Renewable Transport Fuel Obligations (Amendment) Order 2011

My Lords, I confess that I do not fully understand the point made by the noble Baroness, but I will undertake to discuss it with my honourable friend Mr Norman Baker, the Parliamentary Under-Secretary of State for Transport. Many noble Lords are concerned about ethanol from the United States, and what support exists for British ethanol producers. UK farmers and biofuel producers have historically been able to demonstrate strong sustainability performance for their products, which should put them in good stead once the mandatory sustainability criteria of the RED come into effect. This should help their competitiveness. Ethanol producers in the UK have also had concerns that US imports are exploiting a tariff loophole. A European Commission draft regulation addressing the loophole was considered and agreed by the EU Customs Code Committee on 12 October, and should be published soon. The mandatory sustainability criteria will only allow sustainable biofuels to be financially rewarded in the UK. The noble Lord, Lord Berkeley, asked about oil sands. The fuel quality directive seeks to reduce the life cycle of greenhouse gas emissions of fuels used in land-based transport. We want a methodology that is able to account for the greenhouse gas emissions of all crudes, including oil sands and oil shale, and which is based on robust and objective criteria. The evidence is that fuel derived from oil sands has a high intensity of greenhouse gas emissions. However, the same is true of a number of other crude sources, such as Nigerian and Angolan crude, with their associated flaring, and Venezuelan heavy crude oil. My noble friend Lord Reay asked about fuel costs and whether we had considered the impact of the changes on fuel prices. A suite of impact assessments accompanies the two government responses to the consultation. These assess the likely costs and benefits of our proposals to the fuel industry and to fuel prices. The introduction of sustainability criteria is expected to result in some short-term upward pressure on biofuel prices as the necessary investments are made in supply chains and refineries. These price increases are expected to feed into final petrol and diesel pump prices. The overall impact is expected to be fairly small, peaking at 0.1p per litre for petrol and 0.4p per litre for diesel in 2017. Prices are then expected to fall gradually as market supply adapts to the requirements of sustainability criteria and as suppliers recoup money invested. The noble Lord, Lord Bradshaw, asked why we have removed the duty incentive in respect of cooking oil. A duty incentive offers no mechanism for addressing concerns about the sustainability and sourcing of the biofuel supplier. Because it rewards both sustainable and unsustainable biofuels equally, it does not give sufficient long-term certainty for potential investors in biofuel production or an infrastructure that helps support a market for more sustainable biofuels. That is why the Government have committed to remove the duty differentials on biofuels.