Eamon Ryan (Dublin South, Green Party)

I move: "That the Bill be now read a Second Time."

I am pleased to be in a position to present the Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010 for consideration by the Dáil and commend the legislation to the House. This is a critically important Bill for a number of reasons. Bio-fuels will play a central role in meeting our binding European Union targets for 2020 and, in so doing, reduce our greenhouse gas emissions from transport, improve our energy security and provide a valuable opportunity for the agricultural sector and industry to diversify into new areas. Policy in this regard must strike a balance between taking advantage of these important opportunities and ensuring that these fuels must, at all times, come from sustainable sources and increased penetrations of bio-fuel take place at least cost to the consumer.

The legislation sets out the means by which this will occur and will ensure that Irish consumers have access to appropriately priced, sustainable and reliable sources of bio-fuel over the coming years. In doing so, this will give an important incentive to domestic production.

The environmental benefits of sustainable bio-fuel use stem from the reductions in net carbon emissions over the fossil comparator. This is particularly important given that transport has long been the fastest growing sector in terms of greenhouse gas emissions in Ireland. Bio-fuels are one of the few methods that are readily available to redress this. It is possible, in a small number of cases, that certain bio-fuels may not result in net carbon savings. The Bill ensures that only bio-fuels resulting in net savings of 35% over the fossil comparator will be eligible for the obligation scheme through the strict application of with the EU sustainability criteria, as set out in the 2009 renewable energy directive. Furthermore, from 2017 the net savings required will increase to 50%, further incentivising the incremental development of cleaner and more sustainable bio-fuel.

Increased bio-fuel use has a number of additional benefits, not least in that it can also displace imported fossil fuels and thereby improve the fuel security situation. Furthermore, there exists a series of opportunities to supply this sector for those in the agricultural, waste and industrial sectors. Ensuring the cost effective and sustainable integration of bio-fuels into the fuel supply chain is not an easy task, however, owing to the difficulty in balancing the need to keep costs to the consumer to a minimum with the need to ensure a consistent supply of fuels and underpin long-term investment in more sustainable bio-fuels. It is, therefore, imperative that we put the right policy in place now, setting a clear and transparent framework which will facilitate progressive increases in volumes used, while giving industry and investors the certainty they need to commit funds.

Experience here and elsewhere has shown that short-term fiscal measures cannot provide this type of certainty and only an obligation type system can ensure that Ireland seizes the opportunity to take advantage of bio-fuel and that the considerable opportunities for the indigenous production of bio-fuel are exploited.

The experience of the mineral oil tax relief scheme, MOTR, is instructive in this regard. The scheme, which was introduced to incentivise the production of bio-fuel in Ireland as an interim measure, involved two competitions whereby companies bid for excise relief under specific conditions. While these competitions have proven to be very successful in getting initial volumes to market - the market penetration rate for bio-fuels as a percentage of road transport fuels was 0.0003% prior to the schemes being introduced, a figure which had risen to 1.6% market penetration in 2008 and a predicted 2.5% in 2009 - the problems experienced by domestic producers illustrate the need for an obligation scheme. In short, after investing heavily in plant and equipment, several manufacturers found that they could not find a market for their fuel, despite the fact that they had the benefit full excise relief. In turn, this made sourcing investment in other plant more difficult and meant other developments could not take place.

Therefore, while the introduction of a national bio-fuel obligation has been the preferred policy option since 2004, the interim experience has further reinforced the need for such a scheme. Such schemes provide industry with the certainty it needs to invest and compels the oil industry to engage with this new sector. Furthermore, by using legislation to lock in a certain outcome rather than using public money to support the sector, the market is left to find the most efficient way of delivering the volumes of bio-fuel to the market, minimising the effect on consumers and the Exchequer.

There has been some comment as to the effectiveness of such schemes in encouraging domestic production. We need look no further than our nearest neighbour, which introduced a similar scheme in 2008, for a demonstration of the effect these schemes can have. Taking recent announcements into account, it is likely that the United Kingdom will shortly have a domestic production capacity of more than 1.1 billion litres of ethanol alone per annum in three new plants, all entering production after the introduction of their obligation. The certainty that these types of mechanisms provide allows this type of investment to take place. Furthermore, the fact that demand for bio-fuel across Europe will rise steadily in the coming years means significant additional production capacity will need to be added in the medium term if these demands are to be met. Ireland, with its strong agricultural and food industries, stands ideally placed to take advantage of this.

In addition to these amendments, concerns were raised about how we could protect ethanol produced from indigenous sources against cheaper imports. It was suggested in the debate in the Seanad that we could specify particular TARIC codes for ethanol, thereby enforcing certain quality restrictions on imported ethanol and supporting indigenous industry to an extent. Having consulted with the Office of the Attorney General and National Standards Authority of Ireland, a new section 44X has been added to the Bill to provide the power for the Minister to make an order specifying the fuel standards required for a fuel to meet the obligation. By introducing this new section I will, once the Bill has been enacted, be able to move to make a statutory instrument setting out the measure that is required in specifying a TARIC code and put this through the notification procedure to the European Commission in due course. By taking this course of action now we are ensuring there is no undue delay in progressing the legislative process and bringing the obligation into force. I have long been an advocate of promoting indigenous industry and this additional section will help to further underpin that goal.

The main purpose of the Bill is to introduce a bio-fuel obligation to underpin the delivery, in an affordable and environmentally sustainable manner, of a number of important national and EU targets for renewable energy in transport. Ireland and all member states are required under the 2009 renewable energy directive to have a 10% penetration of renewable energy in transport by 2020. The Government programme and White Paper on energy policy also commit to the introduction of a bio-fuel obligation for similar reasons.

Policy for future bio-fuel fuel use is ambitious but tempered by a determination, shared among all EU Governments, to ensure there are no adverse consequences for consumers, the environment or those living where the products needed are grown or extracted. This is critical given that it seems likely that bio-fuel penetrations of up to 8% by energy will be required by 2020, with the remainder coming from renewable energy used in electric vehicles. This determination is reflected in two central aspects of national policy, as reflected in the Bill, and in the relevant EU directive, namely, the 2009 renewable energy directive.

The first of these relates to the sustainability criteria regime set out in the directive and incorporated in the Bill. This set of rules, which will come into force across the EU this year, will compel suppliers to ensure every unit of bio-fuel counted towards national targets meets a stringent series of criteria, including life cycle greenhouse gas emissions savings versus fossil fuels, the type of land from which bio-fuel crops can be taken and ecosystem preservation.

The second manner in which this desire to mitigate any additional adverse effects is by means of a number of review clauses built into this Bill and the directive. These involve scheduled reviews of the possible effect of increased bio-fuels, both in terms of the market effects and in terms of any environmental and social consequences. This includes the requirement in the Bill for a review of the ongoing impact of bio-fuel use before any change in the suggested bio-fuel penetration rate.

The National Oil Reserves Agency will be the administrator of the scheme. I have chosen NORA because it has an existing business relationship with the obligated parties, namely, those suppliers of transport fuels to the Irish market. NORA is currently responsible for ensuring that Ireland complies with its EU and international requirements for emergency oil supplies. The agency is funded by a levy on mineral fuel, which it collects from oil suppliers. It also enters into contracts with oil suppliers for the purposes of leasing oil storage. On that basis, it was deemed that NORA was by far the most appropriate administrator for the bio-fuel obligation. The cost of administering the bio-fuel obligation will be met by extending the current NORA levy on oil suppliers to cover bio-fuels, which are currently exempt.

The principal role of NORA will be to administer the bio-fuel obligation on behalf of my Department. The administrator will be responsible for the opening of accounts for obligated parties, and bio-fuel producers or suppliers who wish to be part of the scheme. The administrator will have the power to ask for evidence to support all of the conditions of the scheme. If the administrator deems that the evidence does not support the information provided, it will have the power to reject the application for certificates for some or all of the fuel in a submission. The administrator will also have the power to revoke a certificate that has been issued if the information or the evidence on which the certificate was issued is subsequently found to be false.

The administrator will also have the power to certify trading of certificates among account holders. This means that obligated parties that have not been able fully to meet their obligation by supplying bio-fuel themselves can purchase certificates from other obligated parties, or from bio-fuels suppliers that have registered with the administrator. An obligated party that has a shortfall in the number of certificates at the end of a defined period - the calendar year - will be required to pay a non-compliance fee, calculated by multiplying the number of certificates short by the established amount of 45 cent per certificate. All of the transactions on accounts will be in electronic format in order to reduce the administrative burden on those participating in the scheme.

The Bill also has a number of other provisions that do not relate to bio-fuel. It amends the NORA Act 2007 to provide for some changes in the general strategic oil stocks policy. These include provisions for setting the NORA levy, the management of NORA's funds, refunds for levy overpayments by oil companies, board structures, and increased penalties for non-compliance with legislation in the event of an emergency

It also proposes to assign additional functions to the Commission for Energy Regulation, which is the independent body responsible for regulating and overseeing the liberalisation of Ireland's energy sector. These new responsibilities relate to the safety regulation of the activities of liquid petroleum gas installers.

Established as the independent regulatory body with responsibility for electricity under the Electricity Regulation Act 1999, the CER's powers and responsibilities were extended under the Gas (Interim)(Regulation) Act 2002 to cover regulation of the natural gas market. As the independent regulator for the electricity market, the CER has a range of statutory functions including the licensing and authorisation of electricity undertakings and infrastructure, as well as the regulation of certain tariffs. The CER has a similar regulatory role within the gas sector and also has the power to regulate prices charged to Bord Gáis's residential and SME gas customers.

The Energy (Miscellaneous Provisions) Act 2006 amended the Electricity Regulation Act 1999 to extend further the functions of the CER to provide for electrical and gas safety, including LPG safety. The gas safety regime is now fully operational. However, following legal advice to the Department, it is necessary to address identified gaps in the 2006 amending legislation so that the LPG provisions adequately address the regulation of LPG safety. Given its statutory responsibility to carry out gas safety functions, the CER is evidently best placed to take on the LPG safety functions and responsibilities as provided for in the 2006 Act.

The amending provisions of this Bill represent the first phase of a two phase approach to LPG safety. The focus of the first phase proposals as set out in the Bill is on LPG installer safety provisions. The second phase will require the undertaking of a detailed consultation by the CER on the appropriate options available for the safety regulation of LPG distribution networks, LPG appliance related incident reporting in a domestic setting and LPG promotion by the CER. The CER proposes to launch the second phase consultation exercise over the coming weeks. The outcome of that process will inform thinking on the second phase legislation requirements, which will need to ensure there are no regulatory overlaps with, for example, the role of the Health and Safety Authority. The overall objective is the achievement of first-rate safety standards for the LPG sector.

In order to contextualise the first phase provisions, it is important to note that there is also legislation outside the scope of my Department that relates to the transportation and storage of LPG. The regulation of the transportation of LPG by sea is a matter for the maritime safety directorate under maritime safety legislation. Transportation overland and the safety regulation of storage facilities are covered by regulations governing the transportation and storage of dangerous substances, and by the Health, Safety and Welfare Act 2005.

The safety provisions of the Bill will deliver benefits to LPG consumers and to the public in general. I look forward to working closely with the CER in ensuring the speedy implementation of the Bill's provisions, following enactment. There are no Exchequer costs associated with the Bill.

I now propose to outline the main provisions of the Bill. For the convenience of the House, a detailed explanatory memorandum has been published and this provides a synopsis of the provisions of the Bill. The Bill consists of 27 sections and four parts. The Bill establishes that a bio-fuel obligation will be introduced in Ireland which will compel road transport fuel suppliers to have an average of 4% bio=fuel included in their fuel sales each year. The obligation will be administered by the National Oil Reserves Agency as an additional function to their current remit.

Part 1 contains standard provisions concerning short title, commencement, definitions and making of orders connected with the Bill. Part 2 sets out how the bio-fuel obligation will work. Section 3 outlines how the National Oil Reserves Agency Act 2007 - the principal Act - will be amended by the insertion of an additional part to the Act to allow for the introduction of the bio-fuel obligation. The section sets out the manner in which the scheme will operate, to whom it will apply, and the definitions to be used for the bio-fuel obligation. It also details penalties which will be enforced relating to non-compliance. The section also sets out the accountability of NORA and the account holders relating to the obligation, along with the powers aid functions of NORA relating to it.

Part 3 sets out the amendments required to the principal Act to ensure that all of the powers conferred on NORA in the existing Act are extended to include their administration of the bio-fuel obligation. Sections 4 and 5 provide for amendment of specific sections of the principal act to allow NORA to administer and operate the bio-fuel obligation as an additional function to their current remit.

Section 6 provides that directors appointed to the Board of NORA have knowledge of the bio-fuel area and that the directors, including the chairperson and chief executive, shall be paid by NORA out of the levy and bio-fuel levy such remuneration and allowances for expenses as the Minister, with the consent of the Minister for Finance, may decide.

Sections 7 to 10 provide that the bio-fuel levy collected can be used by NORA to pay for consultants' fees or expenses incurred by a subsidiary of NORA if required and that the bio-fuel levy can be used to pay for staff and the chief executive of NORA. Section 11 provides that the National Treasury Management Agency, with the consent of the Minister for Finance, may act on NORA's behalf in respect of making of investments and borrowings and related financial transactions.

Section 12 provides that reference to expenses shall also include any costs incurred by NORA in administering the obligation or in collecting the bio-fuel levy. Section 13 provides that the Minister for Communications, Energy and Natural Resources shall consult with the Minister for Finance in setting the rate of the NORA levy. Sections 14 and 15 provide for the amendment of the enforcement and penalties provisions in the principal act in order that the bio-fuel obligation is also covered.

Section 16 provides for the procedures in respect of reclaiming overpayments of the bio-fuel and NORA levies and specifies that claims for overpayment must be made within 18 months of the end of the year in which the overpayment was made. Section 17 provides that should a dispute arise with an account holder over whether the payment of the bio-fuel levy is appropriate, the onus is on the account holder to prove otherwise, as is currently the case for the NORA levy.

Section 18 provides that NORA or the Minister for Communications, Energy and Natural Resources may prosecute offences which relate to the bio-fuel obligation, and that a court may order a person convicted of an offence to recompense NORA for its costs in investigating, detecting and prosecuting the offence. Section 19 amends the principal act to clarify that notices may be served by electronic means.

Part 4 deals with miscellaneous amendments to three acts, namely, the Fuels (Control of Supplies) Act 1971, the Electricity Regulation Act 1999 and the Energy (Miscellaneous Provisions) Act 2006. Section 20 increases the fines on summary conviction and on conviction on indictment for offences under section 4 of the Fuels (Control of Supplies) Act 1971.

Safety is and must remain a matter of highest priority. The first phase proposals contained in this Bill propose to provide for the extension to LPG installers of the existing natural gas installers safety regime. These provisions are addressed under sections 21 to 27. Section 21 provides that references in the Bill to "the Act of 1999" mean "the Electricity Regulation Act 1999", hereafter described as the 1999 Act.

Section 22 amends section 2(1) of the 1999 Act by inserting definitions in regard to LPG and LPG fittings. It also extends the definition of "gas installer" to include LPG installers.

Section 23 amends section 9 of the 1999 Act to extend the functions of the CER to include regulation of the activities of LPG installers with regard to safety. It also provides for the establishment by the CER of a LPG safety framework.

Section 24 provides a definition of LPG works.

Section 25 amends section 9H of the 1999 Act to extend the functions of the CER to the making of regulations relating to LPG safety. Such regulations may provide for specifications regarding the installation or maintenance of LPG fittings, the conditions to be fulfilled before LPG may be connected or reconnected to a premises following installation, and the maintenance or repair of an LPG fitting. The penalty provision set out in the 1999 Act, which applies in regard to non-compliance by a person with the natural gas regulations, is to be extended to LPG. In the case of domestic dwellings, an amendment is provided to extend responsibility to the landlord for ensuring that an LPG fitting is safely maintained. In the case of a premises used as a place of business similar responsibilities are set out.

Section 26 of the Bill amends section 9J of the 1999 Act. This provision relates to the appointment of gas safety officers. The amendment proposes to extend the powers of gas safety officers, appointed by the CER, to the inspection of LPG fittings, to the issue of directions, to the taking of measures for the protection of the public from any danger arising from LPG, and to the disconnection of LPG supply.

Section 27 of the Bill provides for the repeal of section 14 of the Energy (Miscellaneous Provisions) Act 2006. The Bill was initiated in the Seanad where a number of important amendments were made on foot of a long and informed debate. The input from Senators on all sides of the House has helped in advancing the measures provided for in the Bill. We had a meaningful debate on the nature of the bio-fuel obligation and the potential for further development of bio-fuel in Ireland. Minor technical amendments were made to specific sections of the Bill, which have provided greater clarity of understanding of certain terms in the Bill.

A number of amendments are likely on Committee Stage, primarily to clarify certain matters, but also to make provision to impose a levy on electricity generators in respect of carbon allowances. Industry groups have consistently called for the Government to take action on the gains made by electricity generators arising from the single electricity market rule requiring electricity generators to pass through the full opportunity cost of carbon into the wholesale cost of electricity.

In July 2009, the Government agreed to progress legislation to recover these gains and use the proceeds to reduce network charges for large energy users in order to support employment and economic recovery. Subject to final legal drafting, I hope to introduce an amendment on Committee Stage that will place a levy upon electricity generators to recover a substantial proportion of these gains.

This Bill is an important measure in delivering on our targets for renewable energy in transport. Furthermore, the safety provisions of the Bill will deliver benefits to LPG consumers and to the public in general. I look forward to working closely with the CER on ensuring the speedy implementation of the Bill's provisions, following its enactment. I look forward to hearing from Deputies on all sides of the House about their views on the Bill.

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