Non-Food Crops

HC Deb 11 January 2001 vol 360 cc287-324WH

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

2.30 pm

The Minister of State, Ministry of Agriculture, Fisheries and Food (Ms Joyce Quin)

The Government warmly welcome this opportunity to debate energy and other non-food crops. This is an important time to discuss those crops and their uses. As I hope to be able to explain, they have great potential to contribute to sustainable development.

Last month, I was pleased to launch the report of the food chain and crops for industry foresight panel, which had made recommendations to unlock the potential of non-food crops. I also recently launched the report of the European Union-funded Interactive European Network for Industrial Crops and their Applications study on those crops, which has been prepared by our Central Science Laboratory. It contains many interesting findings and recommendations and is available in the Library, both as a report and in summary form. Furthermore, I am considering appointments to the Government-industry forum on non-food uses of crops.

Linked to such initiatives is a range of activity in a number of Departments. In the Ministry of Agriculture, Fisheries and Food, we opened the energy crops scheme for business last October. Non-food crops are an important element in our overall strategy and the rural White Paper, which my right hon. Friend the Minister launched with the Deputy Prime Minister, includes crops for energy and industry.

The Department of Trade and Industry is considering how to meet renewable electricity targets. The Department for Culture, Media and Sport is consulting on the use of money from the new opportunities fund to develop renewable energy applications. The Department of the Environment, Transport and the Regions is studying transport fuels following the Chancellor's green fuels challenge, which he announced in the pre-Budget report. I firmly believe that non-food crops can make a major contribution to all those initiatives. With all that activity taking place, the debate is timely.

I am conscious that matters that may be raised in the debate will relate to the work of a number of different Departments. For that reason, I undertake that I will refer such matters to the relevant Ministers and Departments. I will also refer this debate to the aforementioned new Government-industry forum.

Mr. James Paice (South-East Cambridgeshire)

First, I apologise for missing the first couple of words uttered by the right hon. Lady. I am sure that all hon. Members will be pleased that the Minister intends to refer points raised back to other Departments. Has she been fully briefed by those Departments? If she has come without adequate briefing, it will detract considerably from the debate.

Ms Quin

I am certainly not saying that I have not been briefed by other Departments. Indeed, as is always the case in such debates, as the Minister I have come armed with a tremendous raft of briefing material. Moreover, in addition to written briefing, I have met officials from all the Departments concerned in advance of the debate and at the time of some of the initiatives that I have mentioned. All the Departments mentioned, together with the Treasury—with the existence of the green fuels challenge—are working closely together in this area.

Having had a number of briefings on the issues, I am aware of the enormous potential number of uses for such crops and some of the technicalities that are attached to their possible development. Although I take a keen interest in them, I do not pretend to be a scientific expert in the many different technologies that are involved. If, for understandable reasons, I cannot supply information immediately, I shall undertake to obtain it for hon. Members. I shall also ensure that the other Departments involved are fully aware of the points raised during the debate.

Let us consider some of the benefits that the sector can generate. We know that products from plants can be used in a variety of ways as renewable and sustainable raw materials. I shall give some examples later in my speech.

The development of non-food crops can help with agricultural diversification, which is particularly important at present, and it can also help to create rural jobs. The crops help to support our overall objectives of sustaining and enhancing the rural environment and assisting the development of competitive industries.

In addition, the Government have climate change commitments to meet, and non-food crops can contribute in various ways. Energy crops can be used for electricity and heat generation in substitution for fossil fuels, thus helping to cut greenhouse gas emissions. In some cases, we may need to look at new crops. Oilseed rape is a comparatively new crop in the British countryside. We can probably all remember when the fields suddenly turned bright yellow—we were not used to that. In other cases, there will be an opportunity to use existing co-products for new purposes—for example, the use of wheat straw to produce bioethanol.

The debate is very much about new commercial development. Market opportunities are especially welcome in agriculture at a time when farmers are under severe pressure. They are occurring at a time when manufacturers are looking for ways to green their products. The development of biodegradable packaging for fruit and vegetables is a good example of what can be achieved.

Without support, however, progress will be haphazard—after all, it is an infant industry that needs encouragement to get to critical mass. That is why the Government are committed to providing encouragement, strategic direction and financial assistance, where it is needed and where it is felt to be most worth while.

Although we are discussing recent developments in the sector, the Ministry of Agriculture, Fisheries and Food has been involved in its background, having conducted initiatives under the previous Government as well as under the present Administration. The Ministry set up the agri-industrial materials section in 1994—when it was known as the alternative crops unit— to stimulate interest in non-food crops and bring together farmers, researchers, industry and Government.

When set-aside was introduced into the common agricultural policy, the United Kingdom Government pressed for—and gained—agreement to use it for the production of non-food crops. That mechanism helped non-food crops to compete with other subsidised agricultural activities. The Ministry attends agricultural shows, has organised seminars and workshops, has developed a comprehensive research programme and used a dedicated website to promote non-food crops.

Finding uses for set-aside land, however desirable, is not in itself an adequate motivation: there has to be a focus on the market, and the development of non-food crops depends on the readiness of industrial users to incorporate crop-derived materials in their production processes. Therefore, we seek to focus further on the needs of the market. The potential is considerable and I shall cite some of the measures that the Government are undertaking to unlock it.

There is nothing radically new about using plants for non-food purposes. Although we think of agriculture as a producer of food, we also take for granted plant-derived fibres, oils, dyes and medicines. Modern technology has certainly expanded and continues to expand the range of non-food applications of crops. For example, the production of plant-derived oral vaccines is being studied by a number of companies. A fully biodegradable thermoplastic material can be produced from corn, wheat and potato starch, and can be used to make "plastic" bags, disposable blister packaging, packaging pellets and casings for ballpoint pens.

Oilseeds are already used to produce erucamide, a slip agent for plastic films, lubricants and industrial oils. Many hon. Members will be familiar with the use of linseed oils in paints and varnishes. Natural fibres can be used in paper, fibre boards for the construction industry and interior automotive panels. The contribution that the fibre sector can make to the automotive industry is an interesting example and one for which there seems to be increased potential. The woody core of hemp can be used to produce horse bedding and chicken litter; oil from hemp seeds is used in paints, varnishes, soaps and shampoos.

The energy crops with considerable potential are short-rotation willow coppice and miscanthus. I am sure that I am not the only hon. Member who has seen these crops growing. Miscanthus or elephant grass is a very attractive crop. I have seen it growing in Cambridgeshire. I have discussed with people there its ability to supply the Ely power station. Short-rotation coppice is being grown in a number of different locations. Some farmers in Yorkshire have short-rotation willow, which is being linked in with the Project ARBRE power station that is being commissioned at Eggborough in Yorkshire.

Short-rotation willow and miscanthus can be used to produce both heat and power. Other crops can produce higher-value raw materials for niche markets. Borage provides gamma linolenic acid for use in health foods and nutritional supplements. Crambe produces oil in the form of erucic acid for use in slip agents and lubricants. Indigo is extracted from woad for use as inks and dyes.

Mr. Simon Thomas (Ceredigion)

The Minister mentioned willow coppice and elephant grass. Does she agree that there is a vast untapped potential from hardwoods on many Welsh farms, which are not managed in any way? If we could get the right technology to those local markets, the chipped hardwoods could be used in biomass, and it would be a great boost to certain types of agriculture, particularly in some upland areas.

Ms Quin

I accept what the hon. Gentleman says. It is important to consider all opportunities. I also think that it makes sense not only to look at this within MAFF. Obviously, the devolved Administrations are looking into the application of non-food crops in their areas and I am keen for that to be studied on a regional basis in England. There are variations between different parts of the country. Elephant grass is more suited to southern and eastern England. It is therefore important to have a regional and sub-UK perspective on the issue and for available opportunities to be considered in partnership. In other words, the regional development agencies, the agricultural industry and wider industries need to come together to consider the potential that these crops and products may have for their economies.

It certainly would be a mistake to think of non-food crops as a fringe activity. Non-food crops already contribute to several of the Government's key policies and there are serious commercial prospects. Many examples will be given during the debate.

We have incorporated non-food and energy crops into the agricultural strategy because of their potential importance to farming, to the wider industry and to the economy generally. The strategy is a framework providing opportunities to help industry to become more competitive, diverse, flexible and responsive to consumer wishes and more environmentally responsible.

The Government have published the climate change programme. We know that we must reduce greenhouse gas emissions and have identified a range of measures to achieve a reduction, including the development of the energy crops sector. Transport fuels have a significant impact on the environment and liquid biofuels can reduce emissions. As I said, the Chancellor of the Exchequer recently issued the green fuels challenge, which gives industry the opportunity to make the case for environmentally friendly fuels to receive major duty reductions. Obviously, the challenge covers biofuels. Its aim is to allow the Chancellor to make an announcement on successful projects at the time of the Budget.

The Ministry of Agriculture, Fisheries and Food has responded to the challenge of non-food crops with resources and with a range of activity to help to develop the non-food sector. We are ready to give support, especially when there is a real demand or need for those crops. We must recognise the importance of market pull and policy issues such as our commitment under climate change.

We are seeking to publicise and disseminate information about our efforts. Our agri-industrial materials section has extensive contacts with industry. We organise workshops and run a dedicated non-food crops website. In the past year, we have increased the number of staff to develop the new energy crops scheme and run the non-food crops forum, which is being set up following publication of the report into the non-food crops sector by the House of Lords Select Committee on Science and Technology. I welcome that report, which has some worthwhile points and was a serious contribution to the debate about the development of the sector.

We have a research and development programme on non-food crops and spend more than £1 million in that sector, partly through a dedicated LINK programme. We are keen to highlight our support for the sector as part of our overall agricultural strategy. The Government announced their approach for a new direction for agriculture more than a year ago. The UK is one of the European Union countries that is most keen to exploit the opportunities under the new rural development pillar of the common agricultural policy. Our reforms of the CAP are aimed at switching CAP funds away from production aids to support for the broader rural economy. Our rural development programme for England and the similar work being done in Scotland and Wales is part and parcel of that. It recognises the multi-faceted nature of agriculture, both as food producer and custodian of so much of our natural environment.

We are keen for non-food projects to access funds under the rural development programme. That is why we introduced the energy crops scheme. Previously, there was limited support for planting short rotation coppice under the woodland grants scheme. However, we judged it insufficient to move the solid biomass sector forward and under the new scheme we paid grants for planting short rotation coppice and miscanthus and can also pay up to 50 per cent. of the set-up costs for producer groups in that sector.

Occasionally, concern has been expressed about the environmental impact of these crops, which must be taken into account. No one would want to repeat past mistakes over forestry policy—for example, when insensitive, dark green geometric stabs of trees were imposed on a heath or moorland landscape prominent for wide sweeping views, which could be spoilt by the insensitive plantations. We therefore designed a scheme that would subject each application to rigorous assessment of the environmental impacts. Applications will be listed on a public register and statutory authorities will be invited to comment and suggest improvements. We are also developing codes of best practice to help farmers develop their knowledge of new crops.

Funding of £30 million has been allocated to the scheme over the life of the rural development programme. That should enable us to support planting of about 22,000 hectares. Energy crops could be used for small-scale heat applications, combined heat and power schemes, as well as large-scale power generation. We have already seen early expansion of the heat market, for example, with the wood-fired system at Weobley school in Hereford and Worcester—an area that I visited a couple of days ago. The development of the market in this sector is important.

In framing national agricultural policy, it is impossible to ignore the influence of the common agricultural policy. Traditionally, it has been a mechanism for supporting existing industry through production aids rather than stimulating the development of new industries. Many critics of the CAP view it as a backward-looking or ossifying policy—ossifying existing patterns of production and failing sufficiently to look ahead to future markets.

Successive CAP reform has moved support for different crops towards alignment with the cereals rate. That is a good thing overall if it enables farmers to get their signals from the market rather than from the CAP, but it has entailed a lower subsidy for crops such as linseed, flax and hemp, much to the concern of those involved in those sectors. While I understand the concerns, the sector's future will be served better by a new direction for the CAP rather than by going down the old route of subsidised crop support, which tends not to solve the sector's problems.

I am keen to respond to any questions about that issue, but I want to flag up two pieces of news for flax and hemp growers. First, they will benefit from agrimonetary compensation totalling more than £1 million. Secondly, because we are aware of the consequences for farmers of severe weather and flooding, we have secured a derogation that removes the harvesting requirement and protects farmers' rights to aid. I hope that that demonstrates the Government's commitment to the fibres sector.

The Central Science Laboratory has, with EU funding, created the Interactive European Network for Industrial Crops and their Applications. I commend its summary report, which is in the Library, because it examines the potential for non-food crops throughout the European Union. I am glad that such co-ordinating work is being carried out in the United Kingdom and I pay tribute to the efforts made in pursuing it. I am also glad that this work has been recognised, a second tranche of EU funding having recently been agreed to develop it further.

A direct result of the IENICA and House of Lords reports is the new Government-industry forum on nonfood uses of crops, which we hope will start work shortly. It will tackle issues raised by those reports and consider the recent work of the foresight panel task force on unlocking the potential of industrial crops. The forum will provide strategic advice and keep under review technological developments and market opportunities. It will make recommendations on policy affecting non-food uses of crops and on research and development priorities. It will also produce an annual report to chart the sector's development. The forum has an important job to do and we will ensure that it is in place for as long as necessary.

We want the forum to make a difference. My Ministry is leading the initiative, with support from the Department of Trade and Industry and the Department of the Environment, Transport and the Regions. I assure hon. Members that Ministers will take a personal interest in the forum's work and will make an announcement shortly about appointments to the forum. It will help to maintain momentum in the sector and will continue to engage the key players.

In essence, the Government share the vision set out in the foresight report. We consider it essential to harness the benefits of scientific research to make the transition from technological development to commercial exploitation. All hon. Members are concerned about that all-important process.

The development of renewable sources of energy is an important policy objective of the Government as a whole. Perhaps I can refer in my concluding remarks to the work being done on that, which is led by other Departments. The Government are committed to developing renewables as a key part of our wider approach to climate change and as one of a range of initiatives to support the development of a more sustainable approach to energy use. Our objective is to stimulate the development of the renewables industry, so that it can provide a continuously growing contribution in the competitive energy market.

Hon. Members will know that we have proposed placing a legal obligation on all electricity suppliers to secure a specified proportion of their supplies from renewable sources. We have also proposed the target of supplying 5 per cent. of United Kingdom electricity from renewable sources by the end of 2003, rising to 10 per cent. in 2010, subject to the cost to consumers being acceptable. The detailed proposals were set out in a consultation paper published last October by my right hon. Friend the Secretary of State for Trade and Industry.

We anticipate that significant contributions will be required not only from more established sources, such as landfill, gas, hydro and onshore wind, but from previously less well developed sources, such as offshore wind and energy crops. The Government's commitment was underlined by the announcement by my right hon. Friend the Prime Minister in October that a total of £50 million would be made available from the new opportunities fund for that purpose, in addition to the £39 million allocated by the DTI to offshore wind. Several Departments have shown our commitment to renewables.

There has been much interest in liquid biofuels, particularly biodiesel. We recognise that biodiesel and bioethanol have the potential to contribute to a reduction in greenhouse gas emissions. Competitiveness, however, is an important issue. Many processes need substantial subsidies at different stages of production. That is why the Government have a responsibility at least to analyse the sectors that seem to have higher energy yields with lower chemical inputs and that are capable, economically, of being the most viable. I hope that the green fuels challenge will help to identify promising projects.

Non-food crops have the potential to be good for UK farming, the rural economy, user industries and the environment. I look forward to hon. Members' contributions to the debate, which I hope will be seen as a step towards ensuring a wider recognition of the important developments, which I am sure that many of us welcome, that are taking place in the sector.

3 pm

Mr. James Paice (South-East Cambridgeshire)

I, too, welcome the debate. As the Government initiate these Thursday debates, I am grateful to them for having introduced it and look forward to exploring a fascinating policy arena that covers a great range of potential crops.

Although the Minister has been courteous and interesting, she has shown remarkable complacency about what the Government have achieved in the area, as I shall demonstrate. She referred briefly to the report of the Lords Select Committee on Science and Technology, dated 25 November 1999. A debate on the subject was also held in the other place on 3 March 2000, referring to the interesting statement on page 30 of the Select Committee's report: We have been unable to identify a co-ordinated approach across all relevant Government departments that might enable the potential of non-food crops to be realised. That is a pretty damning statement from a Committee that took evidence from a huge range of parliamentary and non-parliamentary bodies and individuals, and it demonstrates considerable complacency on the part of the Government. The Ministry of Agriculture, Fisheries and Food issued a consultation document on the energy crops scheme early last year. It deals with crop husbandry research and development. Paragraph 33 says: Measures to promote new energy outlets such as smaller scale combined heat and power units will fall to other Government Departments. That is an off-hand dismissal of any MAFF interest in the subject.

The Government are supposed to have seen the light and recognised the importance of the market, yet virtually everything we have heard from the Minister—with a few exceptions, which I shall address—has been to do with the research into growing such crops. That research is essential but the Minister is wrong to suggest that it is something new. Research into innovative crops has been going on for many years. A company with which I was involved before entering Parliament grew crops such as fenugreek and borage for commercial purposes in the mid-1980s. It was also researching the conversion of straw into paper. Farmer-based innovation has been around for a long time and the husbandry side of many such crops has largely been cracked, although in others, much work has still to be done. Much of the technology has also been cracked, particularly in the energy sector. What has not been cracked is the market. That is the key point.

On biomass, the Minister rightly referred to short rotation, coppice and miscanthus. Forestry waste is another relevant material, although not directly because it is not a crop. As I am sure all hon. Members present know, one cannot create matter, which means that the carbon emitted from the burning of a crop can be no more than the carbon absorbed in the growing process. That is a great advantage and a considerable environmental benefit. In that respect, the process is neutral; only the energy used in growing, harvesting and converting that plant material into the combustion process affects that balance. That is the down side.

It is widely recognised that burning biomass for energy generation has huge potential, as demonstrated by the ARBRE project in north Yorkshire to which the Minister referred. The House of Lords report states that the process costs £20 per dry tonne of biomass, and that over 25 years it will cost £630 million, with electricity selling at 8.65p per kWh—compared with less than 3p, which is the rate for the conventional systems of generation that generate the vast bulk of our power. That includes the non-fossil fuel obligation of £55 million to £60 million over 15 years. She referred to the Government's target of generating 10 per cent. of energy from renewables by 2010. If that were to be achieved purely through burning biomass—I appreciate that that is not so—20 to 25 such power stations would be required.

The Minister said that £30 million is available for the establishment of short-rotation coppice, and helpfully translated that into 22,000 hectares In fact, more than 100,000 hectares of short-rotation coppice would be required in order to make a significant contribution to the Government's 10 per cent. target.

Mr. Eric Martlew (Carlisle)

Has the hon. Gentleman taken the use of forestry waste into account in his calculations? That is a great source for generating energy without any extra planting.

Mr. Paice

No, I have not. Although forestry waste has immense potential—I was involved in it before I came to this place—considerable costs are involved in gathering, harvesting and transporting it. The material is often produced a long way from the national grid and from power stations, and it is expensive to transport it in any form to a suitable site for combustion in a power station. It has a huge role to play, but it is not the automatic alternative that the hon. Gentleman implied, nor is it cheaper.

The Minister mentioned the 31 MW straw-based power station at Ely. In fact, it is a few miles outside Ely—unlike Ely, it is not in my constituency. Other examples include the poultry waste facility on the Eye airfield in Suffolk, and several more are up and running or in development. However, the Government will have to do a lot more. In the past 24 hours, I have received a letter from the Country Land and Business Association saying that the very welcome MAFF funding for establishment of biomass crops contained in the Rural Development Regulation (RDR) is on course for failure. The accompanying briefing note concerns the lack of action by the DTI in recognising the need to support that development.

Dr. Alan Whitehead (Southampton, Test)

Is the hon. Gentleman setting out an additional spending commitment whereby the Opposition, were they to be in government, would greatly enhance the amount that they commit towards bringing the technologies that he describes to market?

Mr. Paice

That is a puerile intervention in a debate that, as the Minister said, aims to take a constructive approach to dealing with the problems. I shall come to firm propositions during my remarks.

The Country Land and Business Association clearly does not believe that expansion of biomass is likely. Energy Power Resources Ltd., which runs the power station near Ely, told me that the industry urgently needs agricultural support equivalent to 2 to 2.5p per kWh to enable it to develop and to make the contribution that the Government expect of it. That is because of the huge cost of generating power from biomass, whether straw, miscanthus or whatever. The Department of Trade and Industry estimates that the first commercial deployment of a power station using energy crops for fuel would require an electricity price of 6.8p per kWh, when, according to the DTI, the value of electricity in 2001–02 will be between 1.8p and 2.5p per kWh. Support of 3p per kWh is available under the non-fossil fuel obligation, leaving a gap of about 2 to 2.5p per kWh before it would be commercially viable. It is all very well developing the technology and husbandry, but if there is no satisfactory market to use the material, the research is useless.

Ms Quin

I am not sure whether the hon. Gentleman is reading a speech that he wrote before he had heard my speech, throughout which I referred to the importance of market opportunities. The Government's response to the House of Lords report in setting up the forum was precisely to cover that point.

Mr. Paice

The right hon. Lady regularly referred to market opportunities, but said nothing about development or what the Government are doing or will do to develop that market. She referred repeatedly to the need for market opportunities, but there was a dearth of information about what was being done. I shall refer to the forum, but it is not sufficient for the Government to use it as an explanation for what they are doing to create a market.

Ms Quin

The hon. Gentleman omits to mention my comments on the work of IENICA and its analysis, which we supported, to identify market opportunities. He overlooked the number of contacts between Departments and industry to identify the most promising market opportunities.

Mr. Paice

I am referring to biomass, on which the Government have not done enough. The DTI subsidy to which I referred leaves a huge gap between the cost of producing electricity using biomass and the amount that will be paid to generating companies. Unless that gap is bridged, there will be no encouragement to develop biomass power stations and improve the technology.

Ms Quin

The hon. Gentleman is being less than fair to the Government and what we are doing. Surely he accepts that the Chancellor's green fuel challenge, which operates on a short time scale, is a speedy measure.

Mr. Paice

As I understand it, the Government's green fuel challenge relates to liquid biofuels—I shall apologise if I am wrong—not to biomass. If it relates to biomass, I look forward to the result of the challenge. I intended to refer to it in the context of liquid biofuels and I shall do so now.

As the Minister said, there are two biofuels: ethanol, which is produced from starch-based products, and biodiesel. On ethanol, there is no doubt that this country is considerably behind many other European countries, in particular France, where production of ethyl tertiary butyl ether, the derivative of ethanol, has risen dramatically. It was expected to be 1.2 million hectolitres last year, with a long-term aim of expanding production to 4 million hectolitres. Only a year ago, the French Ministry of Agriculture announced two more ethanol plants to move towards that. Other countries such as Holland, Italy, Sweden and Spain have all developed plants.

There is no doubt that the use of ethanol has considerable advantages in terms of carbon dioxide emissions, as well as reduced output of nitrous oxides and other particulates. The European Union allows up to 15 per cent. of this derivative ETBE in road fuel and it has recognised the French exemption from the tax on petroleum products—equivalent to a subsidy of FF3.3 per litre on the ethanol component of ETBE.

Biodiesel comes from oils—primarily from rapeseed production. Again, that is a proven technology that has been around for a long time, although it is obviously advancing all the time. Austria has gone far down that road and there have been trials in this country. Many years ago, Reading borough council ran its buses on RME for a period. It was satisfactory as an alternative fuel and I understand that there were no problems, except that the city smelled of fish and chips as a result of the burning vegetable oil.

The right hon. Lady rightly referred to the energy balance and to the point that I mentioned earlier, namely that that balance is not particularly good as regards biodiesel. The energy cost of growing, harvesting, cutting and converting the crop is considerable, so the carbon dioxide savings are not as high as they are with ethanol or other forms of energy production. Nevertheless, even the energy technology support unit, the Government's own research facility, recognises that there is a considerable improvement, as referred to in the report from the House of Lords. It reckons that 'the energy balance ratio may be 1.5: or even 2:1. The British Association for Biofuels and Oils believes that those figures are inaccurate and hon. Members will see in the evidence given to the House of Lord's Select Committee that it says that the energy balance is much more favourable than ETSU calculated. Even if ETSU is correct, a considerable benefit can still be achieved in terms of output. It shows a saving in carbon dioxide emissions that we should be seeking to achieve.

As we all know, oil prices have moved a lot in the past few months in both directions, as have cereal prices. Any set of figures showing the actual cost of producing either biodiesel or ethanol change almost weekly because of the relative costs in one case of the input and in the other of the comparator. Even if oil prices fell back considerably or oilseed rape prices increased dramatically—there seems to be little evidence that either is likely to happen—there is still a case to be made.

As the right hon. Lady said, the previous Government introduced variable taxation to encourage the use of green fuels. That was applied to unleaded petrol to begin with and then to diesel—a policy that has been reversed—and the use of a road gas, to cover the two different alternative gases that are available.

The present Government have continued with most of that policy and, indeed, in what can only be called the emergency announcement in the autumn, they extended it to ultra-low sulphur fuel. Again, the concept is favourable tax treatment to encourage a change of attitude to fuels that are more environmentally friendly or less environmentally damaging. The Government must move faster on that.

The right hon. Lady referred to the green fuel challenge. She intimated that, come the Budget, the Chancellor might have something to say on the matter. I hope that he does, because it would be a considerable step forward. However, why was it necessary to go through the paraphernalia of the green challenge? A tax reduction to the same rate as liquefied petroleum gas would encourage the use of renewable sources of road fuel, such as biodiesel or ethanol. Plant-derived fuel is more environmentally friendly than gas, which is a fossil fuel. The Government have rejected that idea and, before the hon. Member for Southampton, Test (Dr. Whitehead) jumps to his feet to say, "He's made another spending commitment," I shall inform him that I have not. We announced that policy months ago and we will go further, by reducing the tax on liquefied petroleum gas to the recommended minimum rate of 10p per kilogram, which is 7p per litre. We would also tax biofuels at the same rate. That concession would be sufficient to create the market to which I referred, which would encourage the dramatic development of ethanol and biodiesel for environmental purposes.

Mr. Martlew

I am grateful to the hon. Gentleman for putting figures to the Opposition's promises. What is his estimate of the annual cost of that reduction?

Mr. Paice

If the hon. Gentleman sat and thought for a moment, he would realise that one cannot produce an annual cost because the fuel is not available. In year one, the cost would be virtually nil; in year two, it would be much more; over the following years, it would gradually extend. If he can tell me the percentage of road fuel that will be based on plant derivatives in five years, I can tell him the cost. These are policies that my right hon. and hon. Friends in the shadow Cabinet have developed for a considerable time and they are built into our spending plans.

Mr. Martlew

The hon. Gentleman has made a spending commitment that will cost nothing in the first year. Am I right in saying that he does not know how much it will cost in following years?

Mr. Paice

Obviously, it will cost nothing in the first year, unless son Leone miraculously produces a significant source of biodiesel or ethanol. A small amount may be imported, perhaps from France, but the cost in the first year will be infinitesimal.

The Government have already imposed huge costs on industry through the climate change levy, which we shall repeal and replace with a system of tradeable permits. There will be sufficient money in the system, either through savings to industry from the abolition of that levy, or alternative potential savings relating to the cost of pollutants emitted by fossil fuels. Those savings will offset the tax reduction. It is arguable whether that is a subsidy, but it is clearly a tax reduction to facilitate the development of a new market. In the long run, that is more productive than pouring money into production in the hope that that will create a market. As the right hon. Lady said, we have learned that, as with most agricultural products, simply subsiding production does not necessarily generate a market. It is better to work the market end of the chain and supply will follow.

Dr. Whitehead

The problem with ethanol is not that there is no supply; the world is awash with potential or actual bioethanol. For example, Brazil produces a considerable surplus that could be imported immediately. However, if one introduces a tax break to allow cars to run on bioethanol one would have fundamentally to re-engineer the engine of each car. There would be no market until that had been done, so the hon. Gentleman's prediction of a zero spending commitment over a number of years would prove correct.

Mr. Paice

I am grateful to the hon. Gentleman for his generosity in helping me to answer the hon. Member for Carlisle (Mr. Martlew). I was aware of the point that he makes and he is perfectly right. However, I am not sure that he is right about the extent of the re-engineering.

Dr. Whitehead

indicated assent.

Mr. Paice

Well, information from the Parliamentary Office of Science and Technology suggests that many engines would be able to cope with fuel consisting of a 15 per cent. ethanol element. The same situation arose with unleaded petrol. When the previous Government introduced the tax concession on unleaded petrol, very few road vehicles were capable of burning it. The engineering had to be developed, but as we know, that happened in what proved a verb short time. However, unless it proves economically attractive for the manufacturer to provide ethanol because the consumer wants it, things will be rather different. If it does not prove cheaper to abandon conventional fuel and run a vehicle on ethanol, or fuel with an ethanol component, consumers will not want it.

Mr. Simon Thomas

Is it not true that most cars built since about 1995 can run on a fuel mix consisting of 85 per cent. ethanol? For example, the new Ford Focus can be engineered to do that. When the Swedish Government procured the Ford Focus for their own fleet, they insisted that it run on an ethanol mix. That capability could prove of great benefit to Bridgend, in Wales, which manufactures the Ford Focus, and to the manufacturing industry in this country.

Mr. Paice

I do not want to be forced to arbitrate between two hon. Members on whether cars can burn ethanol, but my understanding is much closer to that expressed in the previous intervention. I believe that many cars could burn fuel with an ethanol component of 15 per cent.—although not necessarily 85 per cent. That is why, if such fuel became available, there would be an uptake.

I am conscious that I have spent a long time discussing energy crops, and I want briefly to talk about other non-food uses of crops to which the right hon. Lady properly referred. She mentioned hemp and flax, but miscanthus can also be used as a fibre base, as well as an energy source. As we know, those crops can be used for many purposes—as textiles for conversion to paper, and, as she said, for the manufacture of resin-based car panels. Mercedes-Benz is already heavily involved in such developments.

I welcome the Government's move towards agrimonetary compensation and a derogation for this harvesting period, and it would be ungentlemanly in any way to decry that help. That is clearly a step in the right direction, but the right hon. Lady will accept that it is not particularly significant. Much more significant, particularly in terms of encouraging the growing of hemp—probably the most important crop for fibre-based use—would be the removal of the £300 licence fee that each hemp grower must pay. The House of Lords Select Committee to which I referred called for the deregulation of hemp and the removal of the licence fee. Even though that suggestion was rejected by Lord Carter, who responded to the debate, I hope that in the intervening period the right hon. Lady has considered the case for deregulation.

The right hon. Lady referred to various industrial uses of linseed and oilseed rape, which are already grown on much set-aside land. There is considerable potential for that, in terms of speciality chemicals, lubricants, biodegradable packaging and so on. We should also consider pharmaceuticals, the development of cosmetics, other nutritional uses, and dyes. That shows how the wheel turns full circle. When we think of woad we think of William Wallace charging over the Scottish countryside with his face plastered in it. Yet here we are talking about woad as an important source of pigment for industrial purposes. That shows that there is a lot to be learned from the past and that our forefathers were perhaps not as ignorant as they are often portrayed.

There is a need for further development of crops such as borage and evening primrose, which have immense potential. Again, I welcome Government and independent work to develop the husbandry and harvesting of those crops and the technology. Ultimately, however, it will all be led by the market. I do not suggest that the Government can do much to influence the market for industrial, pharmaceutical and other uses. That will come in its own way. The Government's role is to try to do whatever they can to ensure that the industrial use of these crops is placed on the same playing field as the food use of some of these crops so that they can compete.

The Minister rightly referred to the need for further reform of the CAP. Support should be moved away from production subsidy so that the use of the crop for a more multi-use approach is more fairly balanced than at present. It seems odd that if one grows oilseed for human consumption one gets a significant subsidy, but if one grows it for industrial purposes one gets only the set-aside payment.

During my research it seemed to me that the situation was not quite as optimistic as the Minister has led us to believe, particularly in relation to Government action on energy crops. The Select Committee in the House of Lords spoke of its inability to identify a co-ordinated approach. The Minister referred to the Government's decision to respond to that with the setting up of the industry-based forum. Indeed, Lord Carter said: We intend to consult interested parties on the setting up of such a forum and, if the response is positive, to bring it into existence later this year.—[Official Report, House of Lords, 3 March 2000; Vol. 610, c. 785.] Yet here we are more than nine months later and the Minister can still say only that she hopes to announce shortly the composition of that forum. That hardly gives the impression of any great speed.

I want to emphasise my arguments about developing the market as much as the supply side of the equation. Yes, the technology and the husbandry research are essential, but they would happen anyway, if the market could be generated and developed. The ARBRE power station, to which reference has been made, demonstrates that. Once the market was set up and the Government provided the necessary assurance that there would be a long-term demand at a fixed price for the short-rotation coppice, that side of the equation was filled. The coppice was planted and the plant is, or shortly will be, in production.

My final point also stems from the House of Lords report. It strongly recommended much more of what it described as full life-cycle research into energy crops. As I said earlier—I think that hon. Members on both sides appreciated this—we have to look at that energy balance. We must not just be taken in by the fact that the crop itself is carbon neutral; the energy involved in producing it, harvesting it and converting it has to be taken into account. The general feeling that the House of Lords Select Committee got from its research was that there is insufficient life-cycle analysis to make final judgments.

I have tried to set out a number of proposals that would help to develop the market for this product, a number of areas where the Government could have acted more quickly and a number where we will, on taking office, make imminent changes that would develop the market and therefore develop the supply.

I am grateful to have had the opportunity to make a longer speech than I intended. I apologise for that, but it is an important topic with immense potential for environmental benefit and for helping agriculture in its present difficult circumstances. Most important for me is the long-term benefit to the environment that will be achieved if we can make the shift in farming techniques, management and cropping that the policies will generate. However, we are a long way from the policy framework that will enable that to happen.

3.35 pm

Mr. Eric Martlew (Carlisle)

I thank my right hon. Friend the Minister for her statement, which was useful and pointed us in the right direction. My speech will relate mainly to my constituency. I hope that the Minister will be able to respond, although I realise that her Department will not make a final decision about the plant in my constituency.

When mention was made of the House of Lords Select Committee, I was reminded that, in 1989, I served on the House of Commons Select Committee that looked into forestry. We made several recommendations about biomass. My recollection is that the then Government did not take up any of our recommendations. I remember going to Sweden to look at the coppicing of willow trees. It was not a very attractive process, but I suspect that the countryside where it was taking place was not very attractive anyhow. The issue was whether the wood should be transformed into energy near the site or taken a great distance to a larger power plant. The decision taken, not only for environmental reasons but also for local employment, was that the coppiced wood should be burned in a power plant as near to the site as possible.

The Minister said that mistakes had been made in the past, and she mentioned forestry plantations. Those of us who live in Cumbria have only to look at pictures of Ennerdale valley, which was one of the most beautiful valleys in Lakeland before the forestry plantations: that valley was spoiled. We have to be very careful. Biomass may be a good idea but if we get it wrong we can bring it into disrepute, as happened with the forestry plantation scheme.

The Minister did not mention wind turbines and her view may differ from mine. I find the wind turbines on the hillsides of Cumbria visually polluting. I realise that they produce clean energy, but they do a great deal of damage to the landscape, and we should be careful how far we go down that road. Perhaps biomass might help us to reduce the number of wind turbines.

A company called Border Biofuels plans to build a large power plant near my constituency; actually, it is in the constituency of Penrith and The Border. I take great exception to the proposed plant. It is not that I disagree with the process involved: it is correct, and uses forestry waste. The hon. Member for South-East Cambridgeshire (Mr. Paice) said that that was a difficult and expensive process, but the company is suggesting that process and it seems a good use of the waste.

My objection is that a decision has been taken to build a large power plant in an urban area on the edge of my constituency and to transport the waste timber over a radius of 100 miles. The logic of that on environmental grounds is lost on me. We are talking about 200 heavy goods vehicles a day coming down the motorway—that is the best part of the matter—and along many rural roads on to the busiest road in my constituency. That will not only pause congestion, but will necessitate a new giratory traffic scheme that will cost more than £1 million and will destroy the quality of life of many of my constituents—all so we can say that we have a green energy policy. It will bring the policy into disrepute.

There is great concern in my constituency about the extra pollution that the vehicles will cause, bearing in mind that HGVs do about eight miles to the gallon. There are three primary schools on the route and the road is the busiest in Cumbria; it is even busier than the motorway. Hon. Members will therefore understand my reservations.

Unfortunately, the city council did not have reservations; the first act of the newly elected Conservative city council was to give the proposal planning permission. It was probably the worst decision of any council in Carlisle since reorganisation in 1974 and I am not sure why it was taken. A similar plant was designed and planned for Wales at Newbridge-on-Wye, where the local authority took a different stance. It did an environmental impact study and consulted the locals; after more than a year of deliberation, the authority came to the conclusion that the environmental impact of the plant was greater than the benefits and turned it down.

In Carlisle, planning permission has been given. However, the proposal is unlikely to go ahead because of my opposition and that of the residents, and because the county council is making it plain that the plant should not be built. We should take it as a warning that these schemes may appear very good but there is an element of fashion about them, which the city council officers were guilty of following. They thought that it would be good to have the first major power plant in the area and they rushed to grant planning permission. I hope that we will be able to stop it from going ahead and I find it difficult to accept that the Government are giving the plant massive subsidies to be built. My constituents know that it will affect their quality of life, as there will be a continuous plum e of steam hundreds of yards into the air that will he seen for miles around; people are also worried about pollutants from the plant. Several years ago, the local Conservative Member of the European Parliament was part of a consortium to build a similar plant fuelled by chicken litter rather than wood waste, and there was great alarm among the residents about it.

I welcome the Government's policy. I do not like making "not in my back yard" speeches, but I believe that the policy has wider implications if we get it right. Power plants should be built in the rural community; the transportation costs are lower and, more importantly, there is employment where the product is produced. For that reason, I hope that the Government go ahead. However, they should be careful about the larger plants that have massive transport costs and pollution implications.

3.43 pm

Mr. David Heath (Somerton and Frome)

I congratulate the Minister on securing this timely debate and on much of what she said. This country has come late to many of the issues; we have not established the priorities that might have led to some of the technologies being introduced earlier.

There are worries that it has taken time for the Government to establish a coherent approach between Departments and there is evidence that the issue has not yet been successfully concluded. The Minister's remarks showed that there is commitment, but there is work to be done to make that commitment a reality. My purpose is to encourage the Minister in her proposals and perhaps encourage her and her colleagues to go further on some issues.

The programme is an important development for the agricultural industry and for the wider community. Why do we need those technologies to come on stream? First, our commitment to renewable energy is important and, secondly, they provide carbon neutral fuels for transportation and other energy nerds. To take a wider view, increasing the crop coverage provides for carbon sequestration. Although that has been a difficult subject in recent international discussions, we should bear it in mind.

Thirdly, there is capacity to reduce pollutants and particulates, especially in the biofuel element of the business, and that is a worthy aim. Fourthly, there are opportunities for new uses—pharmaceutical or industrial—introducing more and more recyclable materials. That also has an environmental effect. Finally, not to be forgotten are the effects on local communities and on the difficult circumstances of many people who are engaged in agriculture. The scheme provides opportunities for diversification away from sectors that have been in serious trouble in recent years and for developing the rural economy. Those are worthy objectives.

As other hon. Members have said, a wide variety of crops is involved. We have talked about short-rotation coppice willow—withies, as we call them in Somerset; although we generally grow our withies for different purposes—and miscanthus. When we have these debates, whatever crop or sector we are discussing, I can always tell the Minister that I have examples in my constituency. Today is no exception, and I am indebted to my constituent, Archie Montgomery, who is a great advocate of the virtues of miscanthus, which he is presently planting and sees as having enormous potential benefit. Oil-bearing plants have their uses, either as biofuel or industrial chemicals, as do fibre plants; we had reason to discuss the hemp and flax regime recently. I thank the Minister again for her efforts on behalf of the hemp and flax growers in my part of the world and for her announcement today about the application of the agrimonetary compensation and flood relief. Lastly, there are starch-producing crops.

From the growers' point of view, what are the requirements for the industry to prosper? I agree with much of what was said by the hon. Member for South-East Cambridgeshire (Mr. Paice). The first and most important requirement is a market. Growers need to be sure that there is a viable destination for their produce. Nothing is assured in this world—certainly not in the world of agriculture—but growers must be reasonably assured that they will find a market for what they produce.

Secondly, there are issues of capital investment. Biomass involves start-up costs, certainly for the power production plant. Individual growers also face capital costs when re-establishing a new crop, setting aside and preparing land for it and planting and maturing it over the initial years. The Minister readily understands that one cannot simply plant crops, forget about them and then find that they are ready within the first year. A degree of commitment is required and the grower must be assured that the commitment is worthwhile financially.

Thirdly, the need to secure an income stream for the grower has not been sufficiently recognised. The start-up costs are one thing, but the grower needs to know that the cash flow will continue for the first few years of growth. I shall return to that in a moment because although it is important, it has not been addressed so far in the programmes that have been introduced.

The grower also needs encouragement that the systems introduced by the Government have a degree of flexibility. There is nothing worse than too rigid a protocol which discourages innovation in agriculture and the use of new crops for several reasons. As the Minister said, the climate varies throughout the country, and some areas are much more suited to one crop than another as a result of their temperature, rainfall and soil type. I certainly would not suggest that miscanthus, for instance, was the answer for some northerly parts of the country. Willow is probably not the answer for the drier parts of the country—if such places exist any more. Most of the country looks suitable for willow at the moment.

We should not be too prescriptive about plot size. Why should that make a difference? Let us remember that substantial capital costs are involved in growing willow, which is particularly vulnerable to rabbit problems and therefore requires fencing. Small plots and rabbit fencing are not cost-effective on a relatively small income. Those issues must be considered.

I do not argue with the 25-mile limit on the distance from the generating station, because it is sensible. As the hon. Member for Carlisle (Mr. Martlew) said, a local generating capacity for locally produced biomass is terribly important in maintaining the tightly drawn environmental equation. If we start to produce large quantities of plant material, it will be nonsensical to transport them vast distances across the country to burn them.

Producers are keen to see the Government-industry forum on non-food crops properly established and carrying out its work. A principal reason is their frustration at the Government's apparent lack of joined-up thinking on the issue. Producers go from one Department to another, receiving variable degrees of encouragement but not seeing links being made. The forum will have the opportunity to inform Government and enable Government to take a more coherent view in response to the points raised.

We all know the difficulties that the climate change levy has produced in some sectors, not least the horticultural industry. As everyone knows, we have had long and hard discussions—the outcome is certainly better than the position from which we started—but there are still problems. The Minister may be aware of a glasshouse company on the Isle of Wight. The combined heat and power company that was associated with it and integral to its system has recently gone bust, and the glasshouse company has suddenly been left without the option that it thought it had. We need flexibility in the system to allow for such an event.

As far as growers, environmentalists, residents and everyone else are concerned, I am a great believer that small is beautiful. I believe that for a number of reasons, not least because of what the hon. Member for Carlisle said, but because that approach is a sensible way of developing the technology. We do not need enormous generating stations.

The argument is similar to that about waste disposal. The assumption is often that we should have landfill sites—which I abhor—or large incinerators, because they constitute the only cost-effective method of waste disposal. I suspect that the answer is, in fact, much smaller-scale anaerobic digesters, attached to a small community, where the transportation distances between production and use are much more limited. The same applies to energy production. As some countries have grasped, we should look for much smaller units of production, much shorter travel distances and much more local use of the energy produced.

What do we wish the Government to consider in terms of what they have already produced? There is a commitment to a 10 per cent. renewables percentage by 2010. On my party's behalf, I cannot emphasise strongly enough how important that percentage is and the need not to slip from that commitment. There may be a tendency to do so as we approach that date. I am determined, as are many others, to press the Government to continue that commitment.

We need the headroom within the renewals obligation to enable those technologies to develop. Simpler options such as wind generation and other forms of renewables are important contributors to the non-fossil fuel production of energy, but we also need the headroom that enables technologies such as energy crops, which are not as mature in this country, to develop as viable alternatives through either a banding structure—as was debated at length in the Committee of the Utilities Act 2000 and rejected by the Government—or simply other forms of encouragement. It is an important issue in terms of the long-tern prosperity of the industry.

On price support, I shall not repeat the figures quoted by the hon. Member for South-East Cambridgeshire but it is important that there is a clear commitment on the issue. Those who are tempted to invest as growers or producers of plant must know that they are investing on a firm basis in tern s of capital support, the costs at supplier level—so that they are assured of a market for the energy produced—and cash flow so that there is a guaranteed income stream in the early years of production. There are a variety of ways in which that could be done.

At the moment, one cannot start growing such crops and getting Government support for that unless one has a commitment to a local energy producer within the 25-mile radius. Is it not possible that that scheme could be modified so that, for example, support for the grower could exist and if a buyer for the crop were not found, a claw-back mechanism could be introduced at a later stage? Otherwise one would have a one-way system. At the moment, one has to have the plant in place before one can start growing, but there is great capacity for co-operatives or groups of growers—particularly in my part of the world—to develop the crop and then to attract someone to use it effectively so that the circle is squared. That is a more attractive option and there are ways in which that could be done without the Treasury ultimately being the loser.

I ask the Government to maintain their commitment to research. The Minister said that there are exciting new areas, such as the polycarbonate fibre mix that she mentioned which uses miscanthus or wood chip. That is a tremendously exciting way of finding a new end use for a crop and encouraging more recyclable material for hard uses, which I hope will develop in this country. I also hope that we will have medicinal and industrial use of the new dyes.

I share the view of the hon. Member for South-East Cambridgeshire that it is extraordinary that we are talking about woad those of us from the Celtic fringes welcome that wholeheartedly. That development shows that we should never discard technology. New ways of using materials can often enable materials to become effective again. Hon. Members who read a recent book on the history of mauve will know of the great breakthrough when an analogue dye was first produced by industrial means, replacing the previous agricultural means of production. As the hon. Member for South-East Cambridgeshire said, we have now come full circle and we see the merits of agricultural production complementing industrial uses.

Marketing is also important. The Government have a role to play in finding domestic and potential export markets. We also need underpinning fiscal measures, particularly for biofuel, and I welcome the Chancellor's comments. I suspect that the timing of his anticipated Budget announcement is no coincidence, but so be it. That is politics. The most important point is that we establish the fiscal encouragement for people to use biofuel and biodiesel. I suspect that that will happen, and I welcome it.

As with many other things, these crops give rise to potential dangers in terms of public attitudes and the future market. We have talked about the possible effect of monoculture, and that danger should be resisted. There is also a risk of overstating the contribution of energy-producing crops. Some hon. Members have suggested that they are the answer to all our climate change concerns, but I do not believe for one moment that we can cover the country with hem. However, that does not mean that they cannot make an important contribution.

There is a further danger of a new dependence that is just as corrosive as the dependence that has built up in recent years through commodity support processes in the CAP. I do not want to see a new subsidised sector. Nor do I want viability—whether economic or environmental—to be miscalculated, so that people are led down an investment route, only to find that the sums have been changed and the whole process is deemed to have gone down the pan.

As the Minister knows, the National Farmers Union has advocated a new sector in the CAP for non-food crops, but I am not sure that I entirely accept that argument. Like her, I want total reform of the CAP, not a new subsidised sector. Nevertheless, this is an important component in a move towards environmental and social support, rather than price and commodity support. I hope that the Government will pursue the matter in that way, and that they will be given every encouragement to develop this exciting and potentially valuable sector.

4.2 pm

Mrs. Helen Brinton (Peterborough)

Unlike my hon. Friend the Member for Carlisle (Mr. Martlew), I will not make a constituency-related speech. I shall instead concentrate on biofuels, and biodiesel in particular. The hon. Member for Somerton and Frome (Mr. Heath) has already referred to their importance in achieving our objective of reducing global warming.

So far, this Government have a useful record in using fiscal incentive to encourage alternative, environmentally preferable road fuels. Obviously, they include compressed natural gas and liquefied petroleum gas, which I have been heavily involved in promoting. More recently, the Government have cut excise duty on ultra-low sulphur diesel, and they have shown signs of extending their commitment. Through the green fuel challenge, the Chancellor has invited industry to develop practical proposals for alternative environmentally friendly fuels. As the hon. Member for Somerton and Frome said, the Chancellor hopes to provide some incentive in the next Budget, in the form of duty rates, for the most promising of these fuels.

I want to say a few words in favour of the green fuel challenge, which hon. Members are wrong to rubbish as a publicity stunt. I have introduced representatives of business to Ministers in this House and the other place. They appreciated this example of joined-up government, which involves the Treasury and the Department of the Environment, Transport and the Regions working together. They enjoyed the chance to put the case for their own fuel to the Minister, face to face. I should like to see more of that, not less.

The liquid biofuels bioethanol and biodiesel are excellent candidates for consideration. The major source of liquid biodiesel is rape seed oil. Its production could therefore help many of Britain's farmers, especially in the eastern region surrounding my constituency. I have discussed that with the NFU. Biodiesel is renewable, sustainable and safely biodegradable. The development of a United Kingdom production base for this non-food crop could make a significant contribution to British agriculture and the rural economy.

The previous Administration imposed a duty on biodiesel equal to that on finite fossil fuel-derived diesel. Consequently, biodiesel was priced out of the market, and remains so; it is around twice the price of fossil diesel. A reduction in the rate of duty for liquid biofuels would involve only a hypothetical loss of revenue to the Treasury, because at present no duty is raised from them. Other countries, having recognised the environmental credentials of the fuels, have introduced tax incentives and therefore have established markets.

Biodiesel has a sound environmental record. Total emissions of greenhouse gases from the biodiesel life cycle are at least half those from fossil fuels. As a fuel, it far outperforms fossil diesel on a net carbon basis, because the growing plant that produces the raw material itself recycles carbon. Life cycle emissions for carbon dioxide are only around one fifth of those from fossil fuels. Biodiesel does not contain any sulphur and does not even need to undergo the process required to make ultra-low sulphur diesel. It is a net producer of energy; for every unit of energy that is put into the process, around two units are produced. The contrast with fossil fuels is marked. They are a finite resource, major producers of the dreaded CO₂ and other pollutants and require energy for their production.

The positive aspect is that the technology to produce liquid biodiesel is commercially viable and readily available. Industry is ready, willing and waiting to start its production; all that it requires—this is a note to the Treasury—is the appropriate fiscal incentive. Countries such as France, Germany and Austria already have established markets in the fuel.

In the short term, 33 per cent. of the diesel and petrol markets could be supplied by biodiesel and bioethanol respectively. The necessary farmland is available. Indeed, in 1999, the oil seed from around 120,000 hectares was exported from the UK to France and Germany primarily for the manufacture of biodiesel. In the longer term, more than 5 per cent. of road transport fuels could come from our farms. We are missing an important opportunity. The potential prize for British agriculture and British farmers is significant, because the crop could be grown on land that might otherwise be idle under the wretched set-aside. The United States Government have allocated $150 million a year in capital grants for farmers wanting to produce biodiesel.

In contrast to other road fuels, biodiesel does not require expensive engine modification or special storage, because it has a very low flashpoint. It is safe and easily biodegradable. I have concentrated on the production of liquid biodiesel from rape seed oil, but the potential exists to manufacture it by recycling cooking oil. That would help to deal with the problem of how to dispose of waste congealed cooking fats.

I thank the Minister and the Government for this opportunity to debate non-food crops. All hon. Members have made valuable contributions. I conclude by asking the Minister whether she agrees that the production of biodiesel represents an opportunity for British farmers—especially in the eastern region, with which I am concerned—to make a major environmentally-friendly contribution to the nation's diesel fuel supplies.

4.9 pm

Mr. Simon Thomas (Ceredigion)

I, too, welcome this opportunity to debate a matter that, in 10 or 15 years, will be a much more important feature of agriculture in the United Kingdom and western Europe. We are on the threshold of a bioeconomy that will change the way in which we generate much of our power, run many of our engines and cars, and go about our daily business. That is a prize worth reaching for. It is gratifying to have this debate and to hear that the Minister is prepared to listen to ideas for other Ministries. I do not know whether shorthand is among her talents, but I have a few ideas that I hope she will take down.

The Ministry of Agriculture, Fisheries and Food has demonstrated awareness of the issues during the past few years, but we cannot say the same of all other aspects of the Government's policy, which is not as joined-up as it could or should be. I hope that that will change, not only with the fuel challenge from the Treasury, but with ideas from the DTI and support for the industry. We must work with the market to encourage the bioeconomy, but the infrastructure is not yet fully available.

I have a strong constituency interest in the matter and I chair a biomass working group in Ceredigion to examine how to develop biomass in my constituency. It may be useful if I explain who is represented on that working group, because it is not a fringe interest group on agriculture, environment or energy. It includes representatives of the two farming unions in Wales; Antur Teifi, a local development agency; the Welsh Development Agency; the local authority; the private sector, through British Biogen; various forestry interests, including individual contractors; and Ymlaen Ceredigion, which is a voluntary group for sustainable development in Ceredigion. We have a private, public and voluntary sector partnership and I hope that the Government agree that the way forward is at local development level.

We have had a frustrating year with a commercial project, which I shall not name because it is commercially sensitive. We have tried to get it off the ground to deliver biomass energy from Welsh hardwoods and forestry waste through local processing of agricultural produce. Every hon. Member who has spoken today has referred to the need for local biomass energy production. One reason for our frustration is the funding gap—I support the comments of the hon. Member for South-East Cambridgeshire (Mr. Paice) on that—and the DTI should examine whether that gap can be bridged.

With regard to the comments of the hon. Member for Somerton and Frome (Mr. Heath), farmers in Ceredigion who might be persuaded to diversify into energy crops need about £40 a dry tonne to compensate for the sheep subsidies that are available for a similar acreage. That is way above the £20 or £25 a dry tonne that they can receive. How can that gap be bridged? Efficiency will improve and that £40 will come down, but we need a funding system now that will attract farmers to grow such crops a id provide sustainability for 10 or 15 years.

When the sums are added up, a little is missing, including the renewables incentive of 1p or 1.5p per kilowatt hour, and we need a little more effort from the Government to push us further along the line, so that we can take full advantage of the proposals that the Minister has set out today. The agricultural side is almost there, but the infrastructure and trade and industry side is not. The Treasury side will be in the Budget, but we shall have to wait a few weeks for that.

The great prize is to create a more sustainable, environmentally friendly bioeconomy in the UK, where heat and power from agricultural products can be utilised to create local jobs and keep people in agriculture; albeit growing a different type of crop. We must move out of the carbon economy and into the hydrogen economy which may well exist in 20 or 30 years. Hydrogen is only a carrier of energy; it is not an energy source. The question is how to get the energy into the hydrogen fuel cells of the future, which may power our cars in the next five years. We want to maximise energy from renewable sources, so we must get the non-food side of renewables up and running. Yesterday, the Institute for Public Policy Research announced that it is about to embark on in-depth research on a low-ca -bon initiative programme, which I hope the Government will be part of. We should all pay attention to that and feed ideas into it.

Hon. Members have already mentioned the example of north American agriculture, which produces 1.7 million gallons of biofuel each year. British production lags far behind that total. Small plants and co-operatives produce the majority of north American biofuel, so the cost of transporting raw materials or biofuel over long distances is irrelevant; we can make it in local plants. One million American cars can run on E85 fuel, which is the 85 per cent. ethanol fuel that we discussed earlier. All cars built after 1995 can run on E10, and there is scope for new cars to run on E85, but only if we ask the manufacturers to modify their engines.

On Tuesday, the Government rightly made great play of asking manufacturers to improve vehicle security. They should also ask manufacturers to improve the ability of engines to run on those fuels. In addition, they should start a procurement policy, which would involve the Government buying these fuels and cars that are capable of running on either biodiesel or E85.

Cars in Brazil run on fuel based on sugar cane. In Sweden, 80 per cent. of fuel stations sell bioethanol, which powers all of Stockholm's buses. Furthermore, they have overcome the fish and chip smell associated with ethanol. There are two pieces of good news for Wales. First, Welsh manufacturing industry—for example, Ford in Bridgend—could produce the engines that run on ethanol. Secondly, Welsh agriculture could produce wood and biodiesel.

Because these fuels are renewable and produce low emissions, they also address the problems of climate change that the Government are currently taking seriously. The hon. Member for Peterborough (Mrs. Brinton) said that biodiesel is safe, and mentioned the ease with which it can be put into modern car engines. That is not surprising, because the diesel engine was designed to run on a biofuel—vegetable oil. Later, the oil companies kicked the vegetable side out and asked people to go for the black gold. We could grow our fuel by planting oil seed rape. This is one area where I am prepared to alter my views on genetically modified crops; I am not keen on them as far as food crops are concerned. Research into genetically modified crops for non-food purposes may be something that the public will find more acceptable as we develop non-food crops that produce high energy yields.

Bioethanol can now be produced from wood, in addition to more traditional methods. Wood is something that we in Wales can grow a great deal of, although fewer conifers and more traditional hardwoods would be welcome. The Welsh Assembly is addressing that issue at the moment. One tonne of wood or straw can produce up to 350 litres of biofuel. We can develop that with the right tax breaks for wood.

In addition to energy production, there is also biomass, which is a more direct form of heat production. I am not talking so much about using bioenergy to produce fuel or electricity, but particularly to produce heat directly. It is important to remember that if we use biomass in small-scale heating plants, it is the most effective and efficient of all renewables. It is, incidentally, also one of the most job-intensive. Although my constituency is facing an application to build the largest wind farm in England and Wales at Cefn Croes—which will produce something like 59 kWh—it will create only about six on-going jobs. That is very few, although I shall not oppose it on those grounds. I differ from the hon. Member for Carlisle (Mr. Martlew); there is a need for wind farms and for bioenergy, but we need to get the balance right. The fact is that growing farms for bioenergy creates more jobs than wind farms and the farms are also less visually intrusive.

The potential is great and, in Ceredigion, we have identified 25 small-scale installation sites—for example, schools, old people's homes and residential homes—where the local authority is considering replacing old, inefficient oil and coal boilers and could do so with biomass burners. Those 25 sites would produce about 200 kW each and that represents by far the greatest efficiency and effectiveness.

One of my concerns is to make sure that local farmers are able to use their wood crop for those sites. As I understand it at the moment, if the sites were to go ahead tomorrow, they would use soft wood pellets produced somewhere else and transported over a fairly long distance. That would not be environmentally sound, and it is important to get the right technology into the right place. I should like to see local hardwoods, particularly from the remaining under-managed woods on many Welsh farms, being utilised in the local market.

Although I accept the points made earlier by the hon. Member for Somerton and Frome about transporting materials from a distance, to get things off the ground we perhaps need some sort of bridging regime where it is acceptable to bring the material from further away and then to go for the local market in time. For example, I am given to understand that the Ely power station initially took straw from as much as 100 miles away. Now that the farmers and producers know that there is a market for straw, it is obtained from a far smaller radius. There is a lesson there to be learned.

The DTI has to be aware of that point in the way in which it deals with biomass applications for the capital grants scheme. I understand that the new opportunities fund will have up to £150 million available for community renewable energy schemes. They will need to realise that although on-shore wind energy is the cheapest way to generate electricity, biomass is the best way to generate energy if we can get it directly into the area that is being heated. The European Union has a sustainable communities competition that I understand is also open at the moment for such projects. I hope the Government will look at that. Seventeen local authorities, as well as my own, are currently looking at biomass in this way. Devon schools are already well on the way to being heated by biomass.

The hon. Member for Carlisle mentioned earlier the Newbridge application for the burning of forest residue to produce biomass energy in mid-Wales. Although the application was very contentious, I was not so concerned about it. Opposition is often generated by a sense of nimbyism on the part of many people who have moved into rural areas expecting peace and quiet. They can, of course, have peace and quiet, but jobs are needed for people who live in the area, as well as production with which farmers can engage.

The Newbridge application raises a serious question for Wales and the United Kingdom in general. Are we going for residues and the burning of what is considered waste, with all the attendant environmental difficulties that have to be overcome, or are we going to put our resources much more firmly into the growing of non-food and energy crops? That is why I welcome this debate and the opportunity to press home to the Minister—and, through her, other Departments—the need to put more emphasis on the crop side rather than on the waste side. Further down the waste stream is incineration; that is something that I do not favour and we will have huge difficulties if we go that way.

The National Assembly for Wales has the Welsh forestry strategy currently under consideration and it would be useful, at a United Kingdom level, to emphasise local forestry production and traditional hardwoods as well as the softwoods that are familiar in Scandinavia, where biomass is usually used. That route might lead to a useful future for forestry in Wales.

I make these remarks in the context of a dreadful year for Welsh agriculture. This afternoon's debate provides an opportunity to advance some ideas, as well as to take advantage of the presence of the Minister for Agriculture to remind her of the need for agrimonetary compensation and of the fact that we are currently haemorrhaging jobs in Welsh agriculture. I understand that she no longer has primary responsibility for Welsh agriculture. Nevertheless, she will be interested to know that last year in Welsh agriculture 73 jobs a week were lost. There was a 13 per cent. fall in the number of full-time farmers and 4,000 fewer people were employed in agriculture in Wales.

That dreadful condition is matched by a similar fall in the number of traditional agricultural activities in Wales. The beef-breeding herd has decreased by 3 per cent., the dairy herd by 4 per cent. and the number of sheep in Wales has fallen by 5 per cent; people will no doubt be amazed to hear that. A gap is growing, in that farmers cannot make their regimes work under the present CAP system and with a strong pound, and non-feed crops could have a very useful part to play.

I agree that we do not want a monoculture of energy crops and non-food crops, but I would like the Government to pursue three strands for west Wales in particular. Forestry is one of them. Another is the increasing interest in organic foods. I was lucky to come fifteenth in the ballot for private Members' Bills and my Bill will deal with organic food and farming targets. The third strand is a more sustainable agriculture with added value and the protection of local abattoirs.

The whole of agriculture can have a sustainable future with energy crops as part of the third part of that equation. In that context, I have a few suggestions that the Government could pursue to bring about that change in agricultural practice and more sustainable agriculture. First, I believe that forestry should be regarded as a crop. Some people find it difficult to think of trees as crops because of the time that is required. It is a crop.

Ceredigion has a historical background in forestry. In the early days of agricultural reform in the late 18th century, Thomas Jones of Hafod was perhaps the first person to introduce the idea of growing forestry into the landscape of mid-Wales. It is now seen as one of the great picaresque glories of landscape, but it is interesting to note that forestry was introduced for agricultural purposes as an experiment. We still have a large number of trees in mid-Wales, most of them under-utilised. We need perhaps to view forestry more as a crop.

The CAP regime needs examining. It is curious, to say the least. The most nonsensical aspect is that non-food and energy crops are included in world food prices and set-aside regimes; they are treated as though they were contributing towards the food mountain in western Europe. That is crazy. They should not be part of the CAP. The whole system needs reform, but it would be a useful step forward in the meantime to keep energy and non-food crops separate from the main food aspect of the CAP.

I do not know what the Chancellor is likely to announce on the alternative fuel challenge fund. The tax on petrol is about 65p a litre, while the tax on liquid petroleum gas is just 5p a litre. There is a huge gap. Bioethanol costs about 40p a litre to make. Petrol costs about 22p a litre to make. Hon. Members can see where the gap needs to be bridged. The hon. Member for Peterbrough referred to the tax differential. Bioethanol and biodiesel have to be at least as cheap as ordinary fuels, if not a great deal cheaper. Historically, there was a time when the Government wanted to encourage the use of diesel by reducing the tax. It was seen later as an environmental mistake because of other aspects of diesel. However, it has to be cheaper in order to make the point.

The Department of Trade and Industry has a capital grants scheme for wind farms and for biomass. However, there might be a problem for biomass. For starters the funds are—as always—inadequate. Capital schemes are good for onshore wind, but biomass is not just about capital; it is about getting the market right, on-going revenue costs and getting producers on board. The £50 million that could be in the scheme might not be adequate to secure the requisite spread of costs for biomass. As I said, wind farms will find it much easier.

The DTI intends to pick technology winners, which could be a mistake in view of the need to introduce new technologies. I am not a personal opponent of wind farms, but Government money should not be used to support more wind farm developments when there is an alternative that can generate more jobs and provide a more sustainable future for Welsh agriculture. In that regard, the Government should pay more attention to infrastructure.

We all know about problems over liquid petroleum gas; an acceptable and more environmentally friendly option for use in vehicles. My huge rural constituency contains only one such fuel station. The Government may introduce good measures for biofuels in the challenge fund, but I fear that my constituents will, because of infrastructure problems, be unable to access them. West Wales is at the end of the fuel chain, which is why we were the first to lose our fuel last September. We were also the last to get it back when the protests ended. We also supplied many protesters, but that is a different matter.

To succeed, we must pay more attention to markets and infrastructure, but the Government have paid insufficient attention to them. I acknowledge that the Minister's Department is not responsible, but I am sure that she will want take some of the lessons into account. For example, VAT on biomass equipment and on local installations in homes or small factory units is an important consideration. Bioenergy, which is not usually polluting, can make a huge contribution.

The Minister stressed environmental issues. We cannot be trapped in a fossil fuel-dependent economy for much longer. We must take a visionary look at the problem. Energy crops will provide a better future for the whole of the UK and offer huge opportunities for Welsh farmers. It is worth reflecting on how we became a fossil fuel-dependent economy and on how we can get out of it. The entire world economy was dependent on energy crops until the industrial revolution. It was the replacement of the plant energy from trees, particularly charcoal, that led to the industrial revolution.

I represent a rural constituency in west Wales, but I was brought up in south Wales valleys, in one of the main coal-producing; valleys; it is now the only one with a deep mine—Tower colliery in the Cynon valley, Aberdare. Our debate reminds me of the beginnings of the destruction of the south Wales valleys. Hon. Members with constituencies outside the valleys probably think that it was all about coal. In fact, it was not about coal, but cutting down trees. The valleys were, initially, totally forested. It was cutting down trees—for charcoal burning in the burgeoning iron industry at Blaenavon—that started the despoliation of the valleys.

In a sense, our journey towards the fossil fuel-dependent economy in which we are currently trapped developed out of our need for bioenergy. Curiously, however, because technology has improved so much and we no longer need to burn coal to produce energy from plants, bioenergy and biofuels is could provide our escape out of the dependent economy. We are effectively bypassing several hundreds of millions of years of evolution. Instead of waiting for plants to produce coal, gas and oil, deep in the reserves of the earth, we are using modern technology to achieve the same end. We can build the technology; not bionic man, but bioenergy. I hope that the Government will take account of the issues raised in this valuable debate and that the Minister will acknowledge the need to work a little harder to integrate a great deal more to realise this vision.

4.34 pm

Dr. Alan Whitehead (Southampton, Test)

I welcome this afternoon's debate and also the broad agreement—apart from one or two minor spats—on the desirability of seriously considering energy crops and their role in the future economy.

There is broad agreement, too, about the problems associated with energy crops: making sure that the markets exist, that the production and the markets coincide and that the process by which energy crops can play a greater role in the energy economy runs smoothly.

It is important to see Government investment as investment: not as underwriting mad technologies, but as a method of establishing energy crops and getting them to the market. We are talking not about a series of highly experimental technologies that need enormous research but about mature technologies that have been around for a long time. We are talking about changing some of our ways of thinking about how we use those technologies in our economy. We are also talking about the role of energy crops in contributing to the Kyoto targets. I was proud of this country's leading the way in establishing those targets, and I hope that we will continue that lead by taking the measures being discussed in the debate.

Energy crops are most important to the Government's target of 10 per cent. of energy being supplied from renewables. They are important, too, in the context of renewables' exemption from the climate change levy, which creates a potential market for a range of renewable energy sources, especially from biomass. The task is to ensure that electricity is supplied at an early stage by those sources and that when companies seek green tariff electricity sources they are available at a good price.

The debate should encourage us to make a quantum leap in our energy philosophy, although it is not particularly visionary: it is to substitute irreplaceable mineral energy sources with carbon efficient cycles. The plant grows, it fixes carbon, we combust it and it grows again. It is a simple idea, but a great leap forward in terms of renouncing our long-standing dependence on digging things out of the ground that cannot be replaced.

The development of short-rotation willow coppice as a fuel for power stations is an important step forward, as is the growth of elephant grass and the development of power stations—which I agree should ideally be small and local—burning straw that was previously burnt off and polluted the area where it was grown, with no benefit.

The next horizon is the use of energy crops as a vehicle fuel. The Chancellor's green fuel challenge in the pre-Budget statement was an important step forward in that respect. Hon. Members mentioned two alternative vehicle fuels that we should seriously consider: biodiesel made from rape oil or other oil-bearing plants, and ethanol, which can be made from a variety of sources such as wheat, sugar beet, forest residues and cellulose residues from paper making.

Currently, road traffic accounts for a little more than 20 per cent. of CO₂ emissions. However, as was set out in the climate change and transport Green and White Papers, the problem is that that figure as a total percentage of CO₂ emissions is increasing fast. In 1990, it was estimated that transport produced 33.3 megatonnes of carbon, which, in a business as usual scenario for 2010, will go up to 40.7 megatonnes. That is a substantial increase in a relatively short period.

Projected policy has so far generally been based on proposals to curb traffic growth, to move people out of cars and on to public transport and, under certain circumstances, to develop lean-burn engines and different forms of the internal combustion engine. A depressing reality about policies in that direction is that it is clear, if only because the topography of our country has been built on the idea of the motor car, that people will continue to drive around in motor cars for a long time to come. That is a gloomy conclusion. Until we develop a fuel cell that can drive motor cars, people will continue to drive cars based on the internal combustion engine. Even with developments in engine technology, that will continue to be a substantial and increasing source of CO₂.

How can CO₂ be saved as the motorist drives? Part of the answer lies with the action taken by the European Union to develop targets and standards in vehicle manufacture, so that replacement vehicles coming on stream are far more efficient in terms of emissions than those that they replace. However, that action has already been part of the CO₂ targets, and was certainly mentioned in the climate change Green and White Papers. It assumes that whatever fuel goes into cars is used more efficiently. No assumptions or predictions have yet been made about the contribution of the fuel used, whatever its nature, to combating climate change.

I am concerned about the fact that all the work that has been done so far on alternative fuels places the adoption of such policies well into the future. Electric cars and fuel cells are regarded in the climate change White Paper as peripheral technologies in terms of the market.

Is it possible to make considerable CO₂ savings by changing the composition of fuel that presently goes into cars? The hon. Member for South-East Cambridgeshire (Mr. Paice) made several important points about how one might encourage the use of fuels such as ethanol for precisely the purpose of changing the total fuel mix of cars on our roads. It is not practical to replace petrol or diesel wholly with biodiesel or ethanol. For biodiesel, one would need to cover most of the countryside with oilseed rape. I think that most of the countryside would turn yellow if we were to develop such an economy. As I mentioned about ethanol, if we encouraged E85 cars as a staple alternative to mineral petrol-driven cars, we would need, with a few exceptions, to reconfigure fundamentally the engines of the cars that we use.

How do we resolve the conundrum? My modest proposal, to use Dean Swift's phrase, is that, over time, 10 per cent. of ethanol or biodiesel—I want to concentrate on ethanol—should be added to each litre of petrol or diesel sold. That would be achieved by a requirement that all petrol or diesel sold be subject to that composition. A similar arrangement achieved the elimination of lead additives over time. The most suitable arrangement would be for the Government simply to introduce the requirement by means of an anti-emission escalator, making the refining industry add an additional 1 per cent. of ethanol each year until 10 per cent. is achieved. In policy terms, that would appear to be similar to the requirement that energy suppliers should obtain 10 per cent. of their supplies from renewable sources.

The overwhelming advantage of such a policy would be instant savings of CO₂ emissions without any change in motorists' behaviour—not that I do not advocate change in their behaviour, but it would be complementary to the measures taken to attempt to secure changes in behaviour, such as an increase in public transport use.

Currently, the part of the world in which bioethanol is most widely used is Brazil, where a large number of cars run on 85 per cent. ethanol. The Brazilian ethanol programme, which was introduced as a counter to the fuel shock of the early 1970s—Brazil having few oil resources—is widely regarded internationally as a failure, because the number of cars running on E85 in the Brazilian economy is decreasing. Part of the problem is that motorists have perceived the E85 cars as less efficient and zippy than petrol vehicles and as needing more maintenance. The programme has not proved as acceptable to Brazilian motorists as early experiments suggested that it might.

It is generally less well known that all petrol in Brazil is required by law to contain 22 per cent. ethanol. I defer to the hon. Member for South-East Cambridgeshire, who suggested that at least 10 per cent. of fuel could be replaced by ethanol without significant modification to engines, but it appears that in Brazil substantially unmodified cars are able to run with 22 per cent. ethanol in all petrol.

The Brazilians have taken into account a further point about the composition of petrol. Because cars use lead-free petrol, it is necessary to add an alternative octane enhancer, and it so happens that ethanol is itself such an octane enhancer. The idea of introducing a substantial percentage of ethanol to petrol is not the fantasy that it appears at first sight.

An important question that has been raised this afternoon is whether one creates a significant saving in CO₂ emission by introducing ethanol in the way that I have suggested. The energy output in bringing ethanol to market is considerable. Various estimates, however—depending on the technology that one uses—suggest that overall one can save CO₂ emissions of between 50 and 70 per cent. Let us assume that the median mark is about 60 per cent., and make calculations based on that.

According to the climate change Green Paper, 23 per cent. of CO₂ emissions are derived from transport, of which 85 per cent. is road traffic. A substantial majority of that is petrol-driven and produces 32.3 megatonnes of carbon per annum. The achievement of a 10 per cent. substitution of ethanol reduces the total by 6 per cent., if we assume that it is 60 per cent. CO₂ efficient, or 1.9 megatonnes of carbon—a substantial amount, contributed simply by people continuing to drive their cars exactly as they do at present. That would increase the contribution made by the transport sector to climate change targets by 40 per cent. It is not a speculative programme that might or might not work: if one introduces an escalator, one knows that it will work, and as it takes hold, it produces a certain, quantifiable contribution.

We have talked at length about bringing technologies to market. One of the purposes of an escalator would be to allow industry time to build up effective resources for ethanol, preferably in the United Kingdom, affording potential producers a stable period in which to develop the ability to supply. As we have heard, ethanol in Brazil is sourced almost exclusively from sugar cane. It is estimated by Professor Goldenberg, one of the leading figures of the Rio talks, that Brazil itself could supply one or more industrialised countries that decided to add ethanol to petrol. There is no doubt that a number of other tropical countries currently overproducing sugar from cane could rapidly develop a source of supply. It is an interesting thought. in our currently oil-run world economy, that we might be able to find a new source of fuel from countries that have no oil but can produce an alternative fuel for cars in abundance.

Mr. Paice

I am very interested in the hon. Gentleman's proposed introduction of an escalator. Would he expect the oil companies to absorb the cost? Even with an escalator of 1 per cent. a year, under current circumstances the extra cost of producing ethanol as against the convention fuel that it would replace would be a lot of pence per litre. The balance between the price of the raw material and the comparative price of crude oil changes almost daily, but there is a significant cost difference that runs into several tens of pence per litre. Am I right in supposing that he expects the oil companies totally to absorb that?

Dr. Whitehead

I thank the hon. Gentleman for that helpful intervention It slightly anticipates what I was about to say. I agree that, because the technology is changing rapidly and because one has to work out where, how and what production would be used, it is difficult to be exact about the difference in price that would be represented by the production of a gallon of ethanol as against a gallon of petrol.

One of my propositions is that ethanol can be made by a variety of different techniques, making it possible to reabsorb elements of what are currently industrial wastes such as cellulose from paper manufacture. Although, as the hon. Gentleman pointed out earlier, research is lacking, it would be apposite to try to quantify the overall cost of producing bioethanol within the UK using a combination of residues, first-growth plants and so on. As far as I am aware, the energy technology support unit—ETSU—has done some research on the matter, but not the sort of research that would allow more accurate figures to be produced. The cost per litre is likely to be marginally greater, even if one takes all those factors into account.

The studies in the UK—as far as I recall, they provided the material used by the Lords Select Committee—were based on an assumption that ethanol would be produced in the UK from wheat. In other words, land would be used to produce wheat and ethanol would be derived from it. The same problem then arises with ethanol as arises with biodiesel, that if there were to be a substantial ethanol economy a vast amount of land would be required to grow the wheat to produce the ethanol. However, souring ethanol from a variety of organic sources would considerably mitigate that, as would the phased introduction of an escalator.

It is certainly true that there is a dispute on cost, but we should bear it in mind that estimates for a change from a litre of petrol to a litre of ethanol simply assume that one would be replaced by the other. I have already mentioned that one of the substantial advantages of the idea of an escalator is that, in the first 5 per cent., the octane enhancer already present in a gallon of petrol has simply been replaced, which itself surely costs more than a litre of petrol to produce. That must be factored into the cost equation.

If that factor is taken into account the best guess that I can come up with for the cost of a 10 per cent. ethanol substitution would be to increase the price of petrol to about 5 per cent. more than it other-wise would have been. That cost difference can be treated in policy terms in various ways. It could simply be left to the market, with petrol companies absorbing the differential. That might bring pressure to bear on the efficient production of ethanol. Alternatively, it would be possible to factor in the additional cost, bearing in mind the immense environmental contribution—2 million megatonnes of carbon certainly saved—into a revised policy of a pre-announced fuel escalator. Before a Budget, one could announce, say, a 3 per cent. escalator or a rise in the price of petrol at the rate of inflation, rebating the 0.5 per cent. price increase represented by the additional cost of the ethanol additive.

That suggestion demonstrates that we are now in the real world of energy crops: we are way beyond the idea that these are ideas that exist on the margins of reality with which a few people in a few far-flung parts of the country may be experimenting but which will never really happen in our towns and cities. It seems to me that we are on the cusp, at least potentially, of making those technologies really work in a serious attempt to decarbonise a highly sophisticated in industrial economy.

That can be done largely by market devices and by minimal intervention by Government in bringing the new products to the market. I certainly believe that in the not-too-distant future we will look back on the last century of mineral fuel use as 100 years of needless profligacy and of lost opportunities to power an advanced civilisation in line with our environment rather than against it. I therefore commend the actions that have been taken so far by the Government to bring energy crops to market and look forward to a world where we take them for granted as a fundamental part of the energy use of our country.

4.58 pm

Ms Quin

I am glad to have the opportunity to respond to some of the points that have been raised. It has been a fascinating debate and all the contributions have shown that it was worth while holding it. I have taken so many notes on so many pages of paper that the importance of renewable energy and recyclable materials is very much in front of me.

I was somewhat tempted to exclude the hon. Member for South-East Cambridgeshire (Mr. Paice) from my remarks but, as often happens, even though he began his speech by very much misrepresenting what I said, as his remarks proceeded a good deal of what he said was part of the common ground of the points that have been made by everyone who has spoken, particularly about the potential for development and the importance of the market aspects.

The hon. Gentleman and other hon. Members referred to a joined-up approach, which is an important consideration. Reports such as that from the House of Lords have helped to stimulate a more joined-up approach to the issue. I hope that the Government-industry forum will contribute further, because the Government will be represented through the different Departments. That will be a useful way of ensuring not only co-ordination between Departments but that all Departments have contact with the industry and with potential users of the products.

Co-ordination is not perfect. One of the continual challenges of government is to ensure good co-ordination among Departments. None the less, I strongly believe that on this aspect of policy, co-ordination is improving, and we are all keen to focus on it in the coming months and years.

Unsurprisingly, many comments were made about the amount of finance available from different sources. Although the £30 million energy crops scheme for which my Ministry is responsible was decried by the hon. Member for South-East Cambridgeshire, it is a useful programme. Currently, the issue is not shortage of money but encouraging applicants and ensuring that a market exists. Obviously, none of the schemes is set in stone for all time. We are prepared to learn from experience, but I emphasise that the amount of money that we have already committed, along with the money available through other sources, is an important starting point that will allow a good deal of progress to be made.

The hon. Member for Somerton and Frome (Mr. Heath) spoke about the energy crops scheme. We have made it a requirement of the scheme that the grower should have a firm outlet in view before we approve the grant. I agree with the point about growers wanting some assurance about where their crop will go, to whom it will be sold and the availability of a market for it. We have tried to factor that into the operation of the scheme.

The hon. Member for South-East Cambridgeshire referred to the licence fee for hemp. As I am sure he knows, regulation is required under international conventions. However, the figure that he cited was incorrect, because from the coming season the cost of the licence will be reduced to £80, which is a substantial reduction on the figure of £300 that he cited.

The hon. Gentleman was vague about the cost implications of his party's policy. Far from believing that the intervention of my hon. Friend the Member for Southampton, Test (Dr. Whitehead) was puerile, I believe that it was extremely pertinent. Given the massive hole in the Opposition's spending plans, I would advise hon. Members not to put too much faith in their proposals. I pointed out in an earlier debate in this Chamber on support for organic farming that we had put 10 times more into that sector than the previous Government.

The hon. Gentleman made some generous spending commitments on the support that his party would give to organic farming. Hon. Members would be advised to examine the record. As my hon. Friend the Member for Carlisle (Mr. Martlew) pointed out, the previous Government did not follow up recommendations made in earlier parliamentary reports on such issues.

I was asked what might happen about the reduction of tax on biofuels to bring it in line with liquid petroleum gas. Obviously, I am not the Minister to make announcements about tax breaks, but the green fuels challenge gives industry the opportunity to make its case. If it makes a strong enough environmental case, my right hon. Friend the Chancellor will give serious consideration to the appropriate tax measures.

I agree with my hon. Friend the Member for Peterborough (Mrs. Brinton), who commended the coordination between the Treasury and the Department of the Environment, Transport and the Regions on this issue. They have co-operated together closely on the green fuels initiative and the green fuels challenge, so I am not surprised to hear that she and others have made representations to both Departments on those matters.

The hon. Member for South-East Cambridgeshire was right in saying that the challenge relates to liquid biofuels, to which we normally refer as biomass. However, as his contribution made clear, we are discussing fuels that come from different crops, such as biodiesel, which derives from oilseed rape, and bioethanol. Various crops were mentioned by my hon. Friend the Member for Test and others. The challenge is relevant to the whole crops sector.

My hon. Friend the Member for Peterborough referred to her own hopes for biodiesel. Officials from my Ministry met the relevant trade body yesterday and, although the key assessment will be made by the Department of the Environment, Transport and the Regions, the Ministry of Agriculture, Fisheries and Food will comment on the agricultural use and potential of what is proposed. We recognise the strong interest in the sector from the farming industry. The National Farmers Union has been active in the energy crops sector and made several worthwhile representations to Government. Ben Gill of the NFU has taken a strong personal interest in the energy crops sector and feels that a new outlet for crops is in farmers' interests.

I take the point made by my hon. Friend the Member for Test. Clearly, we must consider some alternative scenarios. I assure him that we are not proposing to cover every square inch of the country in oilseed rape. It is important to consider the countryside implications of any proposals.

The new opportunities fund was also mentioned by several speakers, including the hon. Member for Ceredigion (Mr. Thomas), as was the situation regarding capital grants for power stations using solid biomass—mainly energy crops—and also offshore wind. He expressed some reservations about some of the conditions attached to the new opportunities fund. Although that is not my area of responsibility, it is useful to stress the fact that those schemes are not set in stone: we must consider their practical implementation, take-up and results so that we can review and monitor them.

My hon. Friend the Member for Carlisle was understandably keen to express the views of his constituents, which this debate allowed him to do effectively. He recognised that he was not addressing his remarks to the Minster who would make the decisions about planning. I shall ensure that those remarks are brought to the attention of my colleagues in the relevant Department. I agree that the economics of the proposals should be considered in the round. We should, for example, examine the transport implications and how the overall economics of a project are configured. There are various planning safeguards surrounding the energy crops scheme. We would require crops to be grown as close as possible to the end use, so that the environmental impact of transportation would be minimised. For small-scale heat and combined heat and power uses, crops should ideally be within a 10-mile radius of the user. For larger electricity generation projects, crops should be within a 25-mile radius. Developers will be able to make a case to vary those conditions, but will need to supply economic and environment impact data to do so. I also want to stress that MAFF will consult environmental organisations on proposals for larger projects. I hope that those factors address some of the concerns raised by hon. Members.

My hon. Friend the Member for Carlisle referred to the special landscape of Cumbria, while the hon. Member for Somerton and Frome referred to landscape, wildlife and environmental considerations in his part of the country. My earlier remarks about intrusive forestry developments were influenced by my knowledge of the Northumbrian landscape and the negative visual effects of some early schemes. However, I must pay tribute to the forestry authorities for the way in which such schemes have been made more environmentally acceptable in recent years, which we all appreciate. Landscape implications must be borne continually in mind.

None the less, I welcome the general air of excitement in this debate about the range of opportunities available. The hon. Member for Ceredigion was especially enthusiastic in describing some of the opportunities in relation to cars using green fuels. However, that is not the only issue. The automotive industry can also increasingly use fibres in the manufacture of vehicles and automotive parts. There is a wide range of applications to the automotive industry, never mind some of the other industrial opportunities that were mentioned.

The hon. Member for Ceredigion referred earlier to the use of hardwood forestry residue, and I confirmed that it can certainly be used. Indeed, it can be a useful complement to crops grown for energy purposes. It might be useful to point out to him that MAFF is working with the Forestry Commission on a joint wood fuel initiative. Clearly, he is well aware that responsibility for many such issues is now devolved, and the Welsh Assembly is considering a number of initiatives in the sector, with which I know that he will be familiar. However, the green fuels challenge, which is a taxation matter, is a UK-wide responsibility and of relevance to all the UK territories. He also referred to the possibility of such crops substituting for traditional agricultural production—for example, on land that has previously been used for other crops or livestock.

My hon. Friend the Member for Test mentioned the climate change levy and the renewables exemption. His remarks kept our attention firmly fixed on the wider context and he provided some interesting international examples.

I welcome hon. Members' comments on common agricultural policy reform. The hon. Member for Somerton and Frome gave robust support to the forward-looking approach to rural development, and there was widespread agreement that the energy and non-food crops sector has much to gain from a forward-looking reform of the CAP that places much more emphasis on the rural development agenda.

I reaffirm that I shall refer my ministerial colleagues in other Departments to the comments that hon. Members made during the debate. I shall also draw their contributions to the attention of the new forum, because many are relevant to its work in considering the economics and future outlets of these new technologies.

I strongly believe that the importance of the subject not only justifies this debate but would justify many future discussions in Parliament. I hope that the debate has been a useful contribution to highlighting the importance of a sector that we all agree has significant implications for the future of agriculture and of our country as a whole.

Question put and agreed to.

Adjourned accordingly at seventeen minutes past Five o'clock.