Renewable Transport Fuel Obligations (Amendment) Order 2009

I am grateful to all noble Lords who have spoken. A large number of points have been raised and I may respond to some of them in writing. We have submitted further evidence to the Merits Committee. The noble Viscount, Lord Eccles, may be aware that I wrote to that committee on 27 February, and that we have been revising the impact assessment, which I hope has given him more information. There is a big question and a number of little questions. I shall deal with a few of the little questions first. I welcome the noble Lord, Lord Oakeshott, to our debates. The proportion of UK biofuel coming from domestic feedstock is about 8 per cent at the moment. The noble Lord asked me what ester is. I am afraid that I am coming to the limits of my knowledge here but I am told that it is a chemical compound that mimics, or substitutes for, diesel. I say to the noble Earl that we cannot discriminate between different biofuels suppliers, which is why it is so important for us to ensure that we have a sustainable basis for production at the European and domestic levels. I again put on the record that I agree it is extremely unfortunate that the definition of "relevant hydrocarbon oil" in the 2007 order was inadequate for the purpose. It was precisely for that reason that we regarded it as our duty to come forward with this amendment as soon as we could in order to give the confidence that the noble Lord, Lord Palmer, and the noble Viscount seek as regards the future of the biofuels industry. I think that I can respond fairly robustly to the major question that underpins the debate. It is not the case that we do not see a strong future for the biofuels industry: we do. Indeed, I have met the noble Lord, Lord Palmer, to discuss his interest in biofuel production, as well as quite a number of biofuel suppliers, and I know that they are doing good work. However, to balance the support and confidence that we must give to the biofuels industry with concerns about the environmental sustainability of certain biofuels, we asked Professor Ed Gallagher, the chair of the Renewable Fuels Agency, to look at the whole issue last year. He produced a report that runs to 90 pages and looks at a large number of the issues that have been raised in the debate. I took the noble Viscount, Lord Eccles, to be criticising the Government for not supplying sufficient information to the Merits Committee. We took it for granted that the Gallagher report would be available to the committee; indeed, we supplied it. It is the most substantial and in-depth assessment that has been made of issues such as indirect land use and the sustainability of biofuels. Perhaps the most useful thing that I can do to indicate the Government’s stance is simply to quote from the Gallagher report and its conclusions, which, as I say, were published only last July and formed the basis of government policy on biofuels and the course that we are taking in the ongoing negotiations in Brussels. In the report’s foreword, Professor Gallagher says: ""We cannot afford to abandon biofuels as part of a low carbon transport future. Equally, we cannot continue producing biofuels"—" "we" means not only UK producers but producers globally— ""which are ultimately more environmentally and socially damaging than the fossil fuels they seek to replace"." The report concluded: ""This review concludes that it should be possible to establish a genuinely sustainable industry provided that robust, comprehensive and mandatory sustainability standards are developed and implemented. It further concludes that the risks of indirect effects can be significantly reduced by ensuring that the production of feedstock for biofuels takes place on idle and marginal land and by encouraging technologies that utilise appropriate wastes and residues. A framework for such policies is proposed, but significant challenges remain in the detailed design, implementation and enforcement … The RFA judgement, based upon the balance of evidence is that if all subsidies and other support for biofuels were removed entirely, this would reduce the capacity of the industry to respond to the challenges of transforming its supply chain and investing in advanced technologies. However, the rate of introduction of biofuels should be slowed until adequate controls are established"." That is precisely the Government’s policy. It was precisely in response to those recommendations by Professor Gallagher—a good deal of the points raised by the noble Viscount are, as I say, addressed in the 90-page report—that we announced after careful consideration late last year our intention to slow down the rate of growth in the targets for biofuel, to achieve the 5 per cent target by 2013-14 rather than 2010-11, to remain committed in principle to more ambitious targets for 2020, and to have the EU review in 2013-14: all in the cause of establishing a firm and clear policy base on which we could reassure those who have expressed concerns about the environment and give confidence to biofuel producers that we remain committed to the progressive increase in the supply of biofuels—the present generation of biofuels as well as the second generation to which the noble Viscount referred. In doing that we also give confidence to the investors, who, as I well appreciate, are making significant investments in this area.