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Energy: Biofuels (EUC Report)

My Lords, my interests are listed in the report on page 46. I, too, would like to put on record how sad it is that we published it on20 November, and that it has taken five months to find a slot in which to debate it, when the biofuel movement is changing literally daily. I also pay tribute to the noble Lord, Lord Renton, for chairing the committee that produced this important report, and thank our specialist adviser, Peter Clery, who was making the case for biofuels when Whitehall thought that the topic was just a joke and that fossil-based LPG was the CO2-saving fuel of the future. He was one of the first to stress the energy-saving potential of biofuels. We are debating a report of EU provenance, and noble Lords might wish to note that biofuels were favoured by the European Commission primarily as an alternative energy source, not as a C02-saving policy. The first official announcement of the UK Renewable Transport Fuel Obligation was announced in this House in November 2005. This followed the introduction of the 20p per litre fuel duty rebates for biofuels. Here, I, too, would like to pay tribute to my friend the late Lord Carter who played such a crucial part in persuading the noble Lord, Lord Whitty, who was then a Defra Minister, to accept the principle of an RTFO. I well remember the excitement when the noble Lord originally accepted the amendment to the Energy Act put forward by the British Association for Biofuels and Oils, of which I was then president, and, in particular, the speech of the noble Lord, Lord Ezra, when he thanked the Minister for accepting our amendment. It literally brought tears to my eyes and I am sure that the noble Lord, Lord MacGregor, will remember that occasion. As other noble Lords have mentioned, the present UK proposal is for a 2.5 per cent biofuel obligation in 2008, rising to 5 per cent by volume by the end of 2010. The EU target is 5.75 per cent by energy by 2010. I make no apology for the complication of all these many figures that we will have to quote throughout this debate. The oil companies have predicted that meeting the EU target will require vast amounts of imports from countries such as Brazil, which has been mentioned by other noble Lords. ““We will be swapping oil from Saudi Arabia for biofuels from Brazil and Malaysia. Does that help energy security?””, asked Peter Tjan of the European Petroleum Industry Association only last month. European biodiesel production increased some33 per cent to more than 4 million tonnes in 2006 from just over 3 million tonnes in 2005. Germanywas by far the largest producer. EU fuel ethanol production rose by 71 per cent to 1.5 million litres in 2006 from 913 million in 2005, with Germany and Spain by far the largest producers. Production of biofuels in the United Kingdom in 2006 was approximately 260,000 tonnes—0.53 per cent of total road fuels. That is more than double the 2005 figure, but it is still way below the EU targets. Of this total, 167,000 tonnes was biodiesel, 0.7 per cent of diesel sales, and 93,000 tonnes of bioethanol, which equates to 0.4 per cent of petrol sales, all of which was imported. Virtually all UK bioethanol production went to the high value drinks industry and not, sadly, into road transport fuel. Our own biodiesel industry relies mostly on imported feedstocks, apart from the successful Argent plant in Scotland, which uses mainly recycled cooking oil and tallows. The Biofuels Corporation plant on Teesside, in which I declare a tiny interest as a very small shareholder, is battling with increased palm oil prices and a crude oil price rather below the $70 barrel mark. The UK, unfortunately, continues to lag behind other EU member states in domestic biofuel production and in the proportion of biofuels in the national mix. France, a leading biofuel producer, achieved 1.75 per cent of biofuel incorporation last year and anticipates 7 per cent by the end of 2010. The UK has only a very small but growing biofuels industry, which is to a large extent dependant on imports—chiefly palm and soya oil. No significant amounts of UK oilseed rape are thought to be involved in UK biodiesel production. The increased world demand for biofuel feedstocks highlights an important matter which I wish to bring to your Lordships’ attention. The competition for land between food and fuel is a new phenomenon, which will be of increasing significance. This conflict has already surfaced in the United States where demand for corn for ethanol as a road fuel has driven prices substantially higher, much to the concern of food manufacturers and of course, as a result, their consumer customers. The world price of palm oil has gone up in a year from around $440 per tonne ex-Rotterdam to over $600 per tonne. In the real world, as the price of fossil fuelsrises, the prices of all agricultural commodities are underpinned, as will be the value of land on which these crops are grown. It is a shortage of land and fresh water which could limit economic development if crude oil stays much above the $70 to $80 a barrel mark, although major developments in geothermal energy could improve the picture substantially. This brings me to the crucial point which I wish to make. Compared with many other countries in the EU and indeed outside it, the United Kingdom is relatively short of land in relation to our population. More than in most developed countries, land is a scarce resource. We shall need it increasingly in the future for both food and fuel. Decreasing supplies of fossil fuels, global warming and rising sea levels are the reality that we have to face today, the causes of which will be the subject of debate as more evidence comes forward that man-made CO2 is not the only cause of climate change. But what is indisputable is that we shall need all the land we can get for both food and fuel security, and this is why the EU obligatory 10 per cent set aside is such a scandal, as indeed the noble Lord, Lord MacGregor, mentioned. Only yesterday there was a headline in most of the newspapers, including the Daily Telegraph, as well as a slot on Radio 4, from which I quote: "““Growing demand for biofuels ‘could lead to food shortages’””." That is according to the leading government adviser, also mentioned by the noble Lord, Lord Sewel, Professor Bill McKelvey, the chief executive of the Scottish Agricultural College in Edinburgh—here I must declare a further interest as a former student. The thought that we will always be able to obtain affordable supplies of food, biofuel and fossil fuels is imprudent. It is short-sighted and it is comforting to know that the anxiety is shared by people of such eminence and expertise as Professor McKelvey, even though sadly it may not be shared by Her Majesty’s current Secretary of State for Environment, Food and Rural Affairs. I urge Her Majesty’s Government to take this on board. In answer to a Parliamentary Question I recently put to the Government, PQ 2107, the Ministerof State, the noble Lord, Lord Rooker, was, to my amazement, still talking about making space for water, which is Defra shorthand for the organised flooding of our land. May I ask that Her Majesty’s Government abandon their present policy of allowing good farmland to be inundated by rising sea levels and substitute it with a policy of strengtheningour flood defences against the rising water levels associated with global warming, thus not just maintaining but increasing the land available for food and fuel production? Climate change is with us. It always has been and it always will be. The world is getting warmer, though there is legitimate reason to ask how much is due to natural solar activity and how much to man-made carbon dioxide. Is an increase of 10 per cent in CO2 levels from 300 parts per million to 330 ppm really the only cause of current warming? What is certain is that while we cannot predict the future, we can and should plan for possible alternatives; hence the importance of biofuels, whether they be first or second generation. Professor Martin Parry, co-chairman of the Intergovernmental Panel on Climate Change, reported in the Daily Telegraph of 7 April that actions to adapt to climate change such as improved sea defences and new forms of agriculture should take priority over our efforts to reduce greenhouse gases which would take years to have any effect. Global warming for the world could mean cooling for the UK if the warming effects of the Gulf Stream slow,as indeed has happened before in times of global warming, which would give us a climate akin to that of the Hudson Bay. We simply do not know. Biofuels have a legitimate role to play as alternatives to declining fossil fuels and, in the long term, to reducing atmospheric pollution and CO2 levels. In the context of this debate on the European strategy on biofuels, I ask that the United Kingdom takes a lead on developing a coherent EU policy. This House led the way in establishing the principle of a RTFO, now widely accepted within the European Union. We must do the same for land policies for our future food and indeed fuel needs. I also ask that Her Majesty’s Government decide which department or Minister has overall responsibility for these matters. I know the noble Lord, Lord Ezra, feels very strongly about this, as he raised it at Question Time the other day. The last time I had a Question on biofuels, there was serious uncertainty about whether the Treasury, Defra, the DTI or the Department for Transport were responsible for the Answer. We need a dedicated department with overall responsibilities for these issues, as they will increasingly involve the adjustments to the UK economy, particularly our agriculture, to what could be very rapid changes to our climate. We must be prepared to adapt to what is almost certainly an unstoppable period of global warming allied to a declining supply to what has been our staple form of energy, fossil oil. That is the challenge. Liquid biofuels have their part to play, along with other forms of sustainable energy, improved sea defences and worldwide changes to agriculture and marine husbandry. I hope the United Kingdom will lead on these important issues. We must not getleft behind. I hope the Minister will give us that reassurance today.