Energy Bill [HL]

Part of the debate – in the House of Lords at 6:45 pm on 29th March 2004.

Alert me about debates like this

Photo of Lord Carter Lord Carter Chair, Draft Disability Discrimination Bill (Joint Committee) 6:45 pm, 29th March 2004

My Lords, in speaking to support this amendment I should also declare an interest as the unpaid vice-chairman of the British Association for Bio Fuels and Oils, or BABFO.

I will come clean. I phoned the Public Bill Office on Friday afternoon to add my name to the amendment to find out that I was too late to do so. Even former Chief Whips get the procedure wrong occasionally.

I will deal quickly with the points raised by the noble Lord, Lord Dixon-Smith. Nobody is suggesting that this is the answer to our energy problems. I wish to make two simple points. First, it would be useful if we could use land that is currently in set-aside. I will return to that point. Secondly, there is a proposal that all London taxis should run on biofuels. That would make a significant reduction to the rate of pollution in London.

I moved this amendment in Grand Committee. As we have heard from the noble Lords, Lord Ezra and Lord Palmer, the amendment refines the arguments that were expressed then, so there is no need to repeat them at length. There is a very strong case for biofuels on environmental grounds, as they contribute to the reduction of CO2 emissions. Recent figures show that emissions in the field of road transport are increasing. That is the one area of activity where they are doing so. On economic grounds, it is very efficient. We are quickly meeting our environmental objectives. It provides a viable agricultural alternative to the rural economy.

I will quote from the evidence that was given to the Environment and Agriculture Sub-Committee—EU Sub-Committee D—on which I sit. The committee is currently investigating climate change. We heard evidence from Sir David King, Chief Scientific Advisor to the Government. He said that we should support all sorts of technologies that will lead to reductions in carbon dioxide emissions. I said that the technology that he mentioned was for the long run, but a simple technology—the use of biofuels—is immediately available. He then said:

"I do think, once again, that we need this broad menu approach. Biofuels across Europe is seen to be a big step forward in this way. We do have to recall just the one limitation here, and this is around the question of land use. If we are moving away from farming for food production, then biofuels might be a good way to move into land use".

I said that very large areas of land with nothing growing on them at all which are in set-aside could be used for biofuels. He came up with a marvellous quote:

"Biofuels are considerably smarter than set-aside, yes".

As we are discussing agricultural alternatives, I hope the Minister will not use the example of the biomass of the willow coppice. This argument is now completely exploded. The mid-term review had made the future uncertain for farmers. The idea that they will put land into willow coppice and wait from seven to 15 years for a return is not in accord with reality.

Since we met in Committee, there have been a number of developments. Friends of the Earth has had a meeting with interested parties. They produced some interesting ideas on tradable and levy-exemption certificates. Two members of BABFO, Wessex Biofuels and Wessex Grain, have done some extremely sophisticated modelling on the way that these might work. They point to the existing scheme in the electricity industry—renewable obligations certificates or ROCs. They have devised a simple mechanism that could be used.

The feedback from those involved in informal consultation with the departments involved in biofuels—Defra, the Treasury, The Department for Transport and the Regions and the DTI—suggests that the current reluctance to commit to an obligation centres around the belief that an operable mechanism is not yet available, and that any commitment would prejudice the subsequent setting of UK biofuels targets.

A simple obligation mechanism along the lines already operated in the electricity industry could be readily established and would allow a flexible and efficient incentive to future biofuels production and use across a range of future targets.

While mandates and obligations are often assumed to have a similar application, they vary in one significant area. Where mandate requires a set action, effectively with no exception, obligation allows for non-compliance, but at a price. Although mandatory inclusion of biofuels would be superficially attractive to the Government as it would not be state funded, those mandated would have no choice but to obtain supply and pass on the cost. There is no clear incentive to do this efficiently, and no control over the cost, which would be passed on as "hidden taxation". In the case of obligation, the financial impact in the market is limited to the penalty on those not complying, and the proceeds passed to those who do comply as an incentive to increase supply. An extremely sophisticated financial model has been produced which could be made available to officials.

There was a debate in the House of Commons in March where this was supported by all parties, and there was also an Early Day Motion which has had a substantial number of signatures.

I am sure that my noble friend the Minister has been briefed to say that biofuels are one of a number of possibilities but we must await the outcome of a consultation. When will this consultation finish? Indeed, has it even started? The Government have known since July 2003 that targets stated by July this year are to come into effect in 2005. They have been extremely slow in getting that consultation started: I am not sure that it has started yet. Can my noble friend tell the House whether he would expect the results of that consultation to be available before this Bill completes its progress through the House of Commons?

I understand the Government's difficulty in going all the way to support a mandatory obligation. There is another possibility, which is to have a permissive approach. This would put the principle of an obligation into the Bill, but allow the Government to determine the timing, percentages, and so on, by regulation—what might be called a "sunrise clause". As most of this will come from fields of rape, that is particularly apposite.

I am sure that all of us who support the principle of obligation would be willing to discuss a more permissive approach in an amendment for Third Reading with the Minister and his officials. I hope that my noble friend can make some encouraging noises to that effect in his reply. We want to see a renewable transport fuel obligation in the Bill, but we are willing to discuss ways of achieving that aim which the Government would find acceptable.