It is a pleasure, Mr. Amess, to see a fellow West Ham supporter in the Chair.
I welcome today's debate on the report of the Environmental Audit Committee inquiry into the sustainability of biofuels. I congratulate Mr. Yeo and his colleagues on the report and on securing this debate. If it was not clear before today that biofuels remain a controversial issue, it should be now. It is therefore right that the subject should be fully debated. It is particularly appropriate that today is world environment day; its theme this year is the low-carbon economy and the reduction of greenhouse gas emissions.
Since my last engagement with the Committee six months ago, there have been some important developments. The renewable transport fuel obligation is now operational, with 17 companies registered as obligated suppliers; and the Renewable Fuels Agency—the RFA—has been established as the administrator. This morning, I visited the agency's headquarters in Hastings. As we heard earlier, Professor Gallagher, the RFA chairman, has been leading a review into evidence on the indirect effects of biofuels. The European Commission has published its climate change package, which includes a draft renewable energy directive.
In its original report, the Committee said that
"it is difficult to generalise the benefits or costs of biofuels.".
That goes to the heart of the problem. We heard today that there are good biofuels that are sustainably produced and which help to save greenhouse gas emissions—for example, biodiesel made from waste cooking oil. We also know that there are potentially bad biofuels. For example, everyone agrees that biofuels would be bad if tropical rain forest had to be cleared to grow them. Those are commonly quoted examples, but most cases are not so extreme. It is not always easy to know which biofuels are good and which are bad.
A lot of work has been done, and is still going on, into how to assess the sustainability of biofuels and how to measure their life-cycle greenhouse gas emissions. It is worth reminding ourselves that the United Kingdom is a world leader in the field. Because of the potential of biofuels for greenhouse gas savings, the Government have encouraged them, at first through differential taxation and now through the RTFO. However, we have always recognised that, if given indiscriminately, support for biofuels could lead to unsustainable forms of production.
We have minimised the risk for the RTFO in two ways. We have taken a cautious approach to the level of the biofuels obligation, as articulated by the hon. Member for South Suffolk, the Committee Chairman, and others. We began with a modest target for 2008-09 of a 2.5 per cent. share by volume in total petrol and diesel sales. We also made it a condition that fuel suppliers can claim certificates only if they report on the sustainability characteristics and greenhouse gas savings of their biofuels.
The carbon and sustainability reports will be published in summary for each obligated supplier. That will be an important incentive for them to ensure that their biofuels come from sustainable sources. However, carbon and sustainability reporting is only a first step. We announced last year our aim that, from April 2010, rewards under the RTFO should be linked to the carbon savings of the fuels supplied, and that from April 2011 only biofuels meeting prescribed sustainability criteria would be eligible for certificates. Those provisions would be subject to compatibility with European legislation and WTO rules, as we heard from Mr. Goodwill.
The Government have meanwhile been urged to abandon the RTFO, or at least to put it on hold. In our view, that would be wrong. It would mean giving up worthwhile greenhouse gas savings, with no evidence of any benefit in return. It would also send the wrong signals to the industry, for which a consistent long-term policy is important. Indeed, for that very reason, the legislation establishing the RTFO has been designed so that it cannot be amended quickly. However, we have given a firm undertaking that we will not agree to any increase above existing targets until it can be shown that the necessary biofuels can be produced sustainably. The work to develop robust sustainability criteria at the EU level is therefore most important. With those in place, it will be possible to assess whether enough sustainable biofuels could be produced to meet the targets that have been proposed for the EU.
Two targets affect biofuels. First, the draft renewable energy directive sets a 10 per cent. target for the share of renewable energy in transport, which would almost entirely be from biofuels by 2020. Secondly and separately, the European Commission has proposed an amendment to the fuel quality directive to set a greenhouse gas reduction target for petrol and diesel. That would require a 10 per cent. saving in life-cycle carbon emissions by 2020. Although part of the latter target could be met through the more carbon-efficient production of fossil fuels, it is broadly agreed that the majority of the savings would need to come from biofuels, which could amount to as much as 8 per cent. The amount of biofuels needed would depend on their life-cycle carbon emissions: if they were half those of the equivalent fossil fuels, a 16 per cent. biofuels share would be needed to achieve an 8 per cent. greenhouse gas saving. That is a much greater amount than would be required by the 10 per cent. renewable energy target.
We do not know whether that could be achieved sustainably. We will press for a more realistic but still challenging greenhouse gas reduction target for petrol and diesel. Different sustainability criteria have been proposed for the two directives. A special working group has been set up under the Committee of Permanent Representatives to prepare core sustainability criteria that will apply to both. The hon. Member for Scarborough and Whitby said that directives are difficult to change: in this case, they will have to be changed because they are in conflict with each other. The United Kingdom has been playing a full and active part in the negotiations, which should reassure my hon. Friend Joan Walley.
Recent studies have suggested that the indirect effects of biofuels might be more significant than had been assumed. In the light of uncertainties about those results the Government asked the chairman of the RFA, Professor Ed Gallagher, to undertake a review of the evidence. I am grateful to him and his team for the work that they have put into the review, and to a wide range of stakeholders for their contributions. The time scale for the review has been tight, because the findings need to be fed into the EU negotiations on biofuels sustainability criteria. Our negotiating position will take the findings fully into account. We expect that they will also be of significant interest to other member states and that they may in some cases affect their positions on the negotiations.
Nevertheless, the review team have done a great deal in the time available. Evidence has been collected in the United States and Brazil, which are two of the most important countries for the production of biofuels. There has been a meeting with experts in the Netherlands which, like the UK, is a leading country for work on biofuels sustainability. On Monday, members of the review team will travel to Rome for a meeting at the UN Food and Agriculture Organisation. The meeting will pay particular attention to the impact of biofuels on food security, especially in the light of the high-level conference on food security which has just taken place at the FAO.