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Energy: Biofuels (EUC Report)

My Lords, the noble Lord, Lord Sewel, introduced this debate with his usual flair and wit, and I thank him for introducing the report today. Like many other noble Lords, I regret that there has been a gap of five months between the publication of this topical report and this debate. I declare an interest as a non-executive director of a farming company in Cumbria. "““Say goodbye to your petrol station””." So runs the advertorial from Biomotors Ltd in the November/December issue of The Monitor, Blue Skies. It states: "““A simple upgrade will let most diesel engines run on locally grown rapeseed oil, cold pressed on the farm. It requires no chemical processing, generates no waste, and the co-products of seed cake and straw have multiple uses such as biomass heating””. " However, writing in the Sun last autumn, Professor James Lovelock took the oil companies to task when he said: "““The one renewable energy [vehicles] will use is biofuel, which is made from crops. This fuel is heavily subsidised by you and me in taxes and will be a nice little earner for the oil companies while it lasts. Far from being green, biofuel is the most environmentally destructive of all energy sources. Huge areas of land would be needed to grow the biofuel and it can only be taken at the expense of land for food crops and land for natural forests that keep the air clean and breathable””." I congratulate Sub-Committee D on plunging into this debate and bringing some reason and balance to the extreme views that I have just quoted. The report, The EU Strategy on Biofuels: From Field to Fuel, treads a careful line between the promotion of biofuels per se and the encouragement of the biofuels industry. It identifies three justifications for biofuels; like my noble friends Lord Selborne and Lord MacGregor of Pulham Market, I should like to look at those. The first is the security of energy supply; the second is the Government’s agenda for CO2 saving; and the third is the commitment to agricultural development through growing biofuels in this country. The UK is taking tentative steps towards committing itself to the target set for 2010 under Article 3 of the EU biofuels directive, although the 3.5 per cent by energy offered by the UK falls somewhat short of the 5.75 per cent adopted by the majority of the other member states. Only Italy has opted for an even lower published target of 2.5 per cent. Without such a target and, as mentioned by the noble Lord, Lord Cameron of Dillington, without the tax incentives that go with it, in my view the industry would not get the kick-start it requires to become a sustainable industry in its own right. A few years ago the tax incentive to encourage motorists to switch from leaded to unleaded petrol had the desired effect. That demonstrates that, with the right fiscal incentive, the buying power of consumers can encourage effective investment by the oil companies and possibly British Sugar. The report is right to state that the EU needs to, "““develop an appropriate policy framework and Member States to provide appropriate incentives to encourage further investment in production facilities””." Will the Minister say whether the excise duty on biodiesel and bioethanol, which was lowered by 20p a litre, effective from January 2005 on this three-year rolling programme, will be continued after 2009-10? What criteria would be used to vary it? If the UK falls short of our target for 2010, surely it would notbe sensible to withdraw the incentive to increase production. The UK Government have pinpointed climate change as the number-one reason for promoting biofuel’s use. It is important to understand that the energy consumed in production and transformation into biofuels may be at least nearly equal to, or even more than, the energy they deliver. That warning was given to us by the noble Lord, Lord Cameron of Dillington, and my noble friend Lord Selborne. That issue has split the environmental lobby, where some leading figures have denounced biofuels as a global disaster. In the USA the Worldwatch Institute estimates that to fill a tank of a typical SUV would use enough grain to feed one person for an entire year. The Government’s 2006 energy review proposes a renewable transport fuel obligation to be introduced in 2008-09. It will require suppliers of fuel to ensure that a proportion of their sales are from renewable sources, with the obligation rising to 5 per cent by 2010. The energy review estimates that this will save one million tonnes of carbon in 2010. But the report is cautious about that. The committee considered some form of carbon certification to be desirable and would wish the European Commission to establish a European-wide system of certification for both imported and domestically produced biofuels and feedstocks, a point highlighted by the noble Lord, Lord Sewel. When considering agricultural development and growing crops dedicated to the production of biofuel, one’s eyes turn immediately to the USA, where President Bush has given his support to the increase in land use for biofuels. At present I understand that it used 15 per cent of its corn crop for this purpose, and my noble friend has indicated that that will be increased by another 15 per cent. It is the second most important, cost-effective crop for producing biofuels after sugar cane, and 2 per cent of non-diesel transport fuel is biofuel. A report from the Worldwatch Institute, after warning of significant agricultural and ecological risks, finds that the technology has the potential to increase energy security, create jobs, save foreign exchange, reduce local pollution and emissions of greenhouse gases, and create new economic opportunities in rural areas. I agree with my noble friends Lord MacGregor and Lord Plumb about the land available in this country and in the northern hemisphere. We only have to look at the set-aside policy to understand that that was put in place to reduce the amount of land taken out for food production. My noble friend Lord Renton of Mount Harry indicated that corn prices have already risen on the Chicago exchanges. We need a careful balance between the increase in corn and wheat prices and the price of food. Nobody would deny that farmers are due an increase in their raw material prices, after decades of stagnation. I am sure that that would be echoed by my noble friend Lord Plumb. It is not for me to judge whether sugar beet or wheat should provide the feedstock of this country, but any increase in production facilities will divert crops away from food and into biofuel production. The report correctly urges a strong national commitment to agricultural economic development through biofuels. Like other noble Lords, I consider that the future will most likely lie in the second-generation production of biofuels, using cellulose and all the waste mentioned in this debate. Cellulosic ethanol has a potential to replace nearly 23 per cent of the EU25 petrol market, according to a consortium including the European Commission’s Joint Research Centre. First-generation biofuels could only provide 4.2 per cent. The Nobel laureate Steven Chu, director of the Lawrence Berkeley National Laboratory in California, said that the potential yield from converting cellulose to biofuel could be five or 10 times greater than that for corn. The committee’s report makes excellent reading. Although it limits itself to dealing with the EU biofuels directive, the evidence taken demonstrates that we have some way to go before it is clear whether biofuels are the future for the transport sector. We cannot escape the fact that global warming is with us, and we should take reasonable and sensible stepsto limit carbon emissions without losing sight of sustainable development.