John Perry (Sligo-North Leitrim, Fine Gael)

I am pleased to have an opportunity to speak on this important Bill. I begin by acknowledging the great contribution by Deputy O'Flynn as former Chairman of the Oireachtas Committee on Communications, Marine and Natural Resources in the 29th Dáil, particularly his contribution to the far-reaching report of 2006 which provided the groundwork for this legislation. The public meetings and consultations facilitated by the Deputy led to the production of a visionary document.

In his introductory remarks the Minister said that bio-fuels would 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. The Minister also said that policy in this area must strike a balance between multiple objectives while also ensuring that bio-fuels must at all times come from sustainable sources and that increased market share for bio-fuel take place at least cost to the customer. The Minister also informs us that the Bill will ensure that consumers have access to appropriately priced, sustainable and reliable sources of bio-fuel in the coming years which also give an important incentive to domestic production.

The Bill starts with the simple premise that energy usage in the transport sector must make its contribution to global reduction in greenhouses gases. At European Union level we have the renewable energy directive 2009/28/EC, which places a requirement on all member states that 10% of energy used in transport come from renewable sources by 2020. This Bill transposes the directive into national law. From a scrutiny perspective, it is important that national parliaments debate these issues and ensure their transposition does not breach the requirements of subsidiarity. The target of 10% by 2020 is very substantial; whether it is achievable is another issue.

The energy policy objectives the Bill addresses seem reasonable. However, I have doubts on reading the detail. I am concerned that the complex detail of the technical and administrative issues is at variance with the simplicity and directness of the objectives.

The bill is complex in many ways. I am concerned that the simple objective of using bio-fuel in the transport system requires that bio-fuel producers and suppliers open bio-fuel obligation accounts, that commercial bio-fuel transactions use a parallel certificate system and that there will be a trading system for bio-fuel obligation certificates. We are setting up a complicated back-office system to make bio-fuel requirements work in practice. That must alert us to the fact that although the fundamentals of what we are trying to achieve are praiseworthy, the way we are going about it in practice is off target.

I have serious concerns about the establishment of another new trading system for bio-fuel obligation certificates. The danger is that they may change, as the financial trading system did over the years. We have all seen that pattern. That system started off with a small number of real trading products such as deposits and loans, and then changed fundamentally. The bill has no controls or limitations on the adaption of the bio-fuel obligation certificates into potential products such as futures, contracts for difference, hedges and derivatives. The bill is too complicated technically, administratively and legally.

We face real handicaps in developing bio-fuel crops. Our national capacity for processing those crops will be always marginal compared to what larger countries can achieve. There is a danger that the Irish bio-fuel industry will not be able to achieve significant scale. The sector will be always a marginal player in bio-fuel production and processing. We cannot ignore the large export potential of other world regions such as Brazil, China and Thailand compared with the Irish and EU markets. The production costs in those countries are significantly lower than in the EU. I am concerned that we will start up another struggling production sector - like the sugar sector - that will not survive in the real world.

Various reports in the past decade have shown that our basic bio-fuel feed stock availability will not enable us to reach bio-fuel targets. That would require part of the current food and feed crop production to be diverted to energy purposes. That would most likely lead to additional imports of food and feed.

If, as seems likely, our bio-fuel business can operate only on the basis of significant grant aid, excise relief, bio-fuel imports and other state support, we must question the entire project. The Minister tells us there are no Exchequer costs associated with the bill. However, there is an economic cost to the country, starting with the 2% per litre levy paid by oil companies. There will be other costs associated with the production, refinement and distribution of bio-fuel. There could be substitution costs if scarce national resources are misdirected as a result of any additional revenue costs or taxation incentives to the sector. Studies have shown that biodiesel is expected to cost roughly 30% more than diesel currently costs. All those costs are the real cost for the national economy. We must avoid them if we are to improve our competitiveness, which is important right now.

The carbon tax on farm diesel is now coming into effect. It is another cost increase for the agricultural sector and the retail business, including hauliers. Farmers claim it will reduce farm incomes by 2%. We cannot keep piling up costs on the productive sectors in the economy while hoping growth will recover. There is tax on tax, and it is taking more money out of the economy.

Small and medium-sized businesses and small domestic manufacturers are already paying too much for energy. In the retail business, the small companies are subsidising the large ones. The unit costs charged by the ESB for small companies show they are heavily subsidising the huge commercial companies. They are paying far in excess of what is charged in Northern Ireland. There is no level playing field regarding the direct costs of business. Those small companies are probably even subsidising energy costs for the multinationals sector, which is very unfair.

A better strategy would be for us to recognise reality and avoid putting scarce national resources into a marginal business. We would of course still have to meet our bio-fuel-related carbon requirements. I propose that we do that in a different way. We could trade the bio-fuel carbon for the carbon equivalent for energy crop production, which we as a country can do much better. Ireland will be better off environmentally and economically if we concentrate our scarce national resources on bioenergy crops.

Bioenergy is one of the most significant sources of renewable energy in Ireland. Bioenergy crops, especially forestry, are much more commercially viable than bio-fuel crops. The entire north-west of this country is well adapted to bioenergy production based on forestry and timber. We should consider moving our carbon renewals policy in that direction.

We can see the scale of forestry in the west of Ireland, but people want to thin it out at the moment. There are no grants - forestry involves 30 years of growing, and there is a massive cost disincentive for companies to thin out the forests. The State was giving huge incentives for people to plant forestry, but it appears there is no market for the timber. The thousands of acres of mature forestry could be harvested, but after all the effort and the incentivisation by the Government, it appears there is little or no reward or financial gain for that massive investment. The Minister might comment on that. We have the timber for bioenergy, but there is no plan of action to use it. Very few - if any - companies are prepared to facilitate that and transfer the timber, as there are currently financial constraints. There is a way to deal with the farming population and the thousands of acres of timber.

I am concerned that the bill is part of a wider Green agenda driving our energy policy. That policy is an example of the worst type of Green Party policy making: dogma driven solutions in search of real problems. There are many real problems in energy policy, but they require real solutions.

It is not enough for the Minister, with a majestic wave of the hand, to ward off those who are saying the energy asset investment approach is seriously unbalanced and getting worse. The Minister cannot tell them that they do not understand his vision, and that they will come on board when they see the light. The Minister has shown an unbelievable indifference to the views of those who do not agree with his policy perspective. They are serious people with serious views, and the Minister cannot wave them aside as a minor irritant.

The present situation regarding green energy policy reminds me of the property bubble. Vast sums of public and private money were invested in an inflated and unrealistic property sector. There were few significant objections to the property bubble investments. The Fianna Fáil Ministers, working hand in glove with the property speculators, told us it was okay - that the assets were sound and the sector was strong. Yet it all came crashing down in spectacular fashion. I am concerned we will repeat the financial sector bubble with a wind farm bubble if we are not careful. Far too many of our financial resources - billions - are being invested in wind farms and the associated grid links and interconnectors. The approach of the current Minister to investment in the electricity system is such that we will end up with three parallel and competing electricity systems. The danger is that we will have a grid system with an interconnector system, a wind-generation system and a conventional generation system, each with enough independent capacity to meet our electricity needs. Such a policy could certainly cause many problems.

There is much we can do by way of conservation to ensure energy is used wisely. It is necessary to make the best use of our renewable resources. In this regard, we must be realistic. One must remember the wind does not always blow, as I noted having passed many wind farms, and bear in mind the challenge of storing electricity when generated and the circumstances associated with the grid in the west.

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