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'(3A) The rate of excise duty for biodiesel and bioethanol when used as road transport fuels, shall be 33p per litre below the rate fixed for ultra low sulphur diesel as defined by the Hydrocarbon Oil Duties Act 1979.'.
I have great pleasure in moving this amendment, which would reduce the duty rate for biodiesel and bioethanol to that for road gas fuels, which is around the 7p mark. It offers the Government and the Committee an opportunity to do a deal of good for the environment and for our distressed farming industry at one and the same time. What could be better than that?
Biodiesel offers an unrivalled range of environmental benefits as compared with alternative transport fuels. It is sustainable and renewable, with very positive energy balances; it is safely biodegradable; it is far better in terms of greenhouse gas emissions than fossil fuels; it offers scope for recycling waste oils; it recycles carbon; and it produces far fewer local air pollutants than fossil diesel. Bioethanol is also renewable, sustainable and environmentally friendly and has excellent emission properties. On balance, biofuels offer better environmental advantages than even the road fuel gases liquified petroleum gas, compressed natural gas and liquified natural gas--LPG, CNG and LNG.
My amendment seeks to put the biofuels on all fours with the road fuel gases. Biodiesel compares favourably with those fuel gases and enormously favourably with fossil fuels. The Government have shown environmental logic in granting a substantial reduction to road fuel gases, and the same logic directs that a similar reduction should also be made for the biofuels. Granting a major reduction in duty rates to biodiesel and bioethanol would enable those fuels to make a significant and rapid contribution to reducing atmospheric pollution.
Biodiesel can be used straight or blended in place of fossil diesel in all modern diesel engines, without modification. Bioethanol, blended with petrol, can be used in normal engines or purpose-built bi-fuel vehicles. Ten per cent. ethanol blends are already routinely used in the United States to curtail local air pollution. Life-cycle emissions of greenhouse gases from biodiesel and from bioethanol are at least 55 per cent. and 62 per cent. lower respectively than from fossil diesel. Tailpipe emission figures are also much better for the biofuels. Particulates emissions from biodiesel are 20 per cent. to 39 per cent. better than low sulphur diesel and 10 per cent. to 29 per cent. better than ultra-low sulphur diesel. On almost all normal tests, biodiesel has an extremely favourable score.
A duty rate of 7p per litre has been promised for gas fuels for road vehicles, but the Government have merely indicated that next year there will be a smaller reduction in duty--of 25p--for biodiesel. That is not on the face of the Bill: the Chancellor has simply indicated that that will happen. A much better signal should be sent to the industries involved that they should make the investment.
Major companies are ready to produce such fuels. The necessary crops would provide much-needed new business for agriculture, and the whole country would benefit from cleaner air as biofuels were substituted for fossil fuels.
Mr. Clappison: Can the right hon. Gentleman confirm that, even if the reduction in duty rate is made next year, the price of biodiesel fuels will remain above that of road fuel gases because of the high level of duty on them?
Mr. Beith: That is correct, and I cannot see the logic of the Government's position. It is sensible that the same chain of arguments should apply to biodiesel and bioethanol as applies to road fuel gas. In many cases, those arguments apply more powerfully to biodiesel and bioethanol. There is no logic to the Government's position with regard to duty levels--let alone to the year's delay in the implementation of any reduction.
Mr. Beith: Such a forecast would be difficult, and it is not one that I have come prepared to make. The Government are no more prepared to give a clear indication of what they think will be the take-up of road fuel gases. Such calculations are difficult, and they are a job for industry. Making risky decisions about how extensive investment should be is something at which industry excels. Governments of all parties have a bad record in that regard.
However, for industry to make such decisions, there must be a reasonable taxation basis. Giving industry an incentive to invest in road fuel gases and not in biofuels is likely to lead to the wrong investment decisions, or discourage investment that could be very beneficial in terms of both industry and agriculture.
Mr. David Heath (Somerton and Frome): I agree with the strong points that my right hon. Friend makes, especially on behalf of farmers across the country. However, is he aware that the Government could adopt a policy of substituting at least 15 per cent. of road fuel with ethanol as from tomorrow? The French have relaxed taxation on the ethanol component in fuel, and the Government could do the same. In that way, they could encourage what is an important and environmentally friendly industry.
Mr. Beith: My hon. Friend makes a good point. He underlines my earlier point that conversion would be easy: indeed, people would only need to put a different fuel in their tanks at petrol stations. No engine adaptation is required, so the change would be easy to make.
Another argument that does not stand up is the one advanced by the Financial Secretary in a letter sent to the chairman of the British Association of Biofuels and Oils on 23 April. The Financial Secretary explained why road gas fuels attracted a lower rate of duty than biofuels, and said:
The amendment offers an attractive course for the Government to adopt. Conventional oilseed rape varieties such as are grown now could produce up to 6 per cent. of the UK's requirements for road vehicle diesel fuel. Substantial environmental benefits would be achieved. The technology already exists, and subsidies would not be needed to persuade growers to grow the crop. No new research would be needed to develop growers' skills, as the crop is already being grown. No capital advances would be required for processing, as the UK already has crushing and esterification plants.
In addition, the industry would be ready to increase investment, as long as it knew that the relevant tax regime would work. Britain already exports oilseed rape to Germany and Austria, and those countries use what they import to produce biodiesel. We are denying ourselves environmental advantages that we could have. We are failing to give agriculture a benefit that could be extremely valuable at a difficult time such as this.
The Government clearly realise that they should be doing something. That is the reason for the Chancellor's indication of a 20p cut next year. However, what they are contemplating comes too late and is insufficient. To wait until next year risks investments not being made. To preserve a significant difference between road fuel gas duty and duty on biofuels risks giving the industry the wrong signal.
I invite the Government to accept my amendment in principle. I know that they will want to redraft it and present it in different terms--that is in the nature of parliamentary proceedings. However, it surely makes sense to secure an equivalent rate of duty.