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Energy: Biofuels (EUC Report)

My Lords, it is a great pleasure to follow the noble Lord, Lord Palmer, in this debate. He was an early prophet of biofuels, and it was the fact that we were about to look into biofuels that made him eager to rejoin the EU sub-committee of which I had the pleasure of being chairman for a few years. I was also delighted that the noble Lord, Lord Sewel, who opened the debate today, was willing to succeed me as chairman of that sub-committee. One of our problems during our inquiry was to remind ourselves all the time that we were an EU scrutiny committee. There was an obvious tendency to think about what we were doing in the UK, our problems and how we were tackling biofuels in the UK, but not enough about the EU. I shall come to that in the second half of my remarks. It was a pleasure to be on the committee with so many people with agricultural experience; not only the noble Lord, Lord Palmer, but the noble Lord, Lord Cameron, who has already spoken, and my noble friend Lord Plumb, who is going to speak. The previous chairman of the committee was my noble friend Lord Selborne, who has also spoken already and has a great deal of agricultural knowledge. We brought a good deal of expertise to our subject, but the noble Lord, Lord Sewel, is right to say that our timing was interesting, at least. When we started looking at the whole question of biofuels and we had this rather gentle subtitle, ““From Field to Fuel””, it was a relatively quiet matter; it was relatively shallow and calm. As others have said today, the six months since we produced our report have seen an almost hectic increase of interest in this matter, fired by the increasing certainty of scientists that climate change is a real danger and that one important way of dealing with it in the future will be to find alternative methods of producing energy that either are not dependent on coal or oil at all or have a very low carbon consequence. My noble friend Lord MacGregor said that this has taken us into some unforeseen consequences already; they were not seen when we wrote our report. This centres on the fact that, even at this stage, people look at other sources of biofuels and energy—sugar cane, palm oil, maize corn, rape seed oil and wheat—and consider how those can be used as quickly as possible. One rather delightful result of that that I was told about the other day is that cars in Indianapolis, the home of motor racing in the United States, all have to run on ethanol rather than petrol. That means that the atmosphere is now a nice smell of corn fritters rather than petrol. That is a pleasant consequence. But the rush to create facilities to produce eco-friendly alternatives made from crops, plants and animal fats has had consequences that are clearly worrying or at best unclear. The noble Lord, Lord Palmer, mentioned how much prices have goneup. Wheat prices in the UK have increased by approximately one third from below £80 per tonne to above £100 in the course of the past eight months. In the United States, the maize corn price is at its highest for 10 years. In August, the price of a bushel of maize corn was $1.87. At the end of last week, the Chicago futures market quoted a price of $3.74—doubling in six months. This has led to a lot of alarmist talk in the newspapers about the consequences. The Guardian and the Independent have been the leaders in that, but I was interested to see in last week’s Sunday Times a feature by Kathryn Cooper, which states: "““The race for biofuels is not without risks. Already there have been food riots in Mexico, where the soaring cost of corn has pushed the price of the country’s staple tortilla beyond the reach of many of its poorest people. And the rainforests of Indonesia and Malaysia are being destroyed at a quicker pace as farmers clear the land to produce palm oil, another biofuel””." The article goes on to quote an investor from a company called Invesco, saying that, "““soaring food prices could be one of the factors that push UK interest rates to 5.75 % or even 6% because food is a big part of the Bank of England’s inflation basket””." Such was the effect of that comment, that some of your Lordships will doubtless have noted that when Tesco produced its record profit for the past year of about £2.5 billion, one or two critics said, ““Goodness, in the year ahead it is going to be even more, because food prices are going to go up and that will enable Tesco to have a higher profit margin on food””. I will not say horror of horrors, but I was interested that that was a reaction to the vast success of Tesco. This is the other side of the story. I have been thinking about this debate and these worrying comments, and I am reminded of the remarks of Lord Melbourne on the subject of Catholic emancipation. He said, "““What all the wise men promised has not happened, and what all the damn fools said would happen has come to pass””." There must be a great duty on us all to see that that is not the epitaph on the move into biofuels that we are talking about this afternoon. A real duty lies on the developed countries—the USA, Europe, Japan and ourselves—whose carbon emissions have created so much of the problem. We have a duty to see that the apocalyptic warnings that I have talked about are warnings only and not realised in practice. In that context, I am delighted to see that Defra has created the National Non-Food Crops Centre in York, which is encouraging farmers—to pick up the point made by the noble Lord, Lord Palmer—to use the 1 million hectares of arable land that it considers available in the UK to grow oilseed rape and wheat that is needed to meet our RTFO obligation of 5 per cent of road transport. As noble Lords this afternoon have said, experts at that centre are also investigating the second generation of biofuels and how it must come from a wider range of biomass, straw and forestry residues, for example, than the first generation. Finally, let us consider the position of the EU in this. The EU set a minimum of 10 per cent to come from biofuels by 2020—and then at the Council at the beginning of March proposed an overarching 20 per cent cut in greenhouse gas emissions by 2020. This led the Financial Times on 10 March to come out with a major article which started, almost in capitals, and with an exclamation mark: "““The European Union has agreed to something! Its deal to cut greenhouse gas emissions by 20 per cent is far from perfect… but reaching any agreement on such a painful measure, in a union of 27 members, is an achievement. Europe has shown that it is serous about climate change””." For those of us on the European Scrutiny Committee, this is at the heart of the matter. There will be huge haggling in the EU as to how that 10 or 20 per cent is divided between the countries, but surely here is a leading role for the European Union to play. No nation can solve the problem of climate change and cutting greenhouse gas emissions by themselves, nor can the EU—but it can give an example. It can persuade other European countries to move in the right direction by a mixture of firmness, co-operation and wisdom and give a vital lead. I very much hope that this is the challenge to which the EU Commission and Council will rise, as they are offering a carrot to the rest of the world by saying that in Europe we will cut emissions by 10 per cent more if others follow suit. It is in that context that the EU has to show muscle and the stick at times, too. EU action after 2020 will depend on others contributing as well. As worries about climate change increase, as they certainly will, the EU can in this context convince doubters of the Commission and Council of their usefulness and courage. This is not a challenge that can be avoided. The EU, in my judgment, as a coming together of 27 nations, is in the centre of the biofuels arena. That is where they have to stay—and the EU will be judged by what it achieves in this context.