Michael D'Arcy (Wexford, Fine Gael)
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Question 85: To ask the Tánaiste and Minister for Finance his views on whether subsidising bio-fuels represents a cost-effective way of reducing greenhouse gas emissions. [2100/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I stated previously that taxation can play a part in attaining environmental objectives, including the promotion of energy efficiency and the reduction of emissions. Using taxation as a mechanism to subsidise activity that yields overall benefits to the economy is a tool that has been used by successive Administrations, often delivering very positive results.

To promote the development of bio-fuels in Ireland, I provided for an appropriate excise relief scheme in the Finance Act 2006. Under the scheme, bio-fuels produced under approved projects are exempt from excise duty. This serves to reduce the additional costs associated with the production of bio-fuels and consequently allows them to compete with conventional fossil fuels. With regard to whether this approach represents a cost-effective way of reducing emissions, I will point out that this relief is in place for a period of five years to assist in the development of a domestic bio-fuels industry. Long-term general excise reliefs are not anticipated.

In this regard the Deputy might wish to note that there are additional non-fiscal measures that can be used to promote bio-fuels. To provide further market certainty and encourage projects of scale, the Government has signalled its intention to move to a bio-fuels obligation by 2009, which will require all fuel suppliers to ensure that bio-fuels represent a certain percentage of their annual sales. The obligation will fall under the remit of the Department of Communications, Energy and Natural Resources.

Richard Bruton (Dublin North Central, Fine Gael)
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I know the Minister has seen an in-house report by the Joint Research Centre of the European Commission which raised considerable scepticism about the general EU thrust towards bio-fuels as a solution. It made a number of points. One point was that the use of biomass to generate power was more effective than its use in transport and that some technologies for creating bio-fuels produce more carbon than burning fossil fuels. It raised other concerns that the EU was rigging the market in favour of an untried technology. There is scepticism on how effective and well-grounded is the target. While everybody wants to see this pursued and a successful bio-fuel strategy will provide good domestic opportunities, we want to be sure we are building a strategy on firm, long-term ground. Will the Minister examine these concerns and get the authority of Government to investigate this so that we have a strategy if we decide to pursue this target?

Brian Cowen (Laois-Offaly, Fianna Fail)
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I have not read the report to which the Deputy refers but will have it examined. The European Commission strongly supports the use of these fuels and recently the commissioner with responsibility for this area highlighted the need to support bio-fuels because they are the most immediately feasible way of slowing the growth in greenhouse emissions in the transport sector and reducing our dependence on imported oil. The only alternative to bio-fuels is oil, which is a shrinking source of energy. Bio-fuels provide a development opportunity for poorer countries. However, I take the Deputy's point. Some years ago the concept that bio-fuels or energy crops might provide an alternative or supplementary source of income for farmers was fashionable in Irish agriculture circles. With rising grain prices people may return to greater production of grain, which they were getting out of, and getting out of tillage. That may change as the economics of food changes worldwide. I take Deputy Bruton's point that we must monitor this constantly and that what once looked like an excellent opportunity may not be as great as envisaged when circumstances change. I will have the matter examined.

Richard Bruton (Dublin North Central, Fine Gael)
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Is the Minister aware that one of the impacts of the emphasis on bio-fuels in its current form is a large projected increase in food prices worldwide, a shortage of grains for food use and the impact this will have on some of the poorest people in the developing world and poor families in the EU and Ireland? The Minister is a member of the Cabinet sub-committee on climate change. Has that committee any mechanism to study and reach a balanced conclusion on the advantages and disadvantages of bio-fuels, particularly their negative impact on the Third World in stripping rain forests and causing grain prices for food use to rise dramatically?

Brian Cowen (Laois-Offaly, Fianna Fail)
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The White Paper on energy policy, which is the blueprint for the development of Ireland's energy sector, provides for looking at renewables, bio-fuels and alternative sources of fuel for a more competitive energy sector in Ireland. I made the point that with the big switch of grain to bio-fuel production in the United States and the drought in Australia grain prices are rising again after many fallow years. This is a benefit for Irish farmers and a factor in how attractive energy crops may be for the primary agriculture production sector in the future. I see the question as a front-line issue for the Minister with responsibility for environment and energy on how he is promoting the White Paper objectives on energy policy. The Cabinet sub-committee is drawing up scenarios on the impact of the Commission's proposal on greenhouse gas emissions and the reduction it seeks from us, and this will be the priority in the months ahead.