Seán Sherlock (Cork East, Labour)

I wish to start by quoting Commissioner Piebalgs, who stated:

Europe's energy import dependency is forecast to reach 64% in 2020... That is why the Commission does all it can to improve European levels of energy efficiency and renewables including biofuels... This growth [in greenhouse gas emissions] threatens to cancel out the savings being made elsewhere. On present trends, transport will account for more than 60% of the EU's increase in carbon dioxide emissions between 2005 and 2020.

There is a global debate at the moment on the scarcity of food supply. There are those, particularly the NGOs who represent developing countries, who have rightly stated that the move towards bio-fuel production globally is having an impact on global food prices. The question for us is where we strike the balance. Given such a high dependence on fossil fuels, we cannot detract from tackling that issue. If we do not take action now, it will have serious implications. The Labour Party's view is that while we acknowledge that the increase in food prices globally is as a result of the movement towards bio-fuels, we also acknowledge that appropriate land use and rules governing deforestation would assist in attaining a greater balance between the two.

In essence we welcome the introduction of a bio-fuel obligation scheme. The reduction of the target from the 5.75% reflects current economic realities. Perhaps the right conditions were not in place to reach those targets in the first instance. The legislation before us is a realistic attempt to try to shift the focus from fossil fuels to alternative energy, which we welcome. In establishing a bio-fuels obligation scheme that seeks to ensure that 4% of transport fuel is derived renewable sources from July 2010, we must ensure that such an obligation is as favourable as possible to existing domestic bio-fuels companies and to new companies that will emerge. It is vital that the bio-fuels obligation scheme becomes a source of potentiality, particularly regarding the rural economy.

We must ensure we can stimulate supply domestically to avoid excessive reliance on imports in order to fulfil the requirements of the bio-fuels obligation scheme. For instance, the Munster region traditionally depended largely on the sugar beet industry with approximately 31,000 hectares given over to the production of sugar. There is a potential for diversion of land use in order to be able to meet this obligation. If companies wish to set up in order to assist in meeting the obligations here, it would stimulate a demand that could be filled by the rural economy, which is what we should be doing. We do not want to have this obligation and end up importing the raw materials in order to meet that obligation. We need to consider the economic potential on this island to facilitate that.

Inherent within the bio-fuels obligation scheme is a capacity for growth and economic development of a sector which is, to all intents and purposes, in its infancy in this country. Bio-fuels industry lobbyists, such as Ethanol Ireland, have maintained a starting point which would mandate that, in order for any ethanol to be eligible for an obligation certificate, it would have to meet the EN 15376 standard and be designated as Taric or CN code 22071000. It has been suggested by Ethanol Ireland that a situation similar to that in Germany would be appropriate.

In the Seanad, the Minister, in his response on this issue to Senator Joe O'Toole, stated, more or less, that Ireland had an obligation to remain within the WTO rules and in compliance with EU regulations. My understanding of this is that the introduction of a tariff could not unfairly restrict imports, and that this was the Government position. I appreciate the Minister's statement in regard to the regulation and we will revisit that at a further stage.

The simple issue here, and let us not forget that we are debating this issue at a time when the economy is on its knees, is that compliance with EU and WTO rules must be mutual with this country's need to create new economic opportunities, particularly within the rural economy. The question arises, therefore, as to whether it is possible to introduce an amendment which would tally with the German or other EU member states' positions. As we understand it, the Seanad amendments were fully consistent with EU trade guidelines and do not restrict imports unfairly or unduly. There are concerns, outlined by the Minister in the Seanad, for the implications for this island and the cross-Border impact as to whether this could lead to a distortion in terms of the impact where pricing models may differ.

Senator Joe O'Toole summed it up correctly when he stated in the Seanad debate:

The Minister said that from a national perspective the only substantial problem with the course of action proposed is that the United Kingdom has not adopted such a measure and given that we import 60% of our road transport fuel from the UK, such a measure would have the potential to increase costs to Irish consumers substantially as they would have to be supplied with a different blend of bioethanol. That is probably the most challenging of all the points made.

He further stated:

Most Brazilian fuel ethanol is transported to Europe in bulk tankers in an undenatured state. Normally, it is only denatured at the point of receipt into the member state to benefit from the lower tariff and technical requirements. Most of it is brought into Rotterdam and subsequently broken down and then distributed across Europe. Best practice recommends that blending takes place as close as possible to the point of distribution. Hence, the point of blending tends to be the destination member state. Currently in Ireland, bioethanol blending usually occurs at the point of receipt in the bond - whichever bonded facility it goes into. With regard to petroleum, we currently import approximately 50% of our requirements from the UK, 35% through Whitegate and the balance from Scandinavia, through Derry. We have been reliably informed that all the oil majors in Ireland will have blending capacity and undenatured ethanol at their facilities by the end of the year. This has been confirmed separately to me as being correct. Topaz, in Whitegate, already has full capability. Even if oil companies opt to blend in the UK or mainland Europe, these are pan-European suppliers that already supply some member states with a product similar to the Irish specified product. All that matters is that the bioethanol coming into Ireland satisfies the definition under the bio-fuels legislation, which must comply with Taric code 22071000 and EN 15376.

If I understand the Minister's speech in the Seanad, he alluded to the fact that because the UK has not adopted such a measure, and given the massive rate of importation from the UK, there could be a cost impact for the Irish consumer. I hope this is a matter the Minister will go into further on the next Stage.

To deal with Taric or CN code 22071000, Ethanol Ireland produced a paper which I am sure the Minister and every Member in the House has had sight of. In it, Ethanol Ireland suggested that the German bio-fuel quota law would be the most appropriate for this jurisdiction. There are two provisions within that law and these would effectively create a barrier to imports from non-EU sources being eligible for certificates unless they were of a quality equal to EU production and had paid the higher of the two tariff's applicable to ethanol, namely, 19.2 cent per litre versus 10.2 cent per litre. The issue for Ethanol Ireland is that Irish-produced ethanol can compete with that produced elsewhere in the EU and with non-EU imports if those imports are of a similar purity and attract the 19.2 cent per litre tariff.

I should point out that I hold no brief for Ethanol Ireland but it is the only group I have had an interaction with in regard to the potential domestic producers and I believe its voice probably speaks for the domestic industry in this sense. There have been, to my knowledge, extensive discussions with the Department on these issues, mainly overcoming the Department's issues relating to the pump price impact and on the economic potential of an indigenous bio-fuels industry.

In the Seanad, the Minister gave himself the power to make regulations pertaining to the eligibility of bio-fuels. In discussions I have had with Ethanol Ireland, the reason given for choosing this way is that if the specific regulation were included in the Bill itself, it would require notification to the EU, as the Minister has stated. This would result in a potential delay in implementation of the Bill, which, given the timeframe involved in the bio-fuels obligation scheme, would not be acceptable. We will have to deal with this issue again on the next Stage as it warrants further discussion.

The essence of this issue is whether, by regulation, bio-ethanol used for transport fuel must comply with EN 15376 and, if imported, must have been imported under Taric code 22071000 in order to qualify for an obligation certificate. The two provisions would effectively create a barrier to imports, as I have already outlined.

The other issue in regard to the obligation is whether the three main EU policy objectives are being met, namely, the reduction in CO2 emissions, increased security of energy supply, and the maximisation of EU, national and regional social and economic benefits. If we can create a situation on this island which allows for a new market or a new industry which will take as much of the market share as possible in terms of creating a domestic supply and a domestic market, this legislation should seek to create the conditions which will bring that about. As Deputy Coveney said, farming and agri-business is in a state of flux at present in that there are uncertainties in regard to the dairy sector and the meat sector. We have to recognise that if we do not grasp this opportunity now, it could be lost for a long time.

The Minister's speech gave a sense that he wishes to create domestic supplies for this and if we can facilitate that, it is the way to go. We must not be afraid to take this course of action. Other countries have already implemented tariffs under various models. I see no reason why we cannot be protectionist in our attitude to this issue. If the obligation exists, Ireland should be able to ensure its own security of supply by using domestic means.

I welcome the Bill and will study the Minister's speech in depth before Committee Stage. This is a step in the right direction. We should not be ashamed to protect our own domestic supply in a way that is congruous with WTO and EU rules.

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