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Rob Marris (Wolverhampton, South-West): I should like to echo the comments of the two previous hon. Members who spoke, and urge the Government to reconsider. I am no expert on this subject and I would like my hon. Friend the Minister to tell us whether bioethanol or biodiesel are encompassed in the schedule, especially under the definition of diesel in paragraph 3(10). We should be encouraging the use of lower-polluting vehicles. At the moment, apart from milk floats, all vehicles pollute. The early returns on company car tax show that the Government have been very successful in encouraging the use of new types of cars. That change of behaviour is driven by—to coin a phrase—the fiscal regime introduced by the Government.

I believe that we could go further, and I urge the Government to consider the amendment moved by the hon. Member for Christchurch (Mr. Chope) and the suggestions made by the hon. Member for Southport about examining biodiesel and bioethanol. Perhaps my hon. Friend the Minister would explain some of the technicalities of the subject. Why do the Government feel that it is not appropriate to take such steps at this stage?

Chris Grayling (Epsom and Ewell): I am delighted to hear a considerable degree of consensus about the issue in the Committee. I commend my hon. Friend the Member for Christchurch for the amendments that he tabled. There is no doubt that LPG is a growing market, and one that is encouraged by the Government. For several years, both Conservative and Labour Governments offered incentives to develop the LPG market. Over the past couple of years, the number of filling stations has risen more than fourfold, from approximately 250 to more than 1,100, and is expanding at a rate of one a week.

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There are some contradictions about the nature of the emissions from LPG vehicles, which have lower CO2 and much lower carbon monoxide emissions than petrol vehicles, for example, but which have problems relating to other pollutants that are produced. There are also benefits in relation to diesel vehicles. However, the practical reality is that LPG vehicles can offer a lower-emission alternative. Friends of the Earth recently highlighted the ability of a modern LPG car to meet the arduous standards established in Los Angeles, California—the smog capital of the world for many years—where there are tough restrictions on vehicle usage and emissions. Friends of the Earth believes that a modern LPG car can meet the criteria set in that environment.

Clearly, the Government should encourage the use of LPG vehicles in this country, but the issue goes further than that. We face significant energy problems in the future, and the Government face challenges in relation to future capacity for generating energy. The benefit that LPG offers is that it is, in effect, a by-product; it already comes from the process of extracting and refining existing fossil fuels. Given that this country has a substantial surplus of available LPG, compared with the demand and usage, encouraging the development of LPG when road use is growing can only help to improve the overall environmental picture. LPG already exists, so it must be disposed of or used. Thus making better use of a resource that is already being generated and is already available for use has to make sense, both economically and environmentally.

I hope that the Economic Secretary will reconsider this issue in the light of the comments made by Labour, Conservative and Liberal Democrat Members. My hon. Friend the Member for Christchurch has raised an important point, and the Government would do well to take it into account in this measure before the Bill receives Royal Assent.

John Healey: I start by welcoming the general support that the hon. Member for Christchurch has offered for using economic and tax instruments to pursue environmental objectives. He is rightly a very eloquent and strong champion of LPG, but in the context of clause 58 and this group of amendments, he is wrong to argue that we are ignoring the claims made for LPG. We already recognise the benefits that road fuel gas can offer and have introduced a range of other measures that can support such technology.

Those measures include grant-based schemes, such as the PowerShift programme, which offers targeted incentives to assist with the cost of converting vehicles to run on alternative fuels; lower vehicle excise duty for alternative fuel cars; less tax paid by employees on gas-powered company cars; and, from 2003-04, gas fuel provided free by employers will be taxed at a lower rate than for a similarly priced petrol or diesel cars. Finally, the rate of fuel duty on LPG is much less than that for diesel or petrol at 5p a litre, compared with about 45p a litre for the other fuels.

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That brings me to the second point on which the hon. Member for Christchurch pressed me: the road fuel gas differential beyond 2004. First, he accused me and other Ministers of refusing to say anything about that matter, but that is not the case. He asked why we should not commit ourselves to continuing the differential beyond 2004. The answer is simple: the environmental case for maintaining that fuel duty differential beyond 2004 for road fuel gases, such as LPG, has not yet been proved, so the Chancellor and the Government will consider it on a Budget-by-Budget basis.

Chris Grayling: Does the Economic Secretary that accept that uncertainty is perhaps not visible to the public who are continuing to invest in converting their vehicles, so the Government risk leading people up the garden path if they discover that the existing cost-benefits may not be there in the future?

John Healey: That may be a pertinent general argument, but it is does not relate to clause 58 and this group of amendments for reasons that I shall explain later.

Mr. Michael Jack (Fylde): I welcome the Economic Secretary to his post. Would he be kind enough to tell me on what basis the further assessment of the benefits of LPG will be made? Will that assessment be published?

John Healey: The focus of our concern in relation to clause 58 is CO2 emissions. The threshold that we have set is 120g per kilometre. So in the narrow context of that clause, the future relevance of LPG may come into play in relation to those criteria.

Mr. Jack: Does that mean that the Treasury will discount all the possible health benefits associated with LPG in any further assessment of that fuel?

John Healey: Of course it does not. The point is that there is a narrow focus on CO2 emissions.

As the hon. Member for Southport said, this is a modest, focused measure that must be seen as part of a package of environmental measures, using economic and fiscal instruments, which the Government have already introduced. I have described four or five of those, which are chiefly intended to encourage LPG development and use. It is in that wider context that arguments such as those advanced by the right hon. Member for Fylde (Mr. Jack) will be taken into account.

Mr. Chope: The Economic Secretary has made quite a dramatic statement. He has said that the environmental case has not yet been proved for continuing the duty differential between LPG and diesel and petrol beyond 2004. What evidence has he for saying that the environmental case has not been proved? His party is encouraging people to invest in LPG-powered vehicles. Are those people now to take the view that the Government themselves are not convinced of the environmental case for switching to LPG?

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John Healey: On the contrary. We are talking here about a matter introduced by the hon. Gentleman. We are talking about a time frame—a time limit. Clearly, in a fiscal regime the purpose of a time limit is to concentrate the boost that a measure may give, and increase its impact, in the early days.

I am merely saying that the case for extending the differential beyond 2004 is not yet proved. The decision on whether it has been proved will be considered, and any consequential decisions will be made by the Chancellor and the Government on a Budget-by-Budget basis. I hope that that is clear.

We are now on the territory entered earlier by the hon. Member for Epsom and Ewell (Chris Grayling). The hon. Gentleman was right to say that LPG could offer ''a low-emission alternative''. As he suggested, the schedule focuses on dealing with carbon dioxide emissions. As I have explained, we are encouraging the use of LPG vehicles in other contexts.

My hon. Friend the Member for Wolverhampton, South-West (Rob Marris) began on the same territory, and then moved off it. He urged me to consider the wider application of the measure. As I have said, it is designed to deal with reductions in carbon dioxide emissions. It is part of a wider package of measures, many of which benefit LPG users.

Let me explain a couple of technicalities. My hon. Friend asked whether bio-ethanol was included in the schedule. The answer is yes. First-year allowances will be available if carbon dioxide emissions—here we return to the main focus and reference points—are not more than 120 g per km. That, indeed, applies to other cars.

In pursuing the question of biodiesel, my hon. Friend asked whether there were other provisions encouraging the use of that fuel. The new low rate of duty, 20p below that of petrol and diesel, will do just that.

The hon. Member for Southport made a pertinent point. This was not an isolated measure, he said, but part of a package. He then asked whether that package itself would be sufficient. I suggest that he should regard the work we have done in this Bill, in last year's Bill and previously as policy and legislative work in progress. I refer him to the consultation paper that we issued in the summer of 2001, ''The Green Technology Challenge'', which was designed to encourage debate about further environmental issues that might be tackled through enhanced capital allowances and new technologies that might arguably merit support under such regimes. The hon. Gentleman should view that consultation as a sign that discussion and consideration will continue on a broader front.

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