Baker and Hunter quiz Kelly on biofuels

1.58.38pm BST (GMT +0100) Tue 22nd Jul 2008

• ' . . WE should not throw out the biofuel baby with the bathwater, as some apparently would wish . . '

[Jul 07] Norman Baker (Shadow Secretary of State for Transport, Transport; Lewes, Liberal Democrat): I welcome the early sight of the statement from the Secretary of State for Transport, although I saw most of it in the Financial Times this morning. If one knows where to look, one can generally find Department for Transport statements in the press before they are delivered to the House. Will she take steps to ensure that the House is informed before the press about statements on such important matters?

I broadly welcome the statement, although it might have been made a little earlier. The Environmental Audit Committee reported on the matter quite thoroughly, but the Secretary of State went to Professor Gallagher, who has come out with roughly the same statement as the Committee. Nevertheless, the broad conclusion that we should not abandon but amend the policy on biofuels is correct. Clearly, some biofuels are being produced unsustainably, but we should not throw out the biofuel baby with the bathwater, as some apparently would wish.

I have some questions. First, will the right hon. Lady provide a figure for the impact of biofuel production on food prices? The estimates seem to vary widely, and I have seen figures of between 3 and 75 per cent. in various reports. Secondly, what steps is she taking to improve the sustainability criteria and certification of existing biofuels so that there are no problems with them, given the poor EU regulations on the matter?

Thirdly, what discussions is the Secretary of State having with businesses involved in the development of second generation biofuels, which we all agree we should promote? There is an opportunity to progress that, and I hope that she can take it forward. Fourthly, what is she doing about what I think are the improper subsidies for biofuels from the US? I am thinking particularly of corn-based ethanol and the disgraceful splash-and-dash arrangements, which mean that adding 1 per cent. of US diesel qualifies the fuel for subsidies when it comes into this country. That is bad for climate change as well as for the economy.

Lastly, I welcome the Secretary of State's recognition that the transport sector has a major role to play in tackling climate change. Is she seeking to replace the carbon reduction losses that there will now be as a consequence of the reduction in the biofuels target? Will she apply the logic behind trying to ensure that the transport sector deals with carbon emissions to her aviation policy as well?

Ruth Kelly (Secretary of State, Department for Transport; Bolton West, Labour): First, I should say to the hon. Gentleman and the House that I take my obligations to the House extremely seriously. The press speculation about the content of this statement was not always well informed and certainly did not reflect the detailed content of the report. However, I welcome the tone of the hon. Gentleman's comments.

We do face a choice whether we should abandon the greenhouse gas savings that may come from biofuels-if not now, then potentially in the future-or whether we should scrap our commitment to biofuels and argue that Europe and the wider world should do so too. As I said, Professor Gallagher is clear about his view: we should proceed, albeit more cautiously than we had assumed we should in the past.

The hon. Gentleman asked about food prices; the report has a chapter about the impact of biofuels on those. Professor Gallagher is clear that biofuels are not the only reason why food prices have increased in recent years. Other, more important factors include smaller harvests last year because of droughts, higher fertiliser prices, rising gross domestic products and changing diets in the far east. The Gallagher review concludes that increasing demand for biofuels contributes to rising prices for some commodities, notably oil seeds. However, it says that the price rises are rarely more than 5 per cent. for most crops. That is one of the reasons it is suggesting a more cautious approach. In some areas, there is a marked impact, particularly in the short term, on particular populations in respect of some crops and some biofuels. That is why Professor Gallagher says that we ought to identify those specific effects and take global action to try to mitigate their impact.

The hon. Gentleman asked about sustainability criteria. We are currently negotiating such criteria in the EU context. The renewable energy directive, which should conclude later this year, will propose sustainability criteria. We want to insist that it should now also include the indirect effects of biofuels use. He also asked about second generation biofuels. One of the more surprising conclusions of the Gallagher review was that such biofuels do not always have a clear advantage over first generation biofuels, particularly when land use change is taken into account.

First generation biofuels often produce co-products that can be used as a protein substitute for animal feed-as will happen at the Ensus plant in the north-east, for example. When such use is made of co-products, the impact on land use change can be minimised. Overall, the picture is much more complex than it sometimes appears at first sight; nevertheless, there is potential in exploring further the contribution of second generation biofuels.

We will use the report to try to influence the debate at EU level and in the US. The hon. Gentleman asked about the contribution of the transport sector in tackling climate change. The Gallagher report says that a 10 per cent. transport renewables target could still be appropriate, provided that certain evidence emerges and that appropriate safeguards are in place. It is important, of course, that we should keep that under rigorous review and take any necessary action if evidence emerges that the target is too ambitious.

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Mark Hunter (Shadow Minister, Transport; Cheadle, Liberal Democrat): Does the Secretary of State share my concerns about the conclusions of the Environmental Audit Committee, which came out in favour of a moratorium? Does she not agree that the way forward is through greater and better certification and regulation? The consequence of throwing the baby out with the bathwater is that without investment in first generation biofuels, damage will be done to the potential for future investment in second and third generation biofuels, which are likely to have a much more beneficial impact.

Ruth Kelly (Secretary of State, Department for Transport; Bolton West, Labour): I agree with the hon. Gentleman, who makes an important point. The reason that investors are prepared to invest in clean technology and think about second generation biofuels is that there is a market for biofuels. Part of our approach must be to take that into account and to think about how the risks can be minimised, while examining the evidence and collecting the data necessary to make good judgments in future, and ensuring that sufficient investment takes place in those innovative technologies.