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Energy: Biofuels (EUC Report)

My Lords, I know that the whole House will wish to thank the noble Lord, Lord Sewel, for the very clear and helpful way in which he introduced the debate on this most important report. I congratulate the chairman of the sub-committee, my noble friend Lord Renton, and all its other members for having presented in clear terms some of the dilemmas that a European Union biofuel strategy might lead us into. As the noble Lord, Lord Sewel, reminded us, it is by no means clear that the three objectives are mutually compatible. I declare two interests, which pull me in different directions. The first is that I am a farmer. Clearly, all farmers welcome new income-streams, and there is enthusiasm throughout Europe for maximising income from energy crops. I also chair the trustees of the Royal Botanical Gardens, Kew. Of course, Kew, together with other botanic gardens around the world, tries to conserve rainforests, but one of the great problems that we are dealing with is the massive investment in palm-oil plantations and the loss of rainforest thereby. There is a real irony when you think that this loss of biodiversity is encouraged by people trying to demonstrate their green credentials. Let us look at the three objectives: opportunities for rural areas, a new market contribution to energy security, and a contribution to reducing greenhouse gas emissions. All three have to be tested carefully to see to what extent all of them are valid for setting some challenging targets at the European level. On benefits for rural areas, I had a lot of sympathy for the representative of the Danish Government who gave evidence to the committee. The Danes were not at all keen to set targets; they pointed out thatthey could achieve much better ways of reducing greenhouse gas emissions. After the noble Lord,Lord Rooker, gave evidence, Defra submitted supplementary evidence, which is in the second volume of the report. A question was asked about the respective costs of the different fuels. By far the most competitive source at the moment is ethanol from Brazil derived from sugarcane. It comes in at 6p to 11p per litre. If we grow it ourselves from sugar beet or wheat, it is likely to be three or four times that figure. So you need subsidies or tariff barriers, or you need to require people, under the obligation, to use it whether they want to or not. So although we are saying that it would help rural areas, it would put us back on the old treadmill—which the Danes certainly do not want, and I doubt whether the British public want it—of having subsidised European agriculture, and heavily subsidised at that. The second objective is energy security. Let us briefly consider Sweden, which is well ahead of the rest of Europe in importing ethanol from Brazil. Sweden does not have oil stocks, and undoubtedly it is important to derive energy from another source for energy security reasons, but such imports do not help your security very much if you simply make yourself vulnerable to another source such as Russian oil, gas or whatever. There may be a security element in that reasoning but let us be clear that such an argument is not necessarily very logical. I think that we will always be dependent on imports for biodiesel, for example. We can always produce more ethanol by not exporting our wheat, using our set-aside and perhaps increasing our area somewhat but there is a problem with biodiesel derived from oilseeds: you cannot grow oilseed rape as you can wheat, crop after crop on the same ground. It will always be difficult to be secure in biodiesel supply. In any case there are always competing demands for biomass crops, for use not in transport but to co-fire power stations. There is already a demand there for willow and other biomass sources such as elephant grass, miscanthus and the like. We can see very little contribution towards energy security from these new biofuel food stocks. Thirdly, there are the environmental benefits. The noble Lord, Lord Sewel, reminded us that the British have bought into this much more than the other member states have. It is clearly true, as the report makes clear, that biofuels can make a substantial contribution to reducing greenhouse gas emissions. But that is not invariably so, as the noble Lord, Lord Sewel, also said. Brazilian sugarcane, the best energy performer, yields about eight times the energy for every unit used in its production. Probably the worst example is some of the maize corn ethanol grown in the mid-west of America. It is doubtful whether that energy source yields as much energy as is required to produce it. It source also shelters behind a massive tariff barrier of 54 cents per gallon which is intended to ensure that this burgeoning industry in the mid-west is not undermined by the much more efficient sugarcane ethanol from Brazil. The committee wrestled with the environmental credentials of biofuels, and I agree with the report that it should be possible to have verification on a European scale. There are assurance schemes but it is much more problematic to roll them out on a global scale. We need only think of what is happening with the illegal felling of timber from the Amazon basin, northern Borneo and many other countries. We know that a large amount of the wood that we import is illegally felled. In other words , the forest stewardship schemes which have been around a long time simply have not worked. I am absolutely certain that it willbe just the same with the verification of biofuels. The concern of Kew and others that we will degrade the rainforests as we encourage higher targets for biofuels are a real worry. What is needed is not so much encouragementto maximise biofuel production in the part of the world where it is most efficient as carbon creditsfor conserving forests. The EU Emissions Trading Scheme for carbon credits does not include land use. It would be an enormous advantage if you could give credit to Brazil, Malaysia, Indonesia and other countries for conserving what is already there and not giving credits to industries that pollute less than they used to. I am sure that that needs careful examination. I agree with the noble Lord, Lord Sewel, that the future lies in the second generation. The second generation is all about using cellulose from any biodegradable source, whether it is timber, thinnings or urban waste. It does not matter what it is; provided that it is a plant and you can degrade it with enzymes to its constituent sugars, it is a source of fuel which you can use for transportation or anything. The noble Lord, Lord Rooker, was asked when giving evidence what the potential was. Although he gave rather a long time scale—I think he said it was 2050—he said that it was quite exciting and we might get up to a third of our energy resources from this source. I am not sure whether he was talking about transport or all energy sectors. Either way, a lot of people in the biofuels sector are wedded to the first generation and say, ““No one has ever produced this commercially; it is a long way ahead””. Again, one should be cautious about this. It is moving much faster. Since this report was published in February, the United States Department ofEnergy has announced awards of £385 million forsix commercial cellulosic ethanol refineries, with a completion date of 2009-11. The quantities are not enormous—it will produce only 130 million gallons, compared with the 5 billion produced from corn-based ethanol—but it is a significant breakthrough when these commercial schemes are up and running. There is already a pilot scheme in Ottawa which has been running for some time. It must be admitted that the cost is currently uneconomic. It must come down by at least half and probably by two-thirds. The evidence of this new technology is very promising. The future lies in turning these waste materials—timber thinnings, grass cuttings and the like; all sorts of waste—into transportation fuel. That is enormously valuable. We have the infrastructure for using biofuels because of the present first generation. We must put all our resources into planning for the second generation, not commit ourselves to land use which we might all regret for the first generation.