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Renewable Transport Fuel Obligations Order 2007

rose to move, That the draft order laid before the House on 9 October be approved. 27th Report from the Statutory Instruments Committee and 31st Report from the Merits Committee. The noble Lord said: My Lords, the draft Renewable Transport Fuel Obligations Order 2007 which is before us today will give legal effect to the Government’s renewable transport fuel obligation, or the RTFO as it has become affectionately known. The draft is brought under Sections 124 and 192 of the Energy Act 2004. The RTFO is an integral part of the Government’s climate change programme and is set to deliver significant and immediate carbon savings from the transport sector. It will do this by reducing the amount of carbon from fossil fuels that is emitted into the atmosphere. The precise amount of carbon that the RTFO saves will, of course, depend on a wide range of factors, about which I am sure we will hear more during the debate. The RTFO is due to become the Government’s primary support mechanism for renewable transport fuels. Today’s renewable transport fuels are biofuels—in other words, fossil fuels substitutes derived from crops and other forms of biomass. These fuels reduce overall carbon emissions because the carbon that they emit on combustion has recently been captured from the atmosphere during cultivation whereas fossil fuels release carbon that has been trapped under the surface for millions of years. The RTFO has been under development since 2004, when the Energy Act gave us the necessary primary powers to introduce an obligation along these lines. The detail has been the subject of much discussion with stakeholders over the past three years, including two major public consultations during 2007. This draft order is a culmination of that work and sets out the detail of how the RTFO will work. In brief, the RTFO will require suppliers of fossil-based road transport fuels in the United Kingdom to redeem a certain number of renewable transport fuels certificates with the Renewable Fuels Agency each year, or to pay a buy-out price. The transport fuels suppliers will be able to acquire these certificates either by supplying renewable transport fuels themselves or by purchasing them from other transport fuels suppliers who have put renewable transport fuels onto the market. They may also be able to buy them from traders in certificates. Barring any unforeseen rapid changes in the economics of transportation fuel we expect transport fuels suppliers to fulfil their obligations without significant resort to the buy-out option. The buy-out price acts as a safety valve to prevent steep increases in the price of petrol and diesel at the pump as a result of increases in the price differential between biofuels and fossil fuels. The draft RTFO order sets out a lot of the detail of how this will work. For example, it defines those suppliers who are obligated under the RTFO, primarily UK refiners and importers of fossil fuels; it lists those fuels that are eligible for renewable transport fuel certificates—that is, biodiesel, bioethanol and natural road-fuel gas produced from biomass, commonly known as biogas; it sets the level of the obligation, which is 2.5 per cent in the first year rising to 5 per cent in 2010-11; and it establishes a new non-departmental public body, the Office of the Renewable Fuels Agency, to administer the RTFO, and sets out the powers and duties of that body. Those duties include a duty to report to Parliament annually on the effectiveness of the RTFO. In addition, it sets out how renewable transport fuel certificates are to be applied for and how they are to be used. It provides that certificates can be transferred, banked for later use or revoked. It sets out the level of the buy-out price, and provides for the recycling of buy-out payments. Finally, it sets out the penalties that may apply in various circumstances. Appeals against penalties may, in the first instance, be made to the administrator. If the appellant wishes to appeal further, the Energy Act 2004 sets out that he may have recourse to the court. The draft RTFO order should deliver significant and immediate carbon savings from the transport sector. It will provide long-term certainty for the market, and it is, I believe, the right way for us to be supporting renewable transport fuels. I beg to move. Moved, That the draft order laid before the House on 9 October be approved. 27th Report from the Statutory Instruments Committee and 31st Report from the Merits Committee.—(Lord Bassam of Brighton.)