact of the displacement of crops to areas where they could cause deforestation?
When is the Secretary of State going to start publishing this kind of information and an analysis of how the RTFO is operating in practice today? How many litres of biofuels from unsustainable sources does she expect to have been imported into this country before we get real, lasting and serious reform of the RTFO? How can she possibly justify the Prime Minister's posturing about this issue on the international stage while at home she presses ahead with policies that encourage the use of biofuels that could actively damage the environment?
The Gallagher report is an admission of failure by the Government. Their RTFO biofuels policy is a failure. It has failed industry and farming, because the uncertainty caused by Government dithering is jeopardising investments, not only in existing programmes but in second generation biofuels and in renewable and green technology generally. It has failed the poor of the developing world because it was introduced without safeguards to tackle the problems that are caused when biofuel crops compete with food production. It has failed the environment because it contains no effective measures to guarantee that the biofuels it promotes come from sustainable sources. The Government have made no move to address those failures today.
It is deeply irresponsible to press ahead with a policy that risks driving up food prices and actively encourages people to rip up the rain forests, with the consequent loss of hugely important carbon sinks and wildlife habitats. Why will the Secretary of State not address the facts that are staring her in the face, admit that she has got her policy on biofuels seriously wrong, and suspend the operation of the RTFO?
The hon. Lady has posed a series of questions, and I will answer as many as possible in the parliamentary time available. Let us avoid political point scoring for a moment and take a step back to look at the report in front of us. Surely she and her colleagues will acknowledge that—as Gallagher found in his comprehensive review of the evidence—there is a future for a sustainable biofuels industry. Indeed, just three years ago there was consensus on the issue among the Government, industry, environmentalists and, of course, her own party. It was only at the end of 2005, at a speech to the Renewable Energy Association, that her party leader, Mr. Cameron, said:
"Five per cent. of all fuels sold in the UK to come from biofuels is a start, but it is a minimum step: we will need to go further in the future."
The hon. Lady must also acknowledge that the UK has been at the forefront of efforts to promote sustainability in respect of biofuels. She asked why we did not set up the review to examine indirect land use change before we introduced the RTFO. When she has time to read the Gallagher review, she will see that it says very clearly that the RTFO was established before evidence of the scale of possible indirect effects was known. Indeed, a particularly influential paper from a US economist in February changed the terms of the debate, and the evidence has changed very rapidly over the past few months. It was precisely because the scientific evidence had been changing that I asked Professor Gallagher to review the evidence—the latest evidence—and to make recommendations about the way forward.
We now face a clear choice: either we do as the hon. Lady suggests—abandon our biofuels policy and put the RTFO on hold or, indeed, abolish it—or we amend our policy and proceed more cautiously while collecting the evidence, narrowing the range of uncertainties and putting in place the appropriate safeguards. Professor Gallagher is very clear about the responsible way forward, and he thinks we should continue with our policies because there are such things as good biofuels. We need to encourage them and to put in place the sustainability that the hon. Lady and I both want, but we cannot risk all the investment in the sector, not only throughout the world but in our country, which might make it possible. Biofuels have the potential to produce very serious greenhouse gas emissions reductions if indirect land use change is avoided. That is the Gallagher review's overall finding, and it is one I accept.
My hon. Friend will know that I have committed the Government to work with their international partners, particularly in the European Union but further afield as well, to ensure not only that we understand the indirect land use change effects more fully and put in place global mechanisms to try to prevent such land use change, but that we encourage the industry to innovate and to produce second generation biofuels that will not by definition avoid land use change but may help in producing greater greenhouse gas emissions reductions. One recommendation of the Gallagher review is a specific target, negotiated at EU level, to try to encourage the production of advanced or second generation biofuels. We all need to think about that very carefully.
I welcome the early sight of the statement from the Secretary of State for Transport, although I saw most of it in the Financial Times this morning. If one knows where to look, one can generally find Department for Transport statements in the press before they are delivered to the House. Will she take steps to ensure that the House is informed before the press about statements on such important matters?
I broadly welcome the statement, although it might have been made a little earlier. The Environmental Audit Committee reported on the matter quite thoroughly, but the Secretary of State went to Professor Gallagher, who has come out with roughly the same statement as the Committee. Nevertheless, the broad conclusion that we should not abandon but amend the policy on biofuels is correct. Clearly, some biofuels are being produced unsustainably, but we should not throw out the biofuel baby with the bathwater, as some apparently would wish.
I have some questions. First, will the right hon. Lady provide a figure for the impact of biofuel production on food prices? The estimates seem to vary widely, and I have seen figures of between 3 and 75 per cent. in various reports. Secondly, what steps is she taking to improve the sustainability criteria and certification of existing biofuels so that there are no problems with them, given the poor EU regulations on the matter?
Thirdly, what discussions is the Secretary of State having with businesses involved in the development of second generation biofuels, which we all agree we should promote? There is an opportunity to progress that, and I hope that she can take it forward. Fourthly, what is she doing about what I think are the improper subsidies for biofuels from the US? I am thinking particularly of corn-based ethanol and the disgraceful splash-and-dash arrangements, which mean that adding 1 per cent. of US diesel qualifies the fuel for subsidies when it comes into this country. That is bad for climate change as well as for the economy.
Lastly, I welcome the Secretary of State's recognition that the transport sector has a major role to play in tackling climate change. Is she seeking to replace the carbon reduction losses that there will now be as a consequence of the reduction in the biofuels target? Will she apply the logic behind trying to ensure that the transport sector deals with carbon emissions to her aviation policy as well?
First, I should say to the hon. Gentleman and the House that I take my obligations to the House extremely seriously. The press speculation about the content of this statement was not always well informed and certainly did not reflect the detailed content of the report. However, I welcome the tone of the hon. Gentleman's comments.
We do face a choice whether we should abandon the greenhouse gas savings that may come from biofuels—if not now, then potentially in the future—or whether we should scrap our commitment to biofuels and argue that Europe and the wider world should do so too. As I said, Professor Gallagher is clear about his view: we should proceed, albeit more cautiously than we had assumed we should in the past.
The hon. Gentleman asked about food prices; the report has a chapter about the impact of biofuels on those. Professor Gallagher is clear that biofuels are not the only reason food prices have increased in recent years. Other, more important factors include smaller harvests last year because of droughts, higher fertiliser prices, rising gross domestic products and changing diets in the far east. The Gallagher review concludes that increasing demand for biofuels contributes to rising prices for some commodities, notably oil seeds. However, it says that the price rises are rarely more than 5 per cent. for most crops. That is one of the reasons it is suggesting a more cautious approach. In some areas, there is a marked impact, particularly in the short term, on particular populations in respect of some crops and some biofuels. That is why Professor Gallagher says that we ought to identify those specific effects and take global action to try to mitigate their impact.
The hon. Gentleman asked about sustainability criteria. We are currently negotiating such criteria in the EU context. The renewable energy directive, which should conclude later this year, will propose sustainability criteria. We want to insist that it should now also include the indirect effects of biofuels use. He also asked about second generation biofuels. One of the more surprising conclusions of the Gallagher review was that such biofuels do not always have a clear advantage over first generation biofuels, particularly when land use change is taken into account.
First generation biofuels often produce co-products that can be used as a protein substitute for animal feed—as will happen at the Ensus plant in the north-east, for example. When such use is made of co-products, the impact on land use change can be minimised. Overall, the picture is much more complex than it sometimes appears at first sight; nevertheless, there is potential in exploring further the contribution of second generation biofuels.
We will use the report to try to influence the debate at EU level and in the US. The hon. Gentleman asked about the contribution of the transport sector in tackling climate change. The Gallagher report says that a 10 per cent. transport renewables target could still be appropriate, provided that certain evidence emerges and that appropriate safeguards are in place. It is important, of course, that we should keep that under rigorous review and take any necessary action if evidence emerges that the target is too ambitious.
Is the Secretary of State aware of the enormous problems created by the production of maize-based ethanol, as pointed out by Norman Baker? In central America, the price of tortillas has gone up by 35 per cent. in the past year, causing real hardship to the very poorest people. Have we not an obligation to do all we can to reduce the production of maize-based ethanol, which is neither particularly effective nor particularly efficient and damages the livelihoods of many of the poorest people all around the world? The whole strategy ought to be about reducing the consumption of fuel by private road transport. It seems obscene that we should allow people in central America and other parts of the world to go hungry to feed the gas guzzlers of the United States and parts of western Europe.
My hon. Friend gives a very specific example of bad biofuels. He is absolutely right to suggest that we have a moral obligation to try to weed out, as it were, the impact of bad biofuels on food prices, as well as the potential risk of increasing overall CO2 emissions. The Gallagher report is clear, however, that there are sustainable biofuels and that we should direct their growth on to idle and marginal land. That is one way of minimising their impact.
My hon. Friend also asks about reducing the consumption of fuel, and my answer is that he is absolutely right to say that biofuels are part of a much wider and bigger picture. How do we feed the world's poor in years to come? The answer does not lie in biofuels or necessarily in the contribution of the transport sector, although it has a role to play. We have sizeable moral obligations as Governments across the world to try to think through the wider implications of how we feed the world.
It is true that hybrid and electric cars may well have an important role to play in the future. Indeed, Professor Julia King, who looked into the fuel efficiency of cars and potential technological solutions in future as a means of minimising the impact on the environment, suggested that those vehicles could have an important role after 2020. I have already had conversations with people who are interested in bringing more electric vehicles into the country. It is not necessarily a matter of financial incentives, as it is more about facilitating, particularly through the planning system, the infrastructure necessary to promote the use of those vehicles. Clearly, when people drive such a car, they need somewhere where they can plug it in to charge up. We are having discussions about this issue across government, but it is absolutely right to say that electric cars could have an important role to play in the future.
I hear what my right hon. Friend says. Speaking as someone who saw the advantages of the RTFO, I have not quite changed my mind, although I can also see some of the dangers. The reality of the statement is that we should be entering into international discussions with countries such as Brazil, where the biofuels industry is a major factor in development, and try to persuade them to look at using waste products such as molasses rather than corn or wheat, which my hon. Friend Jeremy Corbyn mentioned, as a way of producing biofuels—with all the consequent dangers to the Amazon. We should be doing that as a matter of priority, so I hope my right hon. Friend will take it into account.
I thank my hon. Friend for his comments. One of Gallagher's interesting conclusions is that the best and worst forms of greenhouse gas savings on biofuels are currently achieved from sugar cane. Even within Brazil, there are very good examples of biofuel production that are energy efficient and high yield. Some Brazilian mills even export electricity to the grid. What we need is a debate in global forums as well as within the EU about how to encourage the use of sustainable biofuels. One challenge that we have set the Renewable Fuels Agency, which will operate at arm's length from the Government, is to use the report and work with our international partners to establish more evidence and to try to encourage people to think differently about the way biofuels are currently grown.
The right hon. Gentleman makes an incredibly important point. In the north-east of England with the Ensus site, but also on other sites, the production process has very substantial direct greenhouse gas savings from well to wheel. Part of the reason for that is, as I have explained, that the co-products are also used to substitute for animal feed. What it does not take into account is the indirect impact. The report suggests that even in those cases we ought to think through the indirect impact. Clearly, we do not currently have a mechanism for measuring the indirect impact, or for safeguarding against the potential greenhouse gas consequences or the increase in food prices that might result. In future, however, we should aspire to that. The report sets out a cautious approach that will give us time to have those global negotiations to put in place progressive measures to control land use, and to make sure that as far as possible—it will not always be possible—first or indeed second generation biofuels are produced on idle or marginal land.
Does the Secretary of State share my concerns about the conclusions of the Environmental Audit Committee, which came out in favour of a moratorium? Does she not agree that the way forward is through greater and better certification and regulation? The consequence of throwing the baby out with the bathwater is that without investment in first generation biofuels, damage will be done to the potential for future investment in second and third generation biofuels, which are likely to have a much more beneficial impact.
I agree with the hon. Gentleman, who makes an important point. The reason that investors are prepared to invest in clean technology and think about second generation biofuels is that there is a market for biofuels. Part of our approach must be to take that into account and to think about how the risks can be minimised, while examining the evidence and collecting the data necessary to make good judgments in future, and ensuring that sufficient investment takes place in those innovative technologies.
The rush to biofuels seems to have led to at least three unexpected consequences: first, higher food prices; secondly, deforestation; and, thirdly, a sliver of sanity belatedly creeping into the Government. The Secretary of State knows that the 10 per cent. by 2020 target is dear to the heart of José Manuel Barroso, the European Commission President. Although she is clearly doing the right thing in sending out signed copies of the report to any interested parties in the EU, she must also remember that the largest biofuels producer is France, which has just taken over the presidency of the EU. What else will she do to ensure that a sliver of sanity also breaks out in Brussels, and that it reconsiders its targets on biofuels?
I thank the hon. Gentleman for his comments. I will seek to persuade my European partners and the European Commission to take such evidence seriously, and to encourage them and their scientific experts to work with those in the RFA in examining it. However, to say that biofuels inevitably increase food prices is a bit simplistic. One of the messages of the report is that some biofuels have a significant impact, especially in the short term and on certain types of rural poor. In the longer term, the effects are much mitigated, and the world should perhaps be thinking about policies to mitigate those impacts in the short term too. It is important to have a balanced approach, and to encourage France and Italy, which are already showing signs of working with us in this area, to continue the pursuit of a sustainable biofuels industry.
Following that reply to my hon. Friend Mr. Evans, does the Secretary of State recall that when the House debated such matters last month, the Department for Business, Enterprise and Regulatory Reform willingly signed up to and endorsed the 10 per cent. target for biofuels in transport fuels by 2020. A month later, the Secretary of State is resiling from that, saying that it is unsustainable and unobtainable. Given that the decision on the draft EU directive will be taken by majority voting, what confidence does she have that her new conditionality and different target will be accepted, as the directive is, after all, mandatory?
I said that we should be arguing for a non-binding target, but a target of 10 per cent. conditional on certain elements: first, second generation biofuels should emerge; and secondly, unsustainable land use change should be avoided and sustainability safeguards adopted. I said that we should review the evidence in 2011-12, and again later, to confirm those targets.
That is an approach for which we shall negotiate very hard in Europe. I believe that it is beginning to gain currency in France and Italy, and I hope that other countries will also see the merits of adopting a conditional rather than a binding target.
Will the Secretary of State explain why she has confidence in the sustainability criteria that she is currently negotiating with the European Union? I should like to know why she feels that she could possibly have confidence in those. Will she also tell us what direct control she will exercise to ensure that biofuels used in the United Kingdom come from sustainable sources?
The hon. Gentleman asks what confidence I have in the sustainability criteria that are currently being negotiated. The report concluded that they ought to be made more sophisticated. Although we have tried to capture the direct impacts on greenhouse gas emissions from well to wheel, we have not yet attempted to calculate the impact of the indirect effects of biofuel production, which is an incredibly difficult calculation. Before January this year, hardly anyone with an interest in the subject even considered the possibility of significant indirect effects on either greenhouse gas emissions or food prices. One of the challenges that we face is to work with our European partners intensively over the next few months to develop a set of sustainability criteria that include a measure of indirect impact.
The Secretary of State admitted a moment ago that growing food shortages and soaring food prices had rendered the redirecting of cereal and root crops to biofuel production highly questionable. She is presumably aware that much of our current biodiesel production results from the refining of used cooking oil. Can she tell us what percentage of it comes from that source, and has she any idea of the potential annual tonnage?
I am afraid I cannot give the hon. Gentleman the figures that he seeks today, although I shall be happy to provide them if they are available. However, I have talked to suppliers about their innovations in that regard. The hon. Gentleman is right to suggest that the current developments are having an impact—particularly in Scotland, I understand. This is what is typically known as second generation biofuel. Again, the impact on both greenhouse gases and food prices will depend on the indirect effects, which are not currently captured in our sustainability reporting mechanisms, although that is what we aspire to for the future.
I listened to the statement with growing concern. Last year, I purchased a biofuel car believing that I was saving the planet. Could the Secretary of State give me some clear advice? As she will know, a biofuel car can run on biofuel or petrol. When I next pull into Morrisons in Welingborough, should I go to the petrol pump or the biofuel pump?
My advice is that the hon. Gentleman should adapt to the evidence, as the Government have. However, let me make a serious point.
The Gallagher review has made it clear that investment in biofuel production should be encouraged, and in particular that it should rise above the current level of 2.5 per cent., so that investors are confident enough to proceed with the investments in bioethanol that are planned in the United Kingdom.