Biofuels

HC Deb 15 October 2003 vol 411 cc69-92WH

Motion made, and Question proposed, That the sitting be now adjourned.— [Mr. Bradshaw]

9.30 am

Mrs. Gillian Shephard (South-West Norfolk)

I am delighted to have the chance to raise this important issue. As can be seen by the attendance here today in the Chamber, there is strong interest from all parties.

I shall make the case that the Government should seriously consider increasing their support for a sustainable biofuels policy on economic and environmental grounds, and for fuel security. In the past few months, the number of questions to Ministers, contributions to debates and early-day motions, together with the work being done by the Select Committee on Environment, Food and Rural Affairs, of which there are several members present, have shown that there is extensive support for increased measures to encourage the development of a biofuels industry in the United Kingdom.

In Norfolk, we practise what I am preaching today. After our disappointment over the amount of support given to biofuels in the Budget, we formed an all-party group in. Norfolk. I am delighted to see colleagues from all parties here in support. MEPs also support us, as do all the local authorities in Norfolk, the university of East Anglia, the Institute of Food Research, British Sugar, the road haulage industry, fuel and petroleum companies, the Royal Norfolk Agricultural Association, the National Farmers Union, the Country Land and Business Association, and the East of England Development Agency. We have had substantial and very welcome support from all our local media. Now that I have secured this debate, for which I am very grateful, our group's next step is to bring a delegation to meet relevant Ministers.

Outside Norfolk, there is strong support for further measures to help biofuels from the CBI, major manufacturers, the Road Haulage Association, Friends of the Earth, and the British Chambers of Commerce, which will make a strong submission to the Chancellor on the Budget. This is an interesting and diverse line-up of supporters, and the Government would be well advised to take notice of them.

The collective view from inside and outside the House is that, although the Government's duty reduction of 20p a litre for biofuels, which was announced in the last Budget, was very welcome, it is not enough to stimulate further development of the industry. If the Government really mean what they say, a further duty reduction and/or other measures are necessary. It is just as necessary that there be a clear cross-departmental Government strategy to achieve the Government's stated objections—I am sorry: objectives, although they may have objections—in this policy area.

The Government is short neither of advice for the case nor of externally set targets. They have not been short of pronouncements either. Like everyone else, they must know that the public want access to environmentally friendly fuels without the expense of switching to hybrid vehicles or to vehicles that have to be adapted. They should be as shocked as everyone else by the fact that rape seed is exported from the UK by road and sea to Germany, where it is made into biodiesel and then imported back into this country by road and sea to be retailed here as environmentally friendly fuel. That speaks for itself.

The Government constantly repeat their commitment to the reduction of greenhouse gas emissions and carbon dioxide emissions. Research commissioned by the Government from Sheffield Hallam university shows that the reduction in CO₂ emissions from conventionally produced bioethanol would be more than 60 per cent. British Sugar says that, with its efficient means of production, it could increase that reduction to 70 per cent. However, the duty reduction of 20p per litre promised for January 2005 will not be enough to encourage investment in the development of the industry. The great fear is that it will do nothing more than encourage imports.

The Government have stated their intention of meeting the renewables targets by 2020, and the requirements of the EU biofuel directive by 2005.

Gregory Barker (Bexhill and Battle)

I am listening carefully to what my right hon. Friend has to say. Would she agree that although their moves are welcome, unless the Government go all the way and lower the tax hurdle to the trigger point at which capital will flow from the private sector to develop the industry, they may as well not bother? Missing by an inch is the same as missing by a mile.

Mrs. Shephard

My hon. Friend makes the point well. We hope that the Minister will clarify matters, but the simple fact is that neither of those targets can possibly be met with the UK biofuels industry in its current state, as our production of biodiesel is less than 10,000 tonnes per annum and we produce no bioethanol for road use. What real measures are being planned by the Government?

The Government are not short of stated aspirations. The report of the policy commission on the future of food and farming—the Curry report—states: England needs a long-term strategy for creating and exploiting opportunities in non-food crops, including starch and oils. This area should be a high priority for the research and technology transfers we have outlined. We recommend that the Government should reduce duty on biofuels to that charged on other clean fuels. We believe this will help processors to drive the market forward. Yes, and many others believe that to be so, but what is being done?

The Government are committed to reducing greenhouse gas and carbon dioxide emissions. They are persuaded of the need for fuel security. They are aware that they must meet renewables targets by 2020, and the requirements of the EU biofuels directive by 2005. They have made a start, which is welcome, but it is not enough. Are other countries doing better? The answer is yes, much better. I shall not say more about that, Mr. Deputy Speaker, because many other hon. Members wish to speak, but the facts may emerge during questions or interventions. Most European countries are doing a great deal better than we are, as are the United States and Brazil.

It has been difficult to discover whether the Government have a cross-departmental strategy. It has also been difficult to persuade Ministers to reveal the reasons that led to the decision to make the 20p reduction in duty that was announced in the Budget. We have also had a problem trying to discover the rationale for the liquefied petroleum gas rate of 41 p on offer. Was it based on the carbon dioxide reduction of 12 per cent. that it offers, which is a great deal less than that offered by bioethanol, or on air quality benefits, which are similar to those derived from bioethanol? Apparently, we are not to be told.

The external targets loom, and environmentally conscious fuel users seem more aware than the Government of the present hazards. I have been sent a copy of a letter from Mr. Peter Howe, a constituent of the hon. Member for North Norfolk (Norman Lamb), who runs a successful cruiser business on the Norfolk broads. In a letter to the Chancellor of the Exchequer, dated 6 October, he wrote: There are, however, significant barriers to the use of the fuel being extended throughout the Broads, particularly because the price of the material is so much greater than conventional fossil fuel. While we are, at present, prepared to pay a premium because of our belief that the fuel is so much better for the environment, other businesses may not be in a position to take the same view. Thanks to Mr. Howe, and thanks also to the work done by the hon. Member for North Norfolk, a loophole has been discovered. However, if the Government mean what they say, it should not be up to others to find loopholes in their attempts to keep the environment clean, especially on the broads.

Mr. Dennis Thouless runs a biodiesel production business in Norfolk and Suffolk that is based in the constituency of my hon. Friend the Member for Mid-Norfolk (Mr. Simpson). Mr. Thouless reprocesses used cooking oil, but he has studied and is enthusiastic about the possibilities of using oil seed rape. However, Ruth Rawling of Cargill plc told the Select Committee: There is an extremely small cottage industry … at the moment in the UK producing biodiesel, but in order to have an industry which would really make a difference in terms of environmental benefits, in terms of our farmers or indeed in terms of being able to go into a petrol station and buy something which contained biodiesel, we do not yet have an industry and the reason is very similar; we do not think that the duty derogation is large enough to make the investment worthwhile. We have argued consistently for the last three years that we need a duty derogation around 28 pence per litre … and we still have not got there. We have only got 20 pence and that is why we do not have a biodiesel industry of any size. Mr. Thouless concurs. Fortunately for him, the forward-looking Breckland district council in Norfolk has just given him permission to expand his business. As Councillor Kemp said at the relevant meeting: This man is doing a fantastic job for the environment. We should remove the conditions and let him carry on. I wish that the Government took the same view.

The same point is made about bioethanol in the excellent study produced by the East of England Development Agency, which was published in July.

What response have the Government collectively made to the conclusions of the report, and what action is to be taken as a consequence? The most interesting feature of the report is that it was a Government agency, and not the Government, that saw the need for a proper economic, environmental and cross-departmental examination of the potential of biofuels. The report will have been seen by many hon. Members present who are interested in the issue. I will not go into detail, but it proposes a selection of options—I have the details, but I do not want to bore the Chamber or you, Mr. Deputy Speaker, which would lead to a fate worse than death, I know. Some propose a further cut in fuel duty, some infrastructure improvements and some grants for other options for the Government to consider. We hope that the Minister will give his view on those options.

In taking evidence for its report on biofuels, the Select Committee has made it its business to ask those giving evidence to sign up behind such options. As far as I could ascertain, there was such an agreement across the board. Obviously I cannot pre-empt the report, which will be produced in good time for the Chancellor's pre-Budget review. However, I will go so far as to tell the Minister that I think that it would be difficult for the Government this time to argue that there is no agreed view across the interests concerned. It would be nice if we were able to say the same for the Departments involved.

There are five Departments involved in the issue. No doubt as many as that are needed if we are to believe that the Government are as serious as they say they are about meeting their environmental and fuel security targets. The only problem is that no one Department is in charge of the policy. That emerged from the as yet uncorrected oral public evidence given to the Committee by Lord Whitty, the Under-Secretary of State for Environment, Food and Rural Affairs, on 15 September. The Minister was asked which Department was in charge of the Government's policy on biofuels. He replied: We have an overall committee in Government following up the Energy White Paper and also as far as the transport side is concerned on low costs fuels, within that different departments have different responsibilities: Defra is responsible for the agriculture environmental dimension, air quality and climate change, et cetera and agricultural production and agricultural markets; broadly speaking the DTI is responsible for the technology and the capital investment and the DfT is responsible for the vehicle fuel dimension, although they do act very closely with Defra … at the end of the day the Treasury is responsible for all the fiscal side. The Minister was then asked if the Committee would be right in inferring from his answer that no one Department was in charge of the Government's policy on biofuels. He replied, "Yes, you would." He was then asked whether there was a group of Ministers who met to co-ordinate policy. He replied that there was, and that it met Not very often, maybe once a quarter. On the substance of the debate, the Minister said categorically that the 20p concession granted so far was not stimulating the needed investment to deliver the outcomes in the UK, and that what was needed was either incentive for investment, a greater duty cut or a combination of the two.

Does the Minister agree with the view of Lord Whitty, as stated to the Select Committee in public? Those points were put to the Economic Secretary to the Treasury at the Select Committee's public oral evidence meeting on 17 September. One might ask why these questions are not being put by one Minister to another, rather than through the intermediary of the Select Committee, but there we are.

Dr. Ian Gibson (Norwich, North)

The right hon. Lady talks about interaction between Departments, but does she see any possibility of interaction between the Departments' policies, such as on transport or trade and industry? Can any of the political aims of the different Departments be linked up?

Mrs. Shephard

The hon. Gentleman is referring to a useful meeting that Norfolk Members had yesterday on transport issues, at which that idea was raised. It is extraordinarily brilliant. It issued from the mouth of the hon. Gentleman, so one would expect that.

Mr. Keith Simpson (Mid-Norfolk)

That is enough.

Mrs. Shephard

My hon. Friend says that that is enough, so we will pursue the idea at a Norfolk level. Although one could say that that is our job, there are people who are paid to do it—they are called Ministers—and we are often told that we live in an age of joined-up government.

In the Economic Secretary's reply on the as yet uncorrected oral public evidence he rejected his ministerial colleague's view. He said: As a government we are not convinced that the 20p cut will not produce the developments that we are looking for. No doubt the Economic Secretary will one day convey that view to the Minister responsible for agriculture, but meanwhile what is the Government's view? I want this Minister to tell us at the end of the debate.

Mr. Michael Jack (Fylde)

Has my right hon. Friend had an opportunity to examine the further supplementary evidence sent by Lord Whitty at the Department for Environment, Food and Rural Affairs to the Select Committee during its biofuels inquiry? It illustrates considerable environmental and employment gains for agriculture, and discusses qualitative issues about biofuels made from rapeseed and other agricultural products. That is in stark contrast to a Treasury policy that continues to promote an industry that is in effect based on recycled cooking oil.

Mrs. Shephard

I have had an opportunity to study that evidence, and I hope that DEFRA sent a copy to the Treasury. To be fair to the Economic Secretary, he made it clear that the Government are considering a range of options.

I should like this Minister to throw light on another interesting point that his colleague made. On the European biofuels directive, he said that he does not accept that the indicative numbers set by the European directive are necessarily appropriate and the best thing for the UK. I thought that the Government had signed up to that measure, but perhaps the Minister will throw light on that.

There we have it. We have a Government who rightly preach their commitment to the environment. They make claims about their intention to observe their European and international obligations and their desire to establish and encourage manufacturing development, especially in areas where there is little. They have even been heard to say, though not loudly, that something might be done to help farmers, who have seen their annual incomes drop by 50 per cent. in successive years under this Government. However, in the one policy area of biofuels, they have the chance to demonstrate all those commitments to the environment—

Mr. David Drew (Stroud)

Will the right hon. Lady give way?

Mrs. Shephard

No, I am concluding my remarks. I hope that the hon. Gentleman will make his own contribution.

The Government have a chance to demonstrate their commitment to the environment, to Europe, to the international community, to the development of indigenous manufacturing industry and to the maintenance of rural prosperity—all in one policy area. The Minister must tell the House this morning how he sees these vital questions being taken forward by the Government.

9.48 am

Paddy Tipping (Sherwood)

I am delighted to follow the right hon. Member for South-West Norfolk (Mrs. Shephard). I reinforce her initial comments that the biofuels campaign has support across the parties and across the country—within and outside Parliament. I am delighted that this debate is taking place. I hope that my hon. Friend the Minister, who takes a close interest in this matter, will listen to the voices and talk to his colleagues across Government.

The Government support biofuels, but I shall argue that the support needs to be converted into action. Unless priorities, policies and an action plan are produced, the United Kingdom will be put at a competitive disadvantage. The Government's position is clearly set out in the energy White Paper published earlier this year. I need not quote all that the White Paper says about biofuels, but suffice it to say that it recognises their value. Paragraph 5.21 comments: Drawing on the Low Carbon Vehicle Partnership and other expert knowledge, we will over the next year produce an assessment of the overall energy implications of both a hydrogen economy, and of large-scale use of biomass-based fuels". That is a clear commitment to produce an action plan within a year. The White Paper was published in February, and it is now six months on. When will the action plan be published? Action has already been taken. It has been made clear that, following the 20p reduction for biodiesel, a similar reduction in duty on bioethanol will be introduced from 1 January 2005. The essential argument is whether that policy is sufficient to enable proper production in the UK. We need to consider the players in the field, particularly Cargill and British Sugar, which, in their submissions to DEFRA and the Treasury, made it clear that the 20p reduction will not create an indigenous production base.

Mr. John Horam (Orpington)

May I reinforce the point that we need to develop a clear implementation plan for the energy White Paper? The hon. Gentleman told us that the Government have not yet said when that will be forthcoming. Could the Minister make it clear what the Government have in mind? It must be something more than what is on the table already.

Paddy Tipping

The hon. Gentleman, who has a good deal of knowledge of, and a long commitment to, these issues, will know that the essential, broader criticism of the energy White Paper is that the mechanism to implement it is extremely weak. A sustainability panel reporting to two Secretaries of State will not effect the radical changes set out in the White Paper. Part of the problem, as the right hon. Lady said, is that different Departments are involved in the discussion about biofuels. No single Department is taking ownership of it. The situation is worse than she outlined, because Ministers are making contradictory statements.

Lord Whitty, a Minister at DEFRA, told the Select Committee on Environment, Food and Rural Affairs that the EU biofuels directive targets would be met. My hon. Friend the Economic Secretary to the Treasury, who has already featured in this debate, made it clear to members that those were indicative targets, and that it was important to get the trajectory right. There is a difference of opinion between two Ministers.

The DEFRA Minister also told the Select Committee that he wanted to see UK-based production, as he thought that there would be benefits to that. By contrast, the Economic Secretary underplayed that, saying that it was unnecessary, but that it was necessary to accrue environmental gains, and that the best gains could be achieved by importing biofuels. It is essential that the Government speak with one voice, because the clock is ticking and the EU biofuels directive has now been published. The Government must produce proposals by next summer on how to meet those targets. I understand that there will be consultation in February to April next year, so it will probably not be concluded until after next year's Budget. Those who produce crops that could be used in the development of biofuels have a planting cycle of 15 months. We need clear and consistent policy statements now from all Departments if we are to meet European targets.

The difficulty is that the Treasury has an environmental model to assess rate reductions. It has already been said that the duty rate reductions on road fuel gases are way in excess of those available for biofuels. It is important to test the Treasury's model. Why is the duty reduction on road fuel gases equivalent to 40p per litre, whereas biofuels are being offered 20p per litre? In previous discussions, the Economic Secretary argued that the environmental benefit from biofuels is only 2.7p per litre.

I do not pretend to understand the methodology, but it is clear that we all need to know why there are such large variations in duty reduction. I draw the Minister's attention to a parliamentary written answer given on 8 September on the question of road gases versus biofuels. The Economic Secretary said: It would not, however, be appropriate to compare the duty incentive for biofuels with those for road fuel gases."—[Official Report, 8 September 2003; Vol. 410, c. 102W.] To put it bluntly, why not? After all, that is what the argument is about. I put it gently to the Minister that many people throughout the country feel strongly about biofuels, which have great environmental and economic benefits, especially for rural areas. I understand the Treasury's concern about not sucking in imports from the big players such as Spain and Brazil. However, the Government need to act by defining their policies and priorities and by producing an action plan that has a clear timetable. If they do not do so, the consequences are as likely as night following day. The United Kingdom will be dependent on income from abroad. That makes no sense for the economy, the environment or society.

Several hon. Members

rose—

Mr. Deputy Speaker

Order. The convention in these 90-minute Adjournment debates is that we commence the winding-up speeches 30 minutes before the end. Six hon. Members are seeking to catch my eye. The two Opposition spokesmen suggested that they should curtail their remarks a little to ensure that other hon. Members can take part in the debate. However, I suggest to those hon. Members that they should bear that generosity in mind when making their contributions and when accepting and responding to interventions.

9.58 am

Mr. Keith Simpson (Mid-Norfolk)

Thank you, Mr. Deputy Speaker. I shall bear your comments in mind. It is a pleasure to follow the hon. Member for Sherwood (Paddy Tipping), and I congratulate my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) on initiating the debate. She has led the initiative on biofuels in Norfolk, and is a senior member of the Select Committee on Environment, Food and Rural Affairs. Again, we see that there is a cross-party, cross-country approach to this issue.

Like the hon. Member for Sherwood and my right hon. Friend the Member for South-West Norfolk, I reinforce the point about joined-up government. It is absolutely crucial when developing Government policy to know which Department is taking the lead; is it DEFRA, the Department for Transport, the Department of Trade and Industry, Customs and Excise or the Treasury? We all want to discover not only what the Government's policy is, but which Department is in charge. Will a Cabinet Committee be set up to co-ordinate Government policy on biofuels? Many old Whitehall hands would argue that that would be better than government by sofa, which we have seen lately in other areas.

I raised the issue of biofuels in a debate on farming in Norfolk in Westminster Hall almost a year ago. I will not repeat the arguments that I made then, but I want to put several questions and observations to the Minister, some of which have been covered by the hon. Member for Sherwood and my right hon. Friend the Member for South-West Norfolk.

What research are the Government undertaking on the utilisation of biofuels in the UK? Sheffield Hallam university is working directly for the Government, but my right hon. Friend pointed out that the main work seems to have been done by a Government agency. Does the Minister's Department believe that an increase in the cultivation of biofuels will assist farming and benefit the environment—the two linked aspects? Does he know whether the Treasury is willing to zero rate biofuels to give UK industry a real boost? Would the action highlighted by the hon. Member for Sherwood lead to the UK market being flooded with European biofuels?

What will the impact be on the UK of the new European Union directive that will oblige Governments to support the production of biofuels, particularly from environmentally friendly fuels made from crops such as oilseed rape and sugar beet? The EU directive must be signed into national law by December 2004, and the EU insists that Governments set targets for increasing the production of biofuels over the next decade. The directive suggests a benchmark that biofuels should account for around 2 per cent. of an EU state's fuel market by 2005, and 5.75 per cent. by 2010. Is that target achievable or is it merely, as the hon. Member for Sherwood said, a trajectory or an ambition?

I understand that the Minister's Department supports biofuels and the EU directive. How can the Minister convince other Departments, particularly the Treasury, that they must comply with the directive, and how will it work on the ground? Biofuels could have a major impact on the environment, farming and transport in Norfolk and East Anglia. There is no doubt that they are cleaner and more efficient, and could offer a lifeline to the farming community. Will the Minister confirm that Franz Fischler, the EU Agriculture Commissioner, is a convert to the idea of using set-aside land to grow biofuels?

Farmers are conscious that they cannot argue the case for biofuels purely on the benefits to the farming industry. At a recent meeting in Norfolk, there was a wail of despair from a farmer who heard people discussing every aspect of biofuels except the benefits that they would bring to farmers. It is important to emphasis in the presence of a DEFRA Minister that biofuels will benefit farming. Despite the early proposal that farming should be omitted from the title of DEFRA when it was established, the Minister, having now been in his post, will understand the important contribution farmers make to food production and the environment.

East Anglia, with its long experience of arable farming, has the potential to become the UK centre for biofuel production by growing the raw materials for the new industry. Many factors need to be brought together, such as science and technology, which I am sure the hon. Member for Norwich, North (Dr. Gibson) wants to speak about, farming, environmental criteria and the requirements of transport. However—this is the reason for today's debate—the most significant role can be played by the Government. Unless the Government seize the initiative, as the hon. Member for Sherwood said, and make what Churchill would have called "action this day", the initiative will he with our European partners and other countries. There will be a biofuel market in the UK, but it will be supported by France, Germany, Spain, Brazil and others.

Mr. Drew

Will the hon. Gentleman give way?

Mr. Simpson

I am just about to finish. However, the hon. Gentleman is always the bridesmaid and never the blushing bride, so I will let him in.

Mr. Drew

We learned from the DEFRA trip to Brazil that its industry was kick-started by direct intervention, when its fuel producers were set a target to include a certain amount of bioethanol. Why are we not considering such a step in this country?

Mr. Simpson

I will pass that on to the Minister, as it was a good point well made. As the hon. Gentleman said, and as I was concluding, this all comes back to Government policy. The Minister may not be able to give one today, but we need a clear Government policy statement on biofuels that contains a clear agreement on the lead Department and, most importantly, has the active support of the Treasury. Lord Healy always said that the Treasury knew the cost of everything and the value of nothing. I hope that on this issue he will be proved wrong.

0.6 am

Dr. Alan Whitehead (Southampton, Test)

I, too, have spoken in this Chamber and elsewhere about the importance of biofuels to the future transport strategy of this country. I will try not to repeat too many of my comments. However, the debate is crucial to how we sort out our future transport strategy. Undoubtedly, we will have to move substantially away from a petrol-based fuel strategy for transport, and if we do not grasp that in the near future, as other hon. Members have said, we will be left far behind.

In grasping a strategy, there is a 'chicken and egg' problem whereby vehicle manufacturers will not deploy new technologies if there is no refuelling infrastructure, whereas energy supply companies are reluctant to invest while there is no significant demand; and with a range of vested interests competing for future markets and the constraint on public policy not to pick winners`, there is a danger that the pathway dilemma` will persist making actors hesitate to back any one technology decisively. They are not my words, but those of the Government energy review published last year. That seems to sum up the dilemma exactly.

The point to remember is that, although bioethanol is a pathway fuel, it is also a long-term fuel for a hydrogen economy. The production of hydrogen has to be done by finding the fuel to create the hydrogen, and if that fuel is a mineral fuel, the problem of CO₂ is simply shifted one stage up the process. Hydrogen can be created by using bioethanol, which provides a zero emission fuel right up the line. As hon. Members have pointed out, bioethanol can be used as a fuel in its own right, and, with the strategy in mind, the question is how one does that.

As my hon. Friend the Member for Stroud (Mr. Drew) pointed out, one problem in picking winners and alternative fuels has been infrastructure. Do we have to set up new pumps to distribute the fuel around the country? The investment process is about not just the production of the new alternative fuel, but its distribution and sale.

In my view, the simplest and most straightforward way of kick-starting an industry in this country and ensuring that it has a secure future is to put the stuff in our petrol now. That would prevent imports from being sucked in because of the trajectory of increasing use of the fuel, and allow a domestic industry to get going. That is not a brand new idea. As my hon. Friend the Member for Stroud said, 20 to 25 per cent. of petrol in Brazil is ethanol, up to 10 per cent. in Canada, Peru and Australia, up to 5 per cent. in India and 3 per cent. in Japan.

Other countries do it, so we could, too. Would it wreck car engines? No. Petrol with less than 10 per cent. ethanol probably does not require any adjustments, while petrol with 5 per cent. ethanol certainly does not. I am afraid that I must mention the word "escalator" now, because my suggestion is that we have an ethanol escalator policy. The idea is quite simple, quite straightforward: 1 per cent. more ethanol in petrol for the next five years.

Dr. Gibson

Is my hon. Friend aware that several cars in the Le Mans 24-hour race this year used a petrol-bioethanol mix?

Dr. Whitehead

I was not aware of that, but I am sure that they did very well.

Dr. Gibson

Yes, they did.

Dr. Whitehead

That is useful information.

The calculations on a 5 per cent. ethanol mix in petrol are quite simple. Getting the escalator to the top of the process would cut 1 per cent. of CO₂ emissions, which would be a substantial contribution on climate change and emissions saving in its own right.

The final question is whether we would have to import bioethanol, as hon. Members have suggested. The answer as far as I can see is that we would not necessarily have to do so. I am interested to hear the results of the Norfolk initiative. Bioethanol can be made relatively straightforwardly from crops, as other hon. Members have said. There is land available, and British Sugar is actively considering the idea. A Canadian company with which I was recently in discussions would like to put a European pilot plant in the UK, together with a production plant later. That bioethanol company can make bioethanol from straw, which is almost 100 per cent. CO₂ restitution capable and therefore very environmentally efficient indeed.

The establishment of a policy structure requires a combination of lateral thinking, discussion between Departments and a determined effort both to pull and to push the market forward, but the rewards are enormous. This important debate points the way and shows why we should move forward successfully on such an urgent task.

10.12 am

Norman Lamb (North Norfolk)

I congratulate the right hon. Member for South-West Norfolk (Mrs. Shephard) on securing this debate and on all the work that she has done in leading such an incredibly important campaign to change the Government's policy and to secure a new, environmentally friendly industry.

I want to say a few words about the gap between the widespread acceptance of the case for developing a significant biofuels industry and the extent to which we have developed the means to do so. The Government are willing the end but not yet providing the means to achieve the end. It is remarkable how much opinion on the subject has shifted just in the past two years. I can remember bringing down a group of Norfolk farmers to see Lord Whitty at the Department for Environment, Food and Rural Affairs. I talked then to the Energy Savings Trust, which was sceptical about the case for biofuels, but the right hon. Lady has referred to the diverse range of interest groups that now support the case for biofuels, above all else the environmental case.

Mrs. Shephard

Does the hon. Gentleman agree that some of the work in Norfolk has directly contributed to that development? Norfolk chamber of commerce is so convinced of the case that it has persuaded the British Chambers of Commerce to include a strong submission for more help for infrastructure for biofuels in its Budget case to the Chancellor.

Norman Lamb

I very much agree with that and always love to see Norfolk leading the way. The discussions that we had two years ago led to the East of England Development Agency producing its study on the impact on the rural economy. I was fascinated to see that, in 2001, a European Commission report highlighted the fact that, if the UK could develop a biofuels industry, we could benefit to the tune of 20,000 to 30,000 new jobs, mostly in rural areas,. The EEDA study reinforces that view.

I recognise that any Government, of whatever political complexion, will be anxious about the loss of duty. However, I am sure that the Minister will be aware of a recent German study that highlighted the fact that 73 per cent. to 83 per cent. of the duty lost is recovered by way of increased economic activity, through more people earning incomes in rural areas and paying taxes. Therefore, the loss to the Exchequer is much less significant than might at first appear to be the case.

I will now say something about the environmental case, which is the most important issue. It runs in parallel with the case for helping the rural economy and tackling our over-reliance on fossil fuels and our concerns about fuel security. Achieving the targets set in the Kyoto protocol presents a massive challenge not just to the UK, but to the rest of the world. The Governments are funding a great deal of research on what the developed and developing worlds need to do to tackle the massive problem of global warming.

In the UK, the situation has worsened. The transport sector produces 22 per cent. of greenhouse gas emissions but, between 1990 and 2001, there was a 5 per cent. increase in those emissions. That should concern the Government, as well as the rest of us, and they need to find a way of tackling that problem.

There appears to be confusion in Government policy. We have heard other right hon. and hon. Members talk about the EU directive on biofuels. Comments made by Ministers on that issue appear to be contradictory. I hope that, in the Minister's response today, he will desrcibe a clear programme of action for implementing the UK's obligations under the biofuels directive. I know that the targets in the directive are indicative but, if we are to meet our Kyoto targets, it is essential that we implement that directive in the spirit in which it is intended. It is clear that the UK lags far behind many other European countries in developing a biofuels industry and in addressing the environmental imperative of tackling global warming.

The UK has failed to achieve the means to the end. A 20p duty reduction has been introduced for biodiesel and, in this year's Budget, it was confirmed that there will be a similar duty reduction for bioethanol from 2005. Is it not bizarre that the duty reduction for LPG—a fossil fuel—is double that amount? How can that contradiction in policy be justified?

we must introduce a significant enough duty reduction, or other measures, to kick-start the biofuels industry. The evidence that we need to do that is already there. A biodiesel industry has already been developed, based on the use of waste cooking oil. However, with the current duty reduction in place, no similar industry has been developed to use oilseed rape as a raw material. That has not happened because it is not considered to be commercially viable—producers need more help to get that started. The same is true of bioethanol. As other hon. Members have said, if we do not produce the catalyst to get the bioethanol industry under way, biofuels will be imported into the UK, and we will lose the great opportunity of securing all those extra jobs in rural Britain.

Dr. Gibson

How would the hon. Gentleman feel if it were discovered that a plant that had been genetically modified at one of the institutes in Norfolk produced a better, purer type of oil, that would help to reduce carbon dioxide even more? Does he think that some of the antipathy towards GM crops would die away in the pursuit of scientific excellence?

Norman Lamb

I thank the hon. Gentleman for that challenging question. I have always made it clear that I have an open mind on GM. The judgment that we reach must be science-based and not based on any emotional anxiety. We need to look at the actual impact of GM crops, but we must work on a precautionary basis in developing that policy.

The Government are not doing enough to develop the technology. Something must happen. Time is of the essence. If we delay much longer, the technology will be based on imports and we will not meet our objectives under the biofuels directive. Most important, we will not reach the Kyoto targets—something that we need to do to save the planet from the serious consequences of global warming.

10.21 am

Mr. Anthony D. Wright (Great Yarmouth)

I congratulate the right hon. Member for South-West Norfolk (Mrs. Shephard) on securing the debate, which is one of many in which all Norfolk Members have achieved unanimity. I support calls for an extension of support for biofuels, but I also welcome the measures that the Government have already announced.

In a speech on sustainable development in February the Prime Minister set out several pledges that will fundamentally alter the course of energy production. He set out his ambition to double the amount of energy supplied by renewables. An essential part of that commitment will be the rapid development of a strong biofuels sector. I want to talk about biofuels in transport. Alternative forms of transport fuel need to be developed rapidly to meet the environmental requirement to reduce CO₂ and other greenhouse gas emissions, improving urban air quality and providing sustainable development.

Biofuel production has been encouraged and promoted for use as an alternative transport fuel through Government policies and incentives in Austria, France, Germany and Italy, among others. In such instances, national Government support is frequently also justified by the broader benefits of savings on imported oil, greater national fuel security, fuel diversification and reorientation, farming innovation and rural economic development.

It is essential that the UK Government provide the necessary financial support to get the industry off the ground. That support must, however, ensure that the production of biofuels proceeds on the basis of their relative worth and their positive effect on the environment. The Government have made a commitment to reducing greenhouse gases to 12.5 per cent. below 1990 levels by 2008–12 and, further, to reduce CO₂ to 20 per cent. below 1990 levels by 2010. In addition to those targets, the Government are committed to the production of 10 per cent. of the UK's electricity from renew, ables by 2010.

In addition, the recent energy report produced for the Government by the performance and innovation unit called for a target of 20 per cent. of energy provision from renewables by 2020. What I am desrcibing shows the Government's commitment to the royal commission's target of a 60 per cent. reduction in emissions by 2050. The Government are working hard, and must continue to work hard, to reach agreement on that commitment with other EU members.

I welcome the fact that on 1 January 2005 the Government will introduce a new rate of duty for bioethanol, 20p per litre below the rate for sulphur-free petrol. We need to go further. The European Parliament wanted 2 per cent. of all petrol and diesel for transport purposes placed on its markets by 31 December 2005 to be produced from biofuels, with the figure increasing to 5.75 per cent. by 2010. However, the biofuels sector of the industry is the least well developed, largely as a result of the current price of fossil fuels. That means that further development of the sector is uneconomical. It is essential to do as much as we can to reverse the situation and there are several ways in which we could do more to promote the industry.

In transport, we must ensure that biofuels are supplied as quickly and effectively as possible for a market where there is sufficient demand for them. I sound a cautionary note, however: that is provided that the necessary research is undertaken to ensure that individual biofuels are viable in terms of their environmental impact and the net environment gain for large-scale production of such fuels. However, their potential benefits could be significant.

The use of bioethanol and biodiesels as fuels for road vehicles could have a large-scale impact on reducing carbon emissions and greenhouse gases in the UK. Compared with other fossil fuels, the Ca2 amounts produced by bioethanol are at least 50 per cent. lower. In the case of conventionally modified biodiesel from oil seed rape the figures, according to the Sheffield Hallam study, show 72 to 86 per cent. net savings in carbon dioxide emissions and 56 to 80 per cent. net savings in greenhouse gas emissions in comparison with ultra low sulphur diesel.

The Government are clearly committed to reducing CO₂ and greenhouse gas emissions by 12.5 per cent. by 2008–12, with a target of reducing CO₂ by 20 per cent. in that time. To meet those targets, significant and quick action must be taken as we face several difficulties. The transport sector contributes nearly a quarter of the UK's emissions of CO₂. It is imperative that we set up a reducing emissions strategy, which includes a much greater focus on the potential of biofuels, to counter a growth in emissions of 5 per cent. from 1990. Although other sectors will probably see a stabilisation or reduction in emissions in the future, emissions in the transport sector will continue to increase until we take aggressive action.

The Government's 1997 national air quality strategy acknowledged that without further action periods of poor air quality will persist in the UK, mainly because of the continuous increase in road traffic, a major source of air pollution. Therefore, a new strategy setting measurable air quality objectives was outlined, to be met by 2005. At the time it was believed that existing programmes that control pollution from industrial plant and Europe-wide policies to improve vehicle fuel and emissions standards would go a long way to meeting those targets. A Government review of the targets the following year led to the conclusion that the date for achieving some of the target objectives should be accelerated, showing a genuine Government commitment to improving air quality in the UK. The aggressive pursuit of stricter and more rigorous standards would be made far easier and correlate to a large degree with the adoption of greater incentives for the wider use and larger production of biofuels. That would, in time, lead to a significant decrease in air pollution in the UK.

Another key environmental benefit regarding the wholesale adoption of biofuels in the UK is the accompanying sustainable development benefits that it would have. As part of a greater use of biofuels the UK would naturally move towards a reduction in the use of fossil fuels, which would provide the UK with more choice and leverage. The UK would be able to choose between maintaining the current rate of depletion of North sea oil and reducing the demands on our North sea oil reserves by using them over a longer period of time. It would also place the UK in a stronger position when negotiating oil imports in the future. That would, in turn, contribute to the reduction of the EU energy deficit through the provision of energy from renewable resources, similar to other EU members. The benefit of securing a renewable fuel from domestically produced sustainable crops would also have significant national fuel security implications. Such fuel diversification could lead to the development of a new industry with the consequent increased economic activity, job creation, and associated socio-economic benefits dependent on the sector's cultivation.

The 20p per litre excise reduction for bioethanol that the Chancellor announced in the Budget, to be introduced in 2005, is welcome. However, he needs to go much further to make it more applicable. Other incentives, for example a capital grant, would also greatly help to stimulate the growth of the biofuels industry.

I finish by asking the Government to consider carefully the cross-party support for this debate by Norfolk MPs and other hon. Members. The Government should find new incentives for the growth of the industry, benefiting the environment as a whole, developing and diversifying in the farming sector, and bringing many associated benefits.

10.29 am

Mr. Richard Bacon (South Norfolk)

I join other hon. Members in congratulating my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) on securing a debate on this very important subject which, as the hon. Member for Great Yarmouth (Mr. Wright) said, has all-party support.

I very much agree with the points that have been made about the need for any coherent transport strategy to take account of biofuels and, as my hon. Friend the Member for Mid-Norfolk (Mr. Simpson) said, for joined-up government on this important issue. I am particularly persuaded by the environmental arguments. We would all like to hear the Minister try to justify why liquefied petroleum gas, which is a fossil fuel, has a higher tax break than biofuels. No sensible person believes that that is justifiable. I am also powerfully impressed by the economic case. Such a strategy would be a huge benefit to farmers in my constituency, which has significant rural economic deprivation.

I want to expand slightly on the subject of fuel security, which has been touched on, and to ask the Minister some questions. Our notion of energy security presupposes more than one source, even for one type of energy supply. For example, we should not be dependent on imported oil only from the middle east and countries such as Iraq, Iran or Saudi Arabia. We should also be able to depend on imports from Latin America, Russia, Alaska and so on.

Energy security also requires diversity of types of supply, not just oil or natural gas, but sources such as wind and solar power. Why would anyone not want to add biofuels to that list? Does the Minister believe that a biofuels industry is necessary, not just desirable, in the United Kingdom? If the answer is yes, do the Government recognise that they have a responsibility to introduce policies to help to start such an industry, either by fiscal means, such as the escalator suggested by the hon. Member for Southampton, Test (Dr. Whitehead) or through other tax breaks? Which would be better?

Are the Government satisfied with the rather bizarre situation desrcibed by my right hon. Friend in which rape seed produced in Norfolk and elsewhere is exported to Germany to be turned into biofuels, only to be imported back into this country with the concomitant extra CO₂ emissions that that causes, never mind the lack of benefit that could be accruing to an industry in this country and, as the hon. Member for North Norfolk (Norman Lamb) said, the extra jobs that would go with it, including in my constituency? If the Government are not satisfied with that bizarre situation and believe that a biofuels industry in the United Kingdom is necessary rather than just desirable, and that they have a responsibility to promote such an industry, will the Minister stand up and tell us what they intend to do about it?

10.30 am

Andrew George (St. Ives)

I congratulate the right hon. Member for South-West Norfolk (Mrs. Shephard) on securing this important debate. She set an appropriate tone, given the fact that there is much cross-party consensus, and explained the need for ministerial assertiveness on the issue. The debate has shown that there is a lack of cross-departmental co-ordination, or at least insufficient evidence that any Department has put pressure on the Treasury, and has been assertive enough to make the necessary policy decisions to provide the kick-start that the industry needs, the case for which hon. Members have made today.

The right hon. Lady drew attention to the disappointing Government response that she and others, including myself, have received in replies to parliamentary questions. A cross-departmental policy is necessary. The hon. Member for South Norfolk (Mr. Bacon) referred to the bizarre situation in which we export crops and import fuel, using fossil fuel to prop up that exchange. He clearly identified a number of arguments that were taken up by other hon. Members.

The hon. Member for Sherwood (Paddy Tipping) pointed out in a telling speech the need for an adequate lead-in time—at least two years is required for preparation—and the need to give the industry the necessary incentives to plan for the improvements that will be required. The hon. Member for Mid-Norfolk (Mr. Simpson) also identified the need for a clear plan.

The hon. Member for Southampton, Test (Dr. Whitehead) read a passage from the Government's energy strategy, which clearly identified the Government's ambivalence. We know that civil servants like to be on the cusp of a dilemma, but Ministers need to push them off it and to adopt clear policy positions. The hon. Gentleman also identified the need to set targets for the blending of ethanol with other fossil fuels.

My hon. Friend the Member for North Norfolk (Norman Lamb) emphasised the environmental case. I agree that pursuing this policy would make a major contribution to a reduction in greenhouse gases. He also appropriately identified, as did others, the need to establish parity in Government policy on LPG.

The hon. Member for Great Yarmouth (Mr. Wright) emphasised the need for a strategic review in the light of the predicted fall-off in North sea oil production, which the Government should take into account when considering their position.

We are aware of the low level of biofuel usage in this country. The Treasury has said that the reduction in fuel duty on biofuels has stimulated the production of biodiesel from waste cooking oil or animal derivatives, but that is based on sales of 400,000 litres of biodiesel a month and a proposed £10 million investment in a plant in Motherwell. Those figures should be considered in the context of the huge amount of road fuels used in the UK. The figure of 400,000 litres is only 0.01 per cent. of the UK's monthly road transport fuel requirement. The £10 million Argent plant in Motherwell promises to produce 45,000 tonnes-50 million litres—per annum, which is encouraging. However, the UK uses 37 million tonnes of road fuels a year, of which 45,000 tonnes is only 0.16 per cent. More action is needed on that front.

Clear co-ordination and cross-departmental effort are required. The right hon. Member for South-West Norfolk identified the need for Ministers to meet and to get off the fence to set a clear policy. They should give a clear lead and encourage civil servants to stop enjoying the intellectual pleasure of being on the cusp of a dilemma. They should establish a clear policy, which includes a further cut in duty and the provision of grants or allowances.

There has been a debate about whether a cut in duty would result in imports flooding into this country. The Central Science Laboratory recently studied the transport costs of fuels and the fiscal regime in the UK. It concluded that it was unlikely that there would be a flood of imports, but we cannot take that risk. The Government should review the situation intelligently to ensure that the balance is right. There needs to be parity with LPG, and the hon. Member for Southampton, Test is right to encourage the Government to set a target for increased blending.

The debate is timely. The Government can no longer faff around—if I may use that expression—but must set clear targets. We need a decisive view, a clear lead, co-ordination and a strong resolve to follow policy through.

10.32 am

Mr. John Hayes (South Holland and The Deepings)

I congratulate my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) on securing the debate. It is indicative of her mix of diligence and insight that she drew the Chamber's attention to this important matter. She will be mindful of the impact that it will have on her constituents, as will other hon. Members. It will also have a beneficial impact on my Lincolnshire constituents, as we are her near neighbours.

It might also be beneficial, not for this well-informed Chamber but for a wider audience, to remind the House what biofuels are. Biodiesel made from a vegetable or animal oil mixed with a small amount of methanol is non-toxic and biodegradable, and bioethanol is a simple alcohol produced by the fermentation of plant co-products such as straw, wheat and potatoes. The hon. Member for Southampton, Test (Dr. Whitehead), with his scientific mind, is probably srcutinising my every word, so I hope I have that right.

In that context, it is important to rehearse the principal environmental benefits of biofuels, which several hon. Members have highlighted. The main benefit is expected to be the reduction in CO, emissions by about 50 to 60 per cent. compared with emissions from fossil fuels. Some of the emissions are absorbed during the growth process. With biofuels there are fewer greenhouse gases and fewer air pollutants, and there is the possibility of recycling waste oils. Given the state of agriculture in the past few years, biocrops would give farmers the real and much-needed option of going into a new product area that provides additional business opportunities, as my hon. Friend the Member for Mid-Norfolk (Mr. Simpson) said.

Mr. Drew

Surely, the problem for farmers is that the structure of the EU predicates against that, because they are asked to sign long-term contracts. Commissioner Fischler should ensure that contracts reward farmers over an acceptable period, rather than their being front or end-loaded.

Mr. Hayes

That is an extremely good point. The hon. Gentleman is a keen contributor to debates on matters that affect agriculture. He is right; there needs to be a clearly defined strategy. We cannot expect growers to plan ahead unless there is clarity of direction both from the EU and the Government. At present, such clarity does not exist at either level. The hon. Gentleman is right to say that that is a necessary component of what I was desrcibing.

Against a background of the accepted environmental benefits of biofuels, the EU is proposing a series of targets for this country and other EU members. Although we are familiar with those targets, it is worth rehearsing them. In essence, the EU directive set out a target for the use of biofuels and other renewable fuels at a rate of 2 per cent. by 2005 and 5.75 per cent. by 2010. Member states will have until 31 December 2004 to develop a strategy to meet the targets. The EU proposes that we should replace 5 per cent. of the total automotive fuel market with alternative fuels by 2020.

As my right hon. Friend said, the Government's response has been to talk a lot: about aspirations. However, the only action taken to meet the targets was to reduce the duty on bioethanol by 20p per litre and it is widely acknowledged that that is insufficient to kick-start the industry. As hon. Members on both sides of the House have said, the judgment is that that simply has not done the job. I will not linger too long on that, but it is worth taking into account the remarks of the president of the National Farmers Union, who said: the Chancellor's decision to reduce the duty on bio-ethanol by 20 pence per litre merely brings the duty on this green fuel into line with that of bio-diesel, which is insufficient to provide any impetus to developing the bio-fuel industry. Peter Clery, Chairman of the British Association for Biofuels and Oils, was also disappointed with the scale and timing of that change. Biodiesel accounted for 0.1 per cent. of UK road transport diesel consumption in 2002. Other countries are racing ahead of us—not only France and Germany, but, as my right hon. Friend pointed out, Spain and Sweden. Furthermore, the issue extends well beyond Europe, and Britain is being left behind.

For brevity and clarity I shall restrict my further remarks to a series of questions. I know that the Minister will have all the facts readily to hand, so answering them in the time available will not be difficult. On the off-chance that he does not have the information, he can drop me a note at his convenience.

The questions are simple. How will the Government meet the EU targets? What are the proposals to meet higher thresholds, which are likely to come later, and what time scales does the Minister envisage for meeting such targets? Will he estimate the level of biofuel that we import from, in particular, Germany and France? What was the Government's estimate of the likely effect of the reduction to 20p? What measurements have they made of the subsequent effect on the industry? What is the Government's estimate of the capacity to grow bio crops—if we can call them that—and what discussions has the Minister had with the farming industry about opportunities for hard-pressed growers? How much palm oil do we import to feed the biofuel industry? I said that the Minister might want to write to me, and if he does not know the figure off the top of his head I am sure he will be able to find it.

Which Department is responsible for co-ordinating the strategy? The hon. Member for Sherwood (Paddy Tipping) was absolutely right, and my right hon. Friend also raised the point when mentioning the evidence given to the Select Committee. There is an extraordinary lack of clarity about who in the Government is pulling policy together. What discussions are taking place? Who is co-ordinating policy? Which officials are dealing with it? Which Department has authority over it?

What proportion of biofuel sales comes from recycled cooking oil? I hope that the Minister will enlighten us on that subject, which has been mentioned by a number of hon. Members and is essential to the debate. Ultimately, what is the Government's strategy? It is one thing to have aspirations, and we know that there are targets, like it or not. However we are not sure, as the hon. Member for Sherwood said, whether the Government speak with one voice. In fact, it is increasingly clear that they speak with many voices or, in answer to some of these questions, with no voice at all.

There must be a strategy, because uncertainty and lack of clarity is causing us to suffer a competitiveness disadvantage, which is likely to grow considerably. There cannot be further delay. We need a clear Government position, not only to allow the industry to grow and develop, but to support growers in their long-term planning—they have to plan two or three years ahead, as the Minister knows.

As I have said to the Minister on other subjects and in other contexts, we have a Minister with a new opportunity. He is a fresh man with fresh ideas coming to the subject for the first time. [Laughter.]

Mrs. Shephard

Why are hon. Members laughing?

Mr. Hayes

It is friendly laughing; they are laughing with the Minister, not at him. With that fresh approach, new energy and helpful zeal, we hope that he will do what hon. Members on both sides of the Chamber have been calling for. I pay tribute to them for championing the issue. Their efforts did not start today, but some time ago. I hope that the Minister will meet those expectations, rise to the challenge and do what is in the interests of the environment, farmers and growers and, I think we would all agree, what is in the nation's interest.

10.50 am

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Mr. Ben Bradshaw)

It gives me great pleasure to respond to the debate, especially given the constructive and consensual nature of the contributions, although at times the Government have not been given enough credit for what they have done so far, but I shall address that. The debate has also given me a chance to take a tour round my home county of Norfolk.

Dr. Gibson

Come back.

Mr. Bradshaw

I was not aware there was a vacancy.

It is pleasing to hear so many Norfolk MPs talking with one voice. I do not intend to make a long speech on the background to this issue, because the opinions expressed in the debate have been fairly united. We all agree that biofuels are a good thing and should be promoted and encouraged. However, I will say a little about the background, because the hon. Member for South Holland and The Deepings (Mr. Hayes) has, as always, generated a great deal of work for my officials. That is his prerogative and a very good thing, too. I promise to write to him if I do not answer all his questions, and to other hon. Members if they do not feel that their points have been addressed.

Biofuels can provide significant life-cycle reductions in carbon dioxide emissions compared with conventional fossil fuels. Bioethanol and biodiesel from virgin crops can reduce such emissions by about half over conventional fuels. In the case of biodiesel from waste vegetable oil, the life-cycle benefits can be even higher. However, as several hon. Members said, environmental considerations are not the only issue. Establishing new markets for agricultural produce and maintaining and increasing rural job opportunities is important for farmers and policy makers alike. That point was well made by the hon. Member for Mid-Norfolk (Mr. Simpson).

The reform of the common agricultural policy is potentially very positive for biofuels. Reduced production of sugar beet, cereals and potatoes could make available more land for the growing of biofuel feedstocks, in addition to the existing set-aside land. Under the agreement for reform, biofuel feedstocks can continue to be grown on set-aside land, and they will receive payments under the new single payment scheme. Feedstocks grown on non-set-aside land will receive payments under the new single payment scheme plus the new €45 per hectare energy crops payment.

The Government have supported the production of biofuels through cuts in the duty rate. In 2000, my right hon. Friend the Chancellor of the Exchequer launched the green fuels challenge to produce proposals for environmentally friendly fuels. As a result, biodiesel was awarded a duty cut of 20p per litre compared with ultra-low sulphur diesel. The cut was implemented in July 2002 and has resulted in some useful production. About 500,000 litres a month—not 400,000 litres, as the hon. Member for St. Ives (Andrew George) suggested—are sold from more than 130 filling stations in the UK. That biodiesel is mostly from recycled vegetable oils—I will write to the hon. Gentleman to give him the exact proportion—so it provides additional waste reduction benefits over and above the benefits from reduced carbon dioxide emissions. He highlighted an example of progress when he drew attention to the Argent plant in Motherwell, which will produce biodiesel from animal fat, including tallow. That shows what can be done under the existing regime of the 20p duty cut and capital support from the regional development agency.

Support is also planned for bioethanol. In the 2003 Budget, the Chancellor announced that a new duty rate would be set at 20p below the rate for ultra-low sulphur petrol, with effect from January 2005.

Mr. Bacon

Will the Minister give way?

Mr. Bradshaw

Of course, but I am about to come to the 20p reduction and the questions that the hon. Gentleman asked.

Mr. Bacon

Does the Minister accept that if all the cooking oil in the United Kingdom were recycled and turned into biofuels, the total contribution would be relatively small, not to say almost negligible?

Mr. Bradshaw

I do not accept that; the contribution made by recycling cooking oil should not be underestimated.

My hon. Friend the Member for Sherwood (Paddy Tipping) asked how the 20p duty reduction was calculated. I understand that the reduction takes into account the environmental benefits of biofuels. The calculation shows that, given the social costs of carbon emission, the environmental benefits can be valued at between 3p and 5p out of the 20p. The 20p reduction recognises the environmental, agricultural and industrial benefits delivered by biofuels.

The right hon. Member for South-West Norfolk (Mrs. Shephard) asked why more support is given to LPG than to biofuels. Several other hon. Members raised that issue. The duty rates for road fuel gases were set to reflect the benefits that they deliver to local air quality rather than the reduction of greenhouse gas emissions. Road fuel gases face significant market barriers, and require a dedicated and separate refuelling infrastructure. Vehicles must be converted or have a dedicated design to use gaseous fuels, so the difference in reduction in duty reflects the extra capital costs that using those fuels requires. The right hon. Lady argued that the duty cuts in the UK did not compare favourably with those in other EU countries. She may be right in one or two cases, but taken across the board the UK duty cuts compare favourably. For example, we are one of the few countries to be committed to offering duty incentives for biodiesel and bioethanol.

Mrs. Shephard

The Minister has four minutes left. Will he use them to tell the House whether he agrees with his noble Friend, Lord Whitty, the DEFRA Minister, that more help is needed than a 20p duty cut? As all hon. Members present have asked, will he also explain the Government's cross-departmental structure? Is it designed to bring about that change, and will there be extra help?

Mr. Bradshaw

I shall endeavour to deal with as many points as possible, and I could get through more if right hon. and hon. Members did not intervene. If they do, I shall have to write to them. I am going through the right hon. Lady's questions one by one, as she will notice.

The right hon. Lady complained about material being exported to Germany and imported back into this country. She will know that the German situation is a particular one dating from reunification when, because of the economic and agricultural inheritance of the former East Germany, the German Government took a strategic decision to invest a great deal of money in the East German industry and biofuels. I do not want to go into details, but I will be happy to expand on that in writing.

The hon. Member for South Norfolk (Mr. Bacon) asked whether the Government believe that biofuels are necessary. We believe that they are necessary as part of a package of renewable energy to help the UK to meet its targets. We recognise the need to provide support to kick-start the industry, and that may well include reconsidering the levels of duty and one or two of the other issues that have been raised.

We shall consider the following possible options: further duty cuts; enhanced capital grants; enhanced capital allowances; and mandatory blending. I agree that it is helpful for Governments to speak with one voice. It would not be the first time that Ministers in different Departments have emphasised different areas; that happens all the time in all Governments and I am sure that the right hon. Lady experienced that in her many ministerial roles. If my hon. Friend the Member for Sherwood is right to say that Ministers have been flatly contradicting one another, I will try to iron out such differences. I would be surprised if that were the case, but I shall certainly speak to the Minister in my Department who leads on this issue, Lord Whitty, and shall ensure that in future the Government speak with the same voice on the matter.

The right hon. Lady asked how the Government would respond to the East of England Development Agency report. We believe that it was an excellent analysis of the potential development of the bioethanol industry. We contributed to that exercise and have drawn on the data that it produced. The process has helped and has informed the Government's analysis, and we shall keep the duty rates under constant review.

The hon. Member for Mid-Norfolk asked what research was being undertaken. Considerable research has been undertaken, not only at Sheffield Hallam university, to which he referred. We have also worked with the EEDA on its study, and our Central Science Laboratory has produced detailed assessments on the potential for an impact—

Mr. Deputy Speaker

Order. We must turn our attention to the next topic for consideration today.