§ 20 Clause 128, Leave out Clause 128
§ Lord Whitty
My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 20. I shall speak also to Amendments Nos. 22 to 30 and 34, which concern a renewable transport fuel obligation.
We have had a substantial debate on this issue at earlier stages of the Bill's passage and I am sure that all noble Lords recognise that renewable transport fuels have an important part to play in reducing the carbon content of our energy use and in the effort to tackle climate change. It was pretty well agreed by all parties in the House that some form of renewable transport obligation is a serious option for ensuring that those fuels become part of the mainstream fuelling of vehicles.
There has been much constructive discussion on this matter before and after the original amendment was agreed to. The clauses that were tabled by the Government in another place have resulted in a more complex system than that which we agreed in this House—one clause has been transformed into nine. That is the effect of further consideration. However, some of the complications that must be faced in retaining the principle behind the original clause require the system to be that lengthy. We have taken the advice of parliamentary counsel that we should do so in this form. There are a number of complications because we do not have an existing regulator to help to run the scheme. A number of clauses therefore have to relate to the appointment of an administrator, funding issues, penalties, appeals and so on. That is the main reason why this group of clauses is so much more complicated than the original approach.
These are all permissive clauses; they will allow the Government to introduce an obligation that would require designated fuel suppliers to demonstrate that their total UK fuel sales included in aggregate a specified proportion of renewable transport fuels. I appreciate that the drafting is complex but it reflects the principle of the clause, which was adopted earlier in this House, and the precedent set by the legislation in the Electricity Act concerning the renewables obligation. For example, it includes features such as the issuing and trading of certificates, the buy-out mechanism, the flexibility that that brings and the ability to make different arrangements for different fuels based on their comparative benefits.
These permissive clauses do not mean that we have taken a final decision but it gives us powers to do so if we wanted to go down that road at, for example, the end of the current consultation by the Department for Transport, or at any subsequent stage. There will be consultation on the precise provisions at that point, and the new clauses include a commitment that we will consult widely before introducing such an obligation.
Noble Lords will have noted that all nine clauses are subject to the affirmative resolution procedure. That means that if we go down this road, we will debate the 1399 issue again in your Lordships' House in future. Personally, I am extremely pleased that that option is available. A great synergy is involved: there is another mechanism to ensure that the transport sector, which has been one of the most difficult to control in terms of carbon generation, has some benefits in terms of cutting carbon. There may eventually be better mechanisms. Incidentally, I point out to my noble friend Lord Carter, who moved the original amendment—he is almost on his feet now—that the approach would also bring huge potential benefit to the agricultural sector. I beg to move.
Moved, That this House do agree with the Commons in their Amendment No. 20.—(Lord Whitty.)
My Lords, the reason I am anxious to get on my feet is that I am chairing a Grand Committee at half-past one. I apologise if I have to leave before the end of this short debate.
I thank the Minister most sincerely for the measure. As he said, the very modest little amendment proposed by myself and the noble Lord, Lord Ezra, comprised about 20 lines but has been replaced by a measure comprising no fewer than nine pages of legislation. My noble friend will remember that perhaps the main reason he accepted the amendment at Third Reading—he said that it would need a certain amount of adjustment in the Commons—was that if there was nothing in statute to allow for an obligation, there was no way of introducing one. That was a compelling argument but I did not think that I would be proved right to the extent of nine pages of legislation.
However, I thank all those who have worked behind the scenes, the officials in the Department for Transport and the DTI and my colleague Mr Peter Clery, the chairman of the British Association for Bio Fuels and Oils—I am the vice-chairman and I declare that interest. A lot of work has gone on behind the scenes and, despite what the Minister said, I cannot really believe that after the Government have gone to all the trouble of drafting no fewer than nine clauses to cover the obligation they will not want to introduce one when the time comes. I assure him that there will be plenty of lobbying to try to ensure that the Government do so.
I have some technical comments that relate largely to the drafting of the orders that will be required, but in the mean time I again thank the Minister for the measure.
§ Lord Dixon-Smith
My Lords, I should like to begin by stating how sad it is that the noble Lord, Lord Palmer, is not present today because he has been a tireless advocate of biofuels. It is very sad that he cannot be here to discuss this measure. I am not so sure that he would be pleased to see what a monster his simple little clause has become, as mentioned by the noble Lord, Lord Carter. It now comprises nine pages of legislation. That, of course, is another matter. Certainly, the noble Lord will welcome the fact—as, I am sure, does the whole House—that the Government have seen fit to accept this obligation and have 1400 brought forward what I would call almost consultative legislation and put it on the face of the Bill in order to have a complete scheme, which I hope we shall see working at some stage.
I accept that all of this depends on orders which are to be brought forward, but I have one or two questions because two aspects of these new clauses cause me some concern. An administrator will have,power to impose charges of specified amounts on transport fuel suppliers… Sums received by the Administrator by virtue of provision within subsection (3)(c) must be used by him for the purpose of meeting costs. I am afraid that I always become a little frightened when I see that someone has a power to impose charges which he can use to meet his costs. My immediate reaction is to ask where is the financial control and how do you know that that money will always be used in a very cost-effective way? The Minister may say that he cannot define that yet because the scheme does not yet exist, but I think that we should be aware that there is a possible marginal problem there. If a man can set his charges to meet his costs, he has no incentive to act in a completely businesslike way.
I turn to the new clause on renewable transport fuel certificates. It appears that these might be tradable certificates in that if someone uses "too much" green fuel, he will then have an asset that he can sell to someone else who has not met his obligation. I do not know whether that is the intention and perhaps I am misreading the way in which these new clauses are drafted. However, it appears that that might be the case.
I turn to the new clause on discharge of obligation by payment. That is well and good, but the following new clause concerns the imposition of civil penalties and states:An RTF order may … provide that a person is to be liable to a civil penalty … That penalty must not exceed the lesser of the specified amount; and the amount equal to ten per cent of the turnover, as determined in the specified manner, of the specified business of the defaulter. If that applied to BP, it might result in a phenomenally large penalty. I merely mention those points as they appear in the amendments. I accept that we do not know how these measures are to be brought forward. I should have thought that if there were a question of financial discharge, there would not be a question of civil penalty. However, without some assurance on how those measures will be brought forward, it is rather difficult to know precisely how one should react to them. It is a remarkable aspect of this development that we have these new clauses, which are very welcome, but they are almost of a consultative nature in the sense that, for implementation, they depend subsequently on orders. Some things may be included and some things may not. I think that it is the first time I have ever come across this in primary legislation, but the measures are very welcome.
§ Lord Ezra
My Lords, I am very pleased to follow the noble Lords, Lord Carter and Lord Dixon-Smith, in welcoming this amendment. Indeed, before we finished with the Bill in this House, the noble Lord, 1401 Lord Whitty, assured us that the Government would take the amendment very seriously but might have to amend it somewhat. It did not occur to us that the "somewhat" was going to lead to this enormous compendium.
What is pleasing about it is that the Government have now devised a way in which the problem of carbon emissions in the transport sector can be seriously dealt with. This is a point that the noble Lord, Lord Whitty, made. The transport sector is an enormous emitter. There is no doubt that through technological change the degree of emissions of individual cars has much reduced, but the number of cars keeps on increasing all the time and measures of a more fundamental nature are therefore obviously required. This amendment provides the means for such measures.
I take it that what is proposed here would be consistent with the Biofuels Directive which is presently going through its various stages in Brussels, and that therefore it would be perfectly straightforward for us, if that directive were finally to come into force, to apply the measures in this amendment and that would put us in full conformity with the directive.
I conclude that this is one of a number of very beneficial effects that the debate on the Bill has had. There have been one or two aspects that we have not dealt with as satisfactorily, but I think that the satisfactory outcomes have somewhat outweighed the less satisfactory ones. I am very pleased to support the amendment.
§ Baroness Byford
My Lords, I thank the Minister for the measure. I am sorry that the noble Lord, Lord Carter, has had to leave as he and noble Lords on all sides of the House tried to persuade the Government of the importance of introducing this amendment.
My noble friend Lord Dixon-Smith asked a couple of questions and I have further questions. We are in slightly unusual water at this stage. I say straight away that we are happy to accept these amendments. We welcome the way in which they address the concerns that have been raised during the various stages of the Bill's passage.
The Minister touched on my next point when he said that the new clause gives the Secretary of State the power to introduce an obligation—that is, he may do so—but it does not require him so to do. I am still a little disappointed with that phraseology. The Minister will no doubt comment on that because I am sure that the Government are committed to the measure. I accept that something may be done later rather than sooner, but some of us on this side of the House would like to have the measure more clearly defined than it is in the new clause at present. Will the Minister clarify the Government's intentions in that regard? The noble Lord, Lord Ezra, raised the important issue of how that will relate to the requirements within the EU directive.
Sitting next to the noble Lord, Lord Ezra, is the noble Baroness, Lady Miller of Chilthorne Domer. She and I faced exactly the same situation when 1402 dealing with the Water Bill. I record my dismay that we are dealing with the Bill as best we can while other directives are emerging which have a bearing on what we should be doing, but we have to discuss them at different times. They do not coincide. In future, if ever we can, it will be much better to avoid being in the situation in which we find ourselves.
Obviously I am grateful that consultation will take place, but can the Minister give me some idea of the time plan for it? When does he think that it will be completed? On what time scale will the orders come through? Is he talking in terms of six months or a year? They will need to address technical issues.
My noble friend Lord Dixon-Smith raised two specific questions that I shall not repeat, but I have a further question. I draw the Minister's attention to proposed new subsection (1) in his Amendment No. 30, in which biofuel means,liquid or gaseous fuel that is produced wholly from biomass. A query with that was raised with me this morning; if it had been raised yesterday, I would have tabled an amendment. It is impractical to have biofuel defined as "wholly from biomass" because it would exclude certain combinations, such as bio-ETBE, and processes, not to mention any bioethanol with a necessary admix of denaturant. Would it not be much safer to describe biofuel as "principally from biomass"? That would cover any new combinations from which we could produce biofuel.
I spoke to the Clerks, and it would be possible for me to move such an amendment and for the Minister to accept it, although it would be slightly unusual. I apologise to noble Lords; my attention was not drawn to the issue until it was too late to table an amendment. I am slightly in the Minister's hands on that issue.
I thank the Minister for all the work that has gone into the provisions. The noble Lord, Lord Carter, touched on the fact that biofuels will have enormous benefits for the farming industry at an increasingly difficult time. Biofuels, combined with the commitment to provide a strategy on micro-generation, will give our farmers another string to their bow in terms of survival and their ability to meet future environmental responsibilities. We support them.
§ Lord Jenkin of Roding
My Lords, while the Minister's advisers are dealing with the string of very relevant questions put to him by my noble friend Lady Byford, I want to ask one rather simple question. I have read through the many pages of proposed new clauses. Do they apply in any way to the suppliers of fuel for the aviation industry? There seems nothing specific to exclude them. Can there be some use of the new obligation to impose pressure on the aviation industry to become more sustainable?
It is a very regrettable fact that more tax is paid on a lorry-load of lettuces from Lincolnshire than on a whole planeload of cargo of cantaloupes from California. There is a soundbite for noble Lords. 1403 No tax is paid at the moment on aviation. The pressure to become more efficient is not applied properly in the area.
§ Lord Whitty
My Lords, I am grateful for the support from all round the Chamber, especially that of my noble friend Lord Carter, the noble Lord, Lord Ezra, and, in his absence, the noble Lord, Lord Palmer. They have been constant protagonists for this or a similar solution for biofuels. The noble Lord, Lord Ezra, was right to say that the definition of "somewhat" had been expanded beyond all our understanding. However, that is in order that—as the noble Lord, Lord Carter, said—we have a robust operation if we take decisions to go down the road as the best way of promoting biofuels in the transport market. It is largely a mirror of what applies to the ROCs in generation.
Some of the features and structures are more or less equivalent, so some of the answers to the questions asked by the noble Lord, Lord Dixon-Smith, and others are that we are using the pattern to apply to the fuel supply companies. That means that there is provision for an administrator. All regulators normally have some obligation to cover costs; they are all subject to approval of their charges, of course, and of the general obligations on efficiency in the public sector. It is not an unusual provision for a regulator to be able to charge to cover its costs. Likewise, the issue of selling and tradability is more or less the equivalent of the situation with ROCs, as are discharge by payment and potential penalties. The administrator has discretion to impose a penalty of appropriate size. It would have to be one of the lesser of the specified amounts relative to the offence, and 10 per cent. Some of that may be covered in regulations, but the key principle is clearly proportionality.
The noble Lord, Lord Ezra, asked how the issue related to the biofuels directive. Consultation on how we implement that directive has just finished from the Department of Transport. The directive sets indicative rather than obligatory targets, but we are required to report to the Commission how we will achieve those targets and the policies that need to be put in place. The level of take-up of biofuels in the UK is so low that there is no possibility of achieving the target set by the EU for 2005, so we have to focus on the 2010 target and measures that might bring us to meet that.
The noble Baroness made some general points about how much was in regulations and how much was in the Bill. There is clearly a fair amount of detail in the Bill, but we will have to consult on the principle, as well as on the details of what will be in the affirmative resolutions when we have adopted the principle. Therefore, it is difficult to give an answer on the timing. If we took a decision, all the timing would stem from the point at which we took the decision in principle. As my noble friend Lord Carter said, the option needs to be there, in order that we can have legislative backing for moving down the road.
As noble Lords who have followed the debate will know, there have been other suggestions—not all of which are dead yet—to aid biofuels. They have varied 1404 from greater fiscal incentives, to capital allowances and other measures to support the industry. Some of them may be needed to meet the requirement, and to aid the agriculture sector to meet the bulk of it from domestic production. We need legislative backing here but not elsewhere. If we go down this road, we therefore need fairly detailed legislative powers.
The noble Baroness, Lady Byford, raised the subject of the definition of renewable transport fuels. I understand that the definition is flexible enough to cover the issues to which she referred, as they are part of the production of fuel based fully on biofuel sources. The fuels could therefore be labelled biofuels or other renewable fuels. The other aspect to the matter is that one can achieve the target under the obligation by blending biofuels with conventional fuels. That certainly would not be prohibited. The proportion that was biofuels would go towards meeting the target and therefore towards meeting the obligation.
I turn to the subject of aviation, raised by the noble Lord, Lord Jenkin. Aviation fuel can be included, and the affirmative resolutions may or may not include aviation fuel at some point. As the noble Lord will be aware, there are some technical problems. Whereas biofuels and biofuel blends have fairly well proven technology, so long as the quality control is sufficient, in relation to road vehicles, there is no similar proven technology in relation to aviation fuel. But there is no reason why that should not be the case over the timescale within which we set the obligation. Therefore, theoretically aviation fuel could be covered.
The noble Lord's comments about aviation touched on a point raised at Question Time—that is, whether the aviation industry was making a contribution in the area of climate change. The taxation of aviation fuel is, directly or indirectly, an important issue, but there must be an international, or at least a European, consensus on that before we can move heavily down that road.
That subject goes somewhat beyond this amendment. However, the amendment would allow the Government and the administrator flexibility to ensure that a biofuels obligation could be made effective. It would also allow them to ensure that the transport sector, which at present, as the noble Lord, Lord Ezra, said, is the least controllable in terms of carbon discharge, could begin to use an already proven technology to make a major contribution towards achieving those objectives.
On Question, Motion agreed to.