Dáil debates

Thursday, 22 April 2010

Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010 [Seanad]: Second Stage

 

12:00 pm

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
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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.

Photo of Simon CoveneySimon Coveney (Cork South Central, Fine Gael)
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I welcome the Bill before the House. I know that a constructive debate took place on this legislation in the Seanad and Fine Gael Senators felt they were listened to in that regard, which is important. Some of the Independent Senators were also involved in that debate, including Senator O'Toole.

The legislation is necessary for the reasons we discussed here last night, including energy security and broader climate change proposals. In addition, EU directives require us to move in this direction. For all these reasons, and more, the legislation is timely. The principle of introducing a blending obligation as a means of increasing the quantities of bio-fuel blended with petrol and diesel, is an approach that I would support.

Although I wish to raise with the Minister some issues concerning the legislation, I acknowledge that the introduction of such an obligation gives a level of certainty that we would not get through optional incentive schemes. If we are serious about dramatically increasing the percentage of bio-fuels used in transport, an obligatory scheme is the way to go. I commend the Minister on introducing such a scheme. We should not leave it at that, however. There should also be an incentive to encourage oil companies and fuel producers to go much further than the 4% obligation we are putting in place from July. I have a number of suggestions for the Minister as to how we could do that and I hope he will take them on board.

I wish to say a few words about the running of this scheme. The Minister is correct to ask NORA, the National Oil Reserves Agency, to administer and apply the scheme for obvious reasons, because the agency is already dealing with oil companies. The easiest way to apply an obligation scheme is on the big producers since one is only dealing with a small number of them, rather than trying to gain a levy further down the supply chain, which would be cumbersome and bureaucratic.

I wish to raise some issues concerning the levy. My understanding is that NORA is currently financed by a 2 cent per litre payment that all oil companies make. We are now going to extend that 2 cent per litre levy to bio-fuels. We are assuming that NORA will be able to recoup the increased budget it needs to be able to administer this bio-fuels obligation programme. Perhaps I am missing something, but it seems that what we are planning to do with this obligation is replace petrol and diesel with a percentage of ethanol and biodiesel. However, the net amounts of fuel being sold and used will remain the same. I do not see therefore how NORA will increase its income by applying a levy on bio-fuels. If Maxol or Shell pay a levy to NORA, they will still be selling roughly the same volumes of fuel. They will just be replacing some of the carbon-based fuel with a bio-fuel, so the levy amount should not change a whole lot. I do not see where the extra income is coming from for the five extra staff who are required within NORA. I would argue that we may need more than that number to ensure this is up and running properly. Can the Minister outline, perhaps in writing, how the finances of this scheme will work? If we are simply displacing some carbon-based fuel initially with 4% of bio-fuel, the net amount of fuel on which the levy is being paid is the same, if it is paid on a per litre basis. I need clarification on that point.

If a bio-fuels industry is developing in Ireland and if people are producing bio-fuel per se, they are also contributing to the levy, so I can understand that potentially one could have more home-grown fuel paying the levy, but that is not the way the levy works. It works on imported fuel and, on a per litre basis, a levy goes to NORA to manage the scheme. Unless we are using more fuel, however, I do not see how NORA will get more money from a levy that is applied on a per litre basis. That is a genuine question and not an attempt to catch out the Minister or the Department. I am just trying to understand the proposal.

The thinking on that levy might be somewhat flawed. If we are going to encourage companies to go beyond the 4% obligation, we will need to increase the levy somehow because we need to pay for this. Surely, however, we should also be loading the levy onto the carbon element of fuel production, rather than applying the same levy to bio-fuels that already applies to carbon-based fuels.

Between now and Committee Stage, I ask the Minister to consider restructuring the levy slightly so that whatever the cost to NORA of administering this bio-fuels obligation, it would recoup that by charging a slightly increased levy on the non-bio-fuel element per litre of fuel used. By giving a financial kickback, the Minister could provide an incentive to oil companies that use fuel with more than a 4% ethanol content or perhaps the Minister could consider suggesting that Government would only take a percentage levy up to the level of 4% from oil companies, but that if companies go beyond that they will not have to pay any levy on it. The same rationale should apply to excise. It would kickstart a demand for a higher blend than 4% of bio-fuel, if an exemption was given not just for the bio-fuel element of the fuel mix from excise, but if a target blend of 10% or 15% also had an excise implication for the non-bio-fuel element of that fuel mix.

In other words, we must provide a financial incentive to businesses to go beyond what they are obliged to do in terms of mixing and blending so that we can change the attitude that exists towards things like E85 which is used by those who happen to have a flexi-fuel car, as I have. People need a price incentive to buy a blend with a much higher percent of ethanol than they otherwise would. If there are no pricing incentives to switch, consumers will not switch over and there will not be a demand for flexi-fuel cars or for the relatively easy conversion from diesel engines to bio-diesel engines. People will not want to make the capital expenditure. There is more work to do in this area.

Perhaps the Minister cannot deal with the issue directly in this legislation but, if necessary, he should try and include the capacity to introduce ministerial orders in the legislation, as he did with regard to customs tariff issues and the definition of purity of ethanol. I will shortly turn to these issues. The Minister should not cast in stone the levy currently proposed in the legislation. We can be cleverer about this. Everything we do must incentivise and encourage fuel suppliers to increase bio-fuel content, particularly in bio-fuel that has been produced in Ireland. Like the French, we need to be cleverer about this. France requires domestic sourcing of blended bio-fuel in the oil industry. I would like the Minister to take these issues on board.

With regard to what we want the National Oil Reserve Agency, NORA, to do in terms of allocating bio-fuel obligation certificates, I understand the process being proposed in the Bill. It makes sense. It is unreasonable, particularly at the outset, to expect that people will be able to switch over to a new blending obligation system immediately. They need to be able to supplement what they are doing by purchasing obligation certificates. This approach also gives the right price indicators because it becomes more expensive not to change. Companies must therefore make the choice that they either switch to bio-fuels or pay for certificates that will allow them sell petrol or diesel based 100% on fossil based fuels. This message will be passed on to the consumer and they will realise that the higher the ethanol content of the blend they use, the cheaper the fuel will be. This is all welcome.

However, I am not quite clear about how this works with regard to the use of bio-gas as a fuel for transport. I would appreciate it if the Minister could provide a briefing note in that regard. It is only a matter of time before we consider fuelling our public transport fleet by bio-gas which is produced either from anaerobic digesters or by companies like Bord Gáis, or the ESB which will enter the gas market. Is there a certificate attached to the production of bio-gas if it is to be used in the transport sector? How does the definition work in this regard? Almost all of the definitions in the Bill are tailored for ethanol and bio-diesel. It seems to me we have underestimated the impact bio-gas or gas can have on the transport sector, particularly in areas such as public transport, whether trains, buses or taxis. Anybody who has been to Hong Kong and taken a taxi there will know that practically every taxi in that city is driven on gas.

I want an assurance that this legislation provides the necessary definitions and flexibility to facilitate this transition in Ireland should it happen in the next four to five years. We should not have to return and add to this legislation to cope with the production of bio-gas or with the bio-fuel certificates that may be required to make it more financially attractive to do it. It goes without saying that the Government should be considering the proactive creation of a market for gas based transport fuel, in particular bio-gas. It makes more commercial sense to produce gas here than some of the other products we are talking about promoting domestically.

I would like to make some comments on the debate in the Seanad. I understand the Minister has taken on board the two major suggestions made to him to try and kickstart a bio-fuel industry or to extend our small bio-fuel industry so as to create a much larger industry here. Most people understand the argument that there is not much point in introducing significant increases in bio-fuel blend into conventional fuels unless we can produce most of that bio-fuel here. There may be some sense to it from an environmental point of view, but it is a massive missed opportunity, particularly if, as a major agricultural country, we cannot grasp the opportunity that exists to produce bio-fuels here.

We would press two suggestions in this regard with the Minister. First, there is a need to put a definition in place that will attempt to give home producers a competitive advantage, without breaking either world or European trade rules. Issues of purity and definition, particularly for ethanol, are also important. It is important to distinguish between the quality of the product we could produce here from wheat or waste or a second generation agricultural or waste product. We have the potential to produce a purer product than is, for example, being produced from sugar cane in Brazil.

If this is true, we should be working with other European countries to ensure we encourage the development of a high quality product, which I understand is defined by alcohol or purity content, thereby giving our home grown producers a competitive advantage. We should not be apologetic about this. We should do this provided it does not cost us a fortune which we transfer onto consumers. I understand from what the Minister has said today that he has included a new section, 44(X), in the Bill which will give him the capacity to introduce a ministerial order without extra legislation being required so that he can deal with the definition issue with regard to purity and the implications this may have on tariffs that may be applied to the importation of ethanol from outside of the European union.

This brings me to the issue of the tariff structure. A strong argument has been made on this, primarily by the industry in Ireland which wants to expand the ethanol industry. If one looks across the European Union - it is very unusual that this would be the case - there are different tariff structures in place in different countries to promote domestic bio-fuels industries in those countries or in the European Union itself. Britain takes a different approach to Germany, and France takes a different approach altogether, with regard to whether there is a low or high import duty. Spain and Portugal are in Germany's camp and Denmark is in Britain's camp. We need to be very clear as to where we want to position Ireland in that context. I struggle to understand how this is being allowed by the European Commission. Applying entirely different import tariffs to different countries throughout the European Union is a very strange way of operating a common market. However, it seems to be making an exception for the bio-fuels industry when it comes to ethanol. I presume the Minister understands why.

I would caution against stating that just because of Ireland's very close, important and intermingled relationship with the United Kingdom, we have to do what it is doing. We do not. If we deem that the approach of Germany or France towards supporting a domestic bio-fuels industry is more suited to Ireland, then we should be brave enough to go and do it. If it causes problems with the United Kingdom, such as fuel smuggling across the Border, then so be it. We will solve them. Let us not just follow the lead of the United Kingdom on this just because it is doing what it is doing. There is some evidence to suggest a significant ethanol industry is developing there at present. That may be the case but the same factors may not apply to have the same result in Ireland.

I cannot stress forcefully enough how Irish farmers need new outlets and new ways of generating income. There is a desperation among certain sectors of the Irish agricultural community because of the revenues they were able to make over recent years and dropping incomes. This is an industry that can provide really exciting opportunities for them. This is also true of the energy industry but let us concentrate on fuels and bio-fuels in particular. I have spoken on biogas and there is also potential for biodiesel and bioethanol. We will never be able to produce ethanol in Ireland from the crops we are speaking about, namely, wheat or sugar beet, as cheaply as it produced from sugar cane in South America. Therefore, we need to either find other ways of producing it or to create an artificial market, which is what the European Union has done in all sorts of areas for many years. There are risks with that, as at some stage in the future an artificial market based on artificial prices outside of world prices could collapse due to a deal in five, ten or 15 years time at world trade negotiations, like what happened with the sugar industry.

We do not want to march our agricultural industry up a hill to have to march it back down in a few years. We need to be cautious about this but there is precedent for us to be brave, in terms of what other countries are doing and have successfully done in creating vibrant and profitable bio-fuel production operations, involving farmers and local business people with significant financial returns through creating an artificial market by applying import tariffs that allow that to happen. We must get that right here. We will probably discuss the figures in more detail on Committee Stage. We will bring forward suggestions which we think make sense. I genuinely have an open mind on this. As somebody who is very close to the agricultural industry, I want to see it work. However, I do not want us to put in place an artificial market that will collapse.

I also wish to discuss the new elements of this legislation which the Minister intends to introduce. In particular, I wish to concentrate on the proposal announced today by the Minister, which was referred to last night by the Minister of State, Deputy White, that he intends to use the Bill to introduce a windfall profits levy or tax on energy generators. The Minster knows I have been calling for this for quite some time. I have always recognised it is not a simple thing to do. I have a little dilemma as it is unfortunate that yet again we will use legislation to introduce a measure not connected with it, but this needs to be introduced. I will co-operate with it because it is the right thing to do. However, I would like to have seen more detail on it to be able to comment on it on Second Stage in the broad way we are discussing the other issues, rather than being confronted with a proposal on Committee Stage which I will have only one opportunity to amend.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
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For the Deputy's benefit, I spoke to the Chairman of the committee after its meeting yesterday and was asked whether we would meet the committee to go into some of the details. Perhaps that would be possible prior to Committee Stage. It would allow such a discussion so that Deputies are not facing it blind on Committee Stage.

Photo of Simon CoveneySimon Coveney (Cork South Central, Fine Gael)
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We strongly advocate the introduction of this measure. At present, we have a pretty scandalous rip-off of consumers. Every consumer and business in the country pays a levy on electricity bills, which is calculated by the cost of carbon emitted into the sky during the generation of that electricity. However, the generators themselves are being given free carbon allowances until the end of 2012 by the Government. In other words, the suppliers and generators of electricity are charging their customers for the cost of carbon being emitted during that process but they are getting it for free because they do not yet need to purchase carbon credits. When they do, I will have no difficulty with them passing on the cost of carbon to consumers.

In an effort to wean consumers into the reality of accepting there is a cost for carbon, which there is, we charge for the cost of it in ESB and Bord Gais bills and in Airtricity bills to a lesser extent. We are giving those companies the capacity to emit carbon for free until proper emissions trading is up and running after 2012. The CER acknowledged this problem more than a year ago. I genuinely welcome the Government's belated acceptance that we should be doing this. However, I also recognise that it is easier to speak about these matters in Opposition than in Government. Other countries that have tried to do this have experienced real problems with legal challenges and that is why the Attorney General's office is being stretched to produce legislation that can make this happen in a way that will not be legally challenged. I accept it is not simple but the principle is one that is absolutely indisputable.

We cannot stand over a situation where we charge consumers for carbon and the money they pay goes into the pockets of generators. It is a windfall profit they have not earned because of the regime we have in place to allocate free carbon allowances to energy generators for the next three years. As if energy prices were not high enough in Ireland, we are charging people even more to give energy generators profits that have not been earned. To be fair to the ESB, it responded by giving back much of that money through reducing network charges and subsidising it by the windfall profits they are making with regard to what consumers pay on their bills. However, the other generators have done nothing and have just pocketed the money. It is welcome. I would like to have seen it by now although I can perhaps understand why we have not. I encourage the Minister to bring it to committee so that we can have a discussion. He will find that we will be very co-operative in trying to find the right mechanism to make this happen. I anticipate us being in government in the not too distant future and we will need to deal with the legal headache should there be any legal challenges to any new windfall profits levy or tax that may be applied to electricity generators, which in many cases are big multinationals with the capacity to stall any such levy by taking legal challenges.

I am supportive of the provisions regarding LPG. It is appropriate to deal with that in this legislation rather than doing it separately. I met representatives from the CER this morning and spoke about some of the regulatory and safety issues it will need to take on regarding LPG. That is welcome. I am somewhat concerned that the CER is being asked to do a considerable amount and I am not convinced it has sufficient staff to do it. For example, I have concerns about the gate 3 process regarding wind energy. I have regularly confronted the CER on the management of the gate 3 process, in particular the fact that we basically apply grid connection and contracts on the basis of a queuing system. Someone wanting to come into Ireland, spend a fortune and employ many people at a perfect site to build a new wind farm cannot do it. We have no mechanism to connect to the grid even if someone wanted to build a wind farm 50 yd from it unless that individual joins the queue. I got a very honest response to the effect that the CER was working with what it had in place and gate 3 is what it has. If it were to open up that system and change it, it would need significant increases in resources to be able to assess all the different projects that exist. The CER is doing its job and defending the gate 3 policy. However, I can talk much more freely about it. It is a flawed policy and we should not just be making the best of a flawed policy; we should put in place a parallel system that can fast-track really good projects. Perhaps we can discuss that in more detail at some other stage, either in committee or elsewhere with the Minister.

Let us get on with the bio-fuels obligation. It is the right way to go. Let us put in place structures and incentives through import tariffs, definitions and export tariffs regarding energy elements of bio-fuels in order to develop a home-grown bio-fuels industry that can and should happen. We certainly have a competitive advantage in that industry versus other European countries, even though we do not have an advantage versus countries such as Brazil. We should make that happen. I encourage the Minister to be brave in promoting that industry rather than just following the lead of the UK, particularly in the tariff structures.

2:00 pm

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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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.

Photo of Seán FlemingSeán Fleming (Laois-Offaly, Fianna Fail)
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I welcome the opportunity to speak on the Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010. We are amending the National Oil Reserves Agency Act 2007 to take account of the bio-fuel obligation, which will be dealt with under the principal original National Oil Reserves Agency Act. We are here to deal with this topic by way of amendment to existing legislation. The Bill is not new legislation, it is a new aspect of the issue and this is the most appropriate way to address it because it will be monitored, controlled, administered and levied through the National Oil Reserves Agency.

I want to make some general points about the Bill and have one suggestion for a specific amendment the Minister might consider. I hope he will be able to consider it in detail between now and Report Stage.

The purpose of the Bill is to introduce the bio-fuel obligation in Ireland. Bio-fuels have a central role to play in the delivery of the target under the EU renewable energy directives and the reduction of greenhouse gas emissions as one of the few available and effective means of reducing emissions from transport. The Government programme and the Government White Paper on energy policy also commit to the introduction of a bio-fuel obligation which will underpin delivery of the national bio-fuel targets and which will take account of EU developments. Under the obligation, suppliers will be compelled to use bio-fuel in the fuel mix to ensure that they represent a certain percentage of their annual fuel sales, thus providing a valuable boost to the bio-fuels industry generally. The effective initial penetration rate will be 4% and this will be increased to 10% by 2020.

The Bill provides that the bio-fuel obligation will apply to all road transport liquid fuels equally, and that obligated parties will be able to apply for certificates in aggregate without separate provision for petrol and diesel. Gas fuel has not been dealt with in the Bill, but it is detailed and complicated legislation.

The Bill provides that oil companies that sell road transport fuel include a certain volume of bio-fuels in their sales. The obligation will only relate to the bio-fuel component of the fuel. It also provides that National Oil Reserves Agency shall automatically open an account for each obligated party currently paying the NORA levy and that bio-fuel obligation certificates may be traded between account holders and sets out the criteria as to how this can be done. Like all these issues, I hope the commercial aspects of trade in these certificates will be well monitored. There are specific provisions for bio-fuels that may be exported, so they will not be doubly certified, on production here and on entry into a second country. Similar issues must also be addressed when bio-fuels come into Ireland. The Minister has taken power by way of statutory instrument to make specific regulations on ethanol content.

There is a general view in the House that there should be a fortress Europe mentality on this and I have a problem with that. We change the definition to suit what we can produce, even when a similar or almost equivalent product is available internationally at a much lower price. That is a feature of the problems in Europe that cause unemployment and a recession: we have built high costs into the economy that did not stack up against international comparisons. We then wonder why people do not do business in Ireland. We should not introduce further artificially high costs into the fuel sector.

We all know the difficulties that will be caused by the new changes being introduced on 1 May. There is a fundamental flaw in how the EU does its business. It looks at everything in terms of the internal market, as if the world begins and ends at the EU's borders. The EU, however, is only a small part of a larger planet and we must look at everything we do with the European Union in terms of global trade. We cannot operate a fortress Europe mentality because Irish consumers pay for it at the end of the day and their needs must be at the heart of this legislation.

The legislation will be of benefit in that it can displace the import of fossil fuels, which will help our balance of payments and improve our fuel security, provided we are not forced to meet our obligation by importing bio-fuels. There is a risk that the Irish industry will be unable to meet the targets being set in the legislation and we will have to import bio-fuels. That would be counterproductive. Opportunities exist for the industry to supply the agriculture, waste and industrial sectors.

The Minister is right that it is better to prescribe a national obligation and national target in terms of the bio-fuel obligation rather than doing it through short-term tax incentives. Those existed in the oil trade tax relief scheme, which were trial runs to see how the situation worked. They ran into difficulties when the operators, despite the massive concessions in excise duties, could not find sufficient outlets for their products. Legislative determination of the requirement will give greater certainty to those selling fuel that they must use a certain amount of bio-fuel. That will give a floor level at which people can be guaranteed a market. We have learned the lessons from the previous tax relief scheme.

The growing and harvesting of products such as rape seed for bio-fuels was mentioned by Deputy Sherlock. We are both from areas close to the sugar factories that closed in Mallow and Carlow. Many people used to grow sugar beet and there was a rush to grow crops to produce bio-fuels. All the time, however, I felt farmers were happier growing crops for food rather than for fuel production. I do not believe the Irish economy will obtain a high standard of living from agriculture and food production alone but farmers see themselves in the food business rather than in the fuel business. There is a psychological issue present. I know very few farmers who, given the choice to produce crops for food or for fuel, would not produce crops for food. There may be an inherent resistance among some farmers to take that route.

The Bill has a complicated structure. Deputy Coveney mentioned the new section 44(X). In Part 2 of this Bill-----

Photo of Brian O'SheaBrian O'Shea (Waterford, Labour)
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The Deputy has one minute remaining.

Photo of Seán FlemingSeán Fleming (Laois-Offaly, Fianna Fail)
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How many have elapsed?

Photo of Brian O'SheaBrian O'Shea (Waterford, Labour)
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Nine.

Photo of Seán FlemingSeán Fleming (Laois-Offaly, Fianna Fail)
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I am taking closer to 15 minutes, as agreed with the Deputy with whom I am sharing.

Part 2 of the Bill is, essentially, section 3 which deals with the bio-fuel obligation. It inserts the new Part 5(a) into the original principal Act. I mentioned the National Oil Reserves Agency Act 2007. Pages 6 to 30, or some three-quarters of the Bill before the House, in essence insert a new part, 5(a), into the existing legislation and it is for that reason that references to sections seem somewhat complicated.

However, I move to the nuts and bolts of the issue I wish to highlight. There are two definitions regarding bio-fuel obligation. The definition of bio-fuel is "liquid or gaseous fuel for transport produced from biomass". Biomass is defined on page 6 as "the biodegradable fraction of products, waste or residue from biological origin or agriculture, including vegetal and animal substances, forestry and related industries including fisheries and aquaculture, as well as biodegradable fractions of industrial and municipal waste". I ask the Minister to amend one section, under careful consideration. Might we add three words to line 17, which deals with the definition of bio-fuels? Bio-fuel means fuel for transport that is produced from biomass. I ask for the inclusion of the phrase "or recovered resources". That may be a slightly different issue but it is significant.

Recently I was amazed by, and found very educational, a visit to a company, Cynar Recycling Limited, in Portlaoise. It takes in waste plastics, black plastic silage wrap - it is cleaned if dirty - and mixed plastics, including all the blue plastic bags which still come from supermarkets whenever people pay their plastic bag levy. The company is able to recycle plastic bags into fuel which is suitable for sale on our forecourts. This is a phenomenal new facility but it is excluded from this Bill and wants the matter of recovered resources to be included. The company has developed, and is operating, the waste plastics to liquid fuel plant in Portlaoise, using groundbreaking and innovative technology that could assist Ireland in meeting its bio-fuel obligation. Inserting the words "recovered resources" would see the inclusion of a company such as this.

This is a growing area in waste management. Given that Ireland consumes more than 10 billion litres of hydrocarbon fuels annually, the setting of a precise bio-fuel obligation is to be commended. We look forward to reaching our target. However, displacing that 4% of hydrocarbon equates to replacing 400 million litres per annum which will be a considerable challenge and may require significant imports, perhaps from South America as already mentioned, if we cannot produce that amount in this country.

In advancing debate and doing everything possible to meet the obligation it is of value to revisit the globally and nationally recognised hierarchy of waste. Within the hierarchy, re-use and recovery of waste are potential options in enhancing Ireland's ability to meet the bio-fuel obligation. The opportunity exists at this stage of the Bill to define bio-fuels appropriately and include the re-use and recovery of all possible hydrocarbon sources. Broadening the bio-fuel obligation to capture the potential hydrocarbon value of waste streams will greatly assist in meeting our 4% obligation and will contribute to our overall target in the year ahead. The precedent exists of taking a broad definition, as in the case of alternative energy which includes hydro, tide, nuclear, solar and wind energies.

It would be of benefit to the State to ensure that every potential source of alternative hydrocarbon fuel is captured and not allowed to escape an optimal end use. This will assist in delivering the bio-fuel obligation rather than have materials end up in incinerator use or being disposed of in landfill.

If there is a facility in this country to produce fuel from recycled plastics, silage wrap, mixed plastics and various such items, we should consider adding those three words to the definition of bio-fuel, either at this point or elsewhere in the legislation. This would open up an entire new area and allow us produce fuels.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
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The Deputy must conclude.

Photo of Seán FlemingSeán Fleming (Laois-Offaly, Fianna Fail)
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It would allow us replace imports. I ask the Minister to take that point on board before Committee Stage. I now hand over to Deputy Kelly.

Photo of Peter KellyPeter Kelly (Longford-Westmeath, Fianna Fail)
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The purpose of the Bill is to introduce a bio-fuel obligation in Ireland with the result that 4% of transport fuels would come from renewable sources. Along with all other EU member states, Ireland is required, under the 2009 renewable energy directive, to have a 10% penetration rate of renewable energy in transport by 2020. The Government programme and the White Paper on energy policy also contain a clear commitment to the introduction of the bio-fuel obligation. This Bill simply ensures that we deliver on these commitments.

We may ask why we should target the transport sector. The reasons are clear. Transport accounts for a significant and increasing proportion of energy use in Ireland. According to the EPA, transport accounted for 27.8% of energy use in 1990. By 2005, this figure had jumped to more than 40%. The transport sector is almost completely dependent on fossil fuels. This is not sustainable for the sector or for the environment. This great dependence on fossil fuels means that the sector is very exposed in terms of oil price fluctuations. It also means that the transport sector is responsible for over a third of energy related CO2 emissions. In this context, it is clear that the promotion and use of bio-fuels are to be welcomed.

Before delving further it is important to be clear about the nature of bio-fuels. These fuels are produced from biomass which, in turn, is any organic material of plant or animal origin that can be used as an energy source. It can be derived from agriculture and forestry production, their resulting by-products, and any renewable portion of industrial and urban wastes which can be used as feedstock for producing bio-energy.

The introduction of the bio-fuel obligation offers many advantages. First, it will help to lower our carbon emissions. We are all aware of the consequences of climate change. Bio-fuels have a central role to play in the delivery of reductions in greenhouse gas emissions, as one of the few available and effective means of reducing emissions from transport. Second, it will decrease our dependence on finite fossil fuels and improve our energy security. Fossil fuels supplies are finite and alternative forms of energy must be developed. At present, 90% of Ireland's energy requirements are imported, meaning that we spend more than €6 billion overseas every year. Third, it will encourage the exploitation of cleaner, renewable energy sources in the transport sector and, fourth, it will provide a boost to the bio-fuel industry generally. This obligation will provide a guaranteed market for the bio-energy sector. Fifth, it will provide a number of economic benefits, particularly to rural areas. Bio-fuels offer a supplementary outlet for agricultural products, thus enhancing farm incomes and possible spin-offs for rural communities.

Whereas the benefits of using bio-fuels are plain for all to see, we must endeavour to minimise any potential adverse consequences for consumers, the environment and for those living where the products needed are sourced. This is addressed by the sustainability criteria included in this Bill. In accordance with these criteria the bio-fuels used must produce 35% less greenhouse gases than their fossil fuel comparators. There are strict requirements on the type of land from which bio-fuel crops can be taken and there are also strict reporting requirements on social conditions; for example, water cannot be diverted from indigenous populations. Measures must be also taken to protect biodiversity, such as rainforests etc. It should be also noted that a number of review clauses are built into the Bill.

I very much welcome the fact that the use of bio-fuel will be monitored in terms of its market, environmental and social consequences. Furthermore, there is a requirement for a review before any change in the suggested penetration rate. There is no doubt that Ireland's future lies in green energy. The revised programme for Government has promised the creation of 127,000 green jobs over the next decade and the bio-fuel obligation introduced in this Bill will play an important part in delivering a greener Ireland.

Photo of Paul Connaughton  SnrPaul Connaughton Snr (Galway East, Fine Gael)
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I am delighted to have the opportunity to speak on this Bill. The Energy (Bio-fuel Obligation and Miscellaneous Provisions) Bill 2010 is to be welcomed as it will have significant consequences for everybody. There are two aspects to my contribution today, one of which is to highlight the total dependance of this State on imported fuel. I am sure this has been already mentioned but it has been the way for years. We are so dependent that even the slightest hiccup in the oil-producing states means that within three or four days we would be in trouble. It is that bad. If the petrol supplies do not run out, as they have done on a few occasions over the years, the scare would be enough to ensure the price of oil increases dramatically.

What is happening in the fuel business even today defies logic. The price of a litre of petrol or diesel is as high today as it was when there was a spike 18 months ago. A barrel of crude oil went to $140 at the time and this House was buzzing with anticipation of what could happen to the economy at that time. At that price it is extremely difficult for manufacturers, commuters and motorists to pay for what they need. We have arrived at that fuel price again today, although I do not know if anybody has noticed it but myself.

Petrol was €1.35 per litre at a fuel station I visited yesterday, with diesel at €1.24 per litre. I have said that the price of a barrel of crude oil 18 months ago was $140 but this morning it was $82.5 a barrel. I cannot understand the discrepancy and I am waiting for somebody to explain it. The current price for oil is approximately 40% less than what it was at that peak. Where is the profit being made this time? We cannot blame the oil-producing countries for the significant increase in fuel prices today.

There was much discussion yesterday about the ESB being forced into competition with Bord Gáis and others, which is good. If fuel prices stay at their current levels, electricity prices will increase instead of decrease no matter with whom the ESB is in competition. We will have to introduce a mechanism in this country to meet a range of issues in the environment and the economy. We must give this serious consideration.

I noticed the introduction of electric car charging points last week. Approximately 15 years ago I was a member of an Oireachtas delegation in Brussels which was brought to see a prototype of an electric car. I drove it around a type of castle complex just outside Brussels. It would have had to have been a fairly big car to hold me in comfort but if I had gone too far in it not too many people would buy it. It was a battery-operated unit but it was not very streamlined. In other words, it was not a sexy car and it got nowhere.

There is a Green Party Minister of State in the Chamber. People may not agree with this statement but I believe that as soon as the price of petrol and diesel drops, it is almost impossible to get the public interested in anything else. Any alternative sources, by their nature at the beginning in particular, are usually more expensive. The only time we can get people to concentrate on an alternative energy or fuel is when the price of diesel and petrol rockets. That price is on the way up and having spoken to some economists in the past month or two, it seems we are not far away from a level of €1.50 per litre for petrol. That is a significant cost at 50% more than what is usual.

If the price trend continues, new alternatives will take on a new relevance. There are a number of farm crops that fit the bill when we talk about bio-fuels. My background is in farming and the Ceann Comhairle knows a good bit about it too. Every business and profession in the world will catch on to something extremely quickly if there is a living to be made from it, and farmers are no different.

Over the past ten to 20 years people have said oilseed rape was the way to go and that it would be a big business. It would provide an alternative to the wheat and barley that made no money and the potatoes that were not sold. Oilseed rape was meant to be a runner but its success was partial. Driving from here to Carlow or Louth, one will not see too many fields containing oilseed rape, and if one crosses the Shannon there is none.

Photo of Mary WhiteMary White (Minister of State with special responsibility for Equality and Human Rights, and Integration, Department of Justice, Equality and Law Reform; Minister of State, Department of Community, Rural and Gaeltacht Affairs; Minister of State, Department of Education and Science; Carlow-Kilkenny, Green Party)
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There are some in Carlow and Kilkenny.

Photo of Paul Connaughton  SnrPaul Connaughton Snr (Galway East, Fine Gael)
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A couple of acres does not make a ranch; the amount is not significant.

Of Ireland's approximately 12 million acres of agricultural land, no more than 10,000 acres is devoted to that crop. While I do not have the figures to hand, the acreage is small. My point is that the circumstances are right at present. Were the prices of oil, petrol and diesel to continue to escalate in the manner I envisage, a major contract can be formed with the Government as an intermediary. I do not expect the Government to be involved at the coalface but an environment can be created in which the market will pay farmers - that is the only way it will work - in order that processors will be able to manufacture and process that crop into an oil that can drive machines and motors nationwide. However, we have not arrived at that stage yet.

I have heard Green Party and Fianna Fáil people talk about the grants that are available to establish some of the other crops to which I will refer later. Some of the aforementioned crops are extraordinarily slow-growing and it takes a long time, two or three years in some cases, for them to mature. At public meetings, I often hear that in some cases, a couple of thousand euro per hectare may be available to plant such crops and then wait for a couple of years for them to reach their harvest date. If this is true and if the grants are as flaithiúil as the Minister of State suggests, many thousands of farmers will sign up, particularly given how farm incomes have gone in the past two or three years. In the main, most crops one can grow for bio-fuel will be grown on arable land. I cannot envisage many of them being grown on poor quality ground, which excludes a great portion of the western seaboard. I have a benchmark in this regard, in that if one was unable in years gone by to grow a good crop with a good tonnage of sugar beet, one will not be able to grow these crops, and the Minister of State knows where those areas are located.

Irrespective of where such crops are grown, a number of factors will influence whether this sector will takes off, as would a crop of wheat, barley or whatever else. We are light years away from such a take-off at present. I acknowledge the experiments that have been carried out all prove that engines will run on the by-products without difficulty. Moreover, they are cleaner and I understand the power they generate in engines is as good, if not better, than that achieved with fossil fuels. However, a problem arises in respect of guaranteed markets or almost guaranteed markets, none of which exists at present. Some processors of oilseed rape and other crops sign yearly contracts, which is somewhat similar to what the vegetable growers of north County Dublin used to do. Ultimately, however, for this to be a runner, a much more watertight relationship between farmers and processors must be established and this must be overseen by a Department to ensure it works. Were Members to have this debate in four or five years' time, so much ground will be lost vis-À-vis our European neighbours that it would be almost impossible to pick up the slack.

I have no idea how much longer the world's oil wells will continue pumping and, moreover, I genuinely believe that no one else does either. It all depends on when one hears of the evaluation or assessment taking place and on who gives it and from where they come. While some suggest the oil wells are likely to run dry as early as ten or 20 years' time, others will predict it will last for 100 years. However, all Members are aware that as the global economy develops and the global population increases, the need for fuel to power industry, cars and homes obviously will increase as years go by.

I refer to an important issue in this debate. I understand that an obligation to use a fuel mix containing 4% of bio-fuels at the petrol pumps will come into effect within a couple of months. However, I understand that Ireland does not have the capacity to provide that 4% at present. Consequently, if this obligation is imposed by the legislation, I assume someone will begin to import it from countries with a lower cost base. Such trade obviously will be from outside the European Union circle and a surcharge should be imposed to facilitate the monitoring of such imports because, were it ever possible to get cheap imports, even temporarily, it immediately would result in a lessening of pressure on Ireland to grow its own fuel. I do not know what will happen between now and the implementation date, which I understand to be in August. Although I agree with the principle of what has been proposed, I do not believe that nearly enough work or thought has been put into the proposal to make it a runner.

If this is played correctly, I see great opportunities in this regard. While everyone is talking about smart ways of doing things, as well as smart fuels and smart energies, now is the time for the real smartness. Regardless of the Government that will implement this measure, be it the present Administration or its replacement, I will know this policy is working when I see halls full of farmers nationwide seeking to enter contracts with processors to grow those crops. I then will know we are winning but that point has not yet been reached. While I acknowledge that great interest has been generated, farmers are not yet signing on the dotted line because no one knows what will happen in a year or two if the world price of oil fluctuates up and down. While that happens, there will be trouble in this regard.

I now wish to discuss electric cars and welcome the decision by the ESB and others to put in place power points around the country. The major problem will be similar to that associated with the aforementioned car I saw in Brussels. This will require a huge leap of faith by many people. Incidentally, without knowing anything about the new models, I do not doubt that the performance of such cars will be perfect. I expect they will meet the highest safety standards and why would they not? The major problem will be psychological. People sitting in their cars in Eyre Square, Galway, on a Sunday who contemplated driving to Dublin that day would ask themselves whether, by so doing they could be sure to be able to return home to Galway that evening. That is what everyone will be talking about. While cost will not be a secondary factor, it will not be the most significant factor. The primary criterion will be the security of people's time on the road and their ability to return. While the Minister of State may believe this is not the case, she should believe me.

Drivers will be obliged to depend on a battery top-up charge and there will be uncertainty until people experience doing so. They must be able to see for themselves that it is possible to pull in at Maynooth or Kinnegad to get their top-ups without being obliged to wait two hours for it or without experiencing a breakdown or problems with the electric charge on the day that left them high and dry on the side of the road. Even if such events were to happen only once or twice to people, it would be somewhat akin to having the misfortune of taking a train that broke down on the first day one availed of the service. In such cases, one would be unlikely to use it again for a while. It is against this background that a huge job remains to be done in this regard. The car manufacturers must put a great deal of effort into this initiative but it will work. It eventually will come, provided that everyone does the sensible thing, which has not always been the case in the past.

I noticed that no Exchequer costs are associated with the Bill. Perhaps the Minister of State or someone else might reply to my question. I do not know why there would be no financial cost. I suppose it is a regulatory Bill more than anything else and I assume it has more to do with the obligation to use bio-fuel than it has to do with the introduction, growing and production of bio-fuel crops, but that will not come cheaply. Whenever one must change a significant culture, one must address many psychological levels. It will take a certain amount of time.

I wish the Government well and hope that whoever is in government next will take this matter seriously, as it will pose a greater problem for whoever has the good fortune to be sitting in the Chamber in five or ten years time. It will not be because oil wells will have run out, but because the cost of the oil coming out of them will be more expensive. If a country like ours, with a population of 4 million that is increasing every year, is to have fuel security, we will want to be less dependent on imported fuels as against windmills, wave energy and bio-fuels.

This matter has nothing to do with the cost as a nation. Were we able to substitute it, the balance of payments would be a better job altogether. Some day, we might get some satisfaction for the €22 billion that has been sunk into Anglo Irish Bank. If that sort of money was available to do what we are discussing, what a wonderful job we could do.

Photo of Mattie McGrathMattie McGrath (Tipperary South, Fianna Fail)
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I am delighted to speak to this Bill. I warmly congratulate the Minister of State, Deputy White, on her appointment.

Photo of Paul Connaughton  SnrPaul Connaughton Snr (Galway East, Fine Gael)
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Agreed. I meant to say that.

Photo of Mary WhiteMary White (Minister of State with special responsibility for Equality and Human Rights, and Integration, Department of Justice, Equality and Law Reform; Minister of State, Department of Community, Rural and Gaeltacht Affairs; Minister of State, Department of Education and Science; Carlow-Kilkenny, Green Party)
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I thank the Deputies.

3:00 pm

Photo of Mattie McGrathMattie McGrath (Tipperary South, Fianna Fail)
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During her years in politics, she has been enthusiastic about many issues in her constituency and region. We have worked together on some community projects, including Ring a Link, and I have always found her to be hard working, energetic, enthusiastic and co-operative. I look forward to co-operating today in spite of the myths driven by the media or whoever concerning Fianna Fáil and the Green Party. We are all on the same mission, that is, representing our people and ensuring a safe, clean and guaranteed range of fuels that keeps our economy and households going at the best possible cost. There are many concerns regarding bio-fuels and the carbon tax, but we must try to explain the issue to people. Doing so is difficult, given the large increases in the price of oil.

The 2009 renewable energy directive requires that 10% of the energy used in transport in each member state will be generated via renewables by 2020. It is no mean objective. As one of the few available and effective means of reducing transport emissions, bio-fuels have a central role to play in the delivery of this target and in the reduction of greenhouse gas emissions, as does developing electric vehicle technology. I am delighted to see the roll-out of such vehicles.

The bio-fuels excise relief schemes, which were launched by the Department in 2005 and 2006, have resulted in 18 projects being awarded excise relief for a period up to the end of 2010. The schemes were designed as interim measures to accelerate the level of bio-fuels in the fuel mix in advance of the introduction of a bio-fuels obligation. More specifically, they were designed to incentivise a move towards the inclusion of bio-fuels in the fuel market and to stimulate the industry's interest in their production, thereby providing an indigenous market.

In 2005, a pilot bio-fuels mineral oil tax relief scheme was rolled out at a cost of €6 million in revenue forgone. It covered three bio-fuel categories. Following the success of the scheme, a second and more ambitious scheme was announced in budget 2006. It will run until the end of 2010 and is valued at more than €200 million in excise forgone. Scheme II provides for four categories of bio-fuel, namely, bioethanol, bio-fuel complying with diesel standard EN590, pure plant oil, PPO, and bio-fuel for use in captive fleets. Some 102 applications were received under Scheme II, 11 of which were in the bioethanol category, 36 of which were in the EN590 category, 18 of which were in the PPO category and 37 of which were in the captive fleets category.

Many of the plants that are up and running happen to be close to the Minister of State's region in the south east, namely, counties Wexford and Carlow and Bellview in County Waterford. There are practical problems on the ground, so I take my hat off to the pioneers who are undertaking this work and showing leadership. I compliment a group in Clonmel headed by Ms Anne Kehoe that is growing bio-fuel as part of a national group of farmers. She has been a champion of many agricultural causes, but she has taken to this cause like a duck to water.

I appeal to the Minister of State to speak with her senior Minister to try to resolve some of the outstanding issues, namely, how some EU countries treat their suppliers and producers, taxation rebates etc. I have corresponded with the Ministers, Deputies Ryan and Gormley, on behalf of the fledgling Bellview group. It has an excellent location and the skillset and financial backing to get a plant up and running. I will not say that it needs some red tape cut, but there is considerable bureaucracy involved, as is often the case in other instances. These obstacles, while unintended, seriously inhibit the development of any business. I am not trying to take shortcuts in directives or safety standards. Instead, I am referring to the State seeing the glass as half full as opposed to half empty. The State should support these fledgling groups. They are putting their money where their mouths are. Their energies and land are being used to grow the crops. They are willing to invest in plants, but they need solid, positive co-operation. I appeal for that now.

I compliment a previous speaker from the opposite side of the House on his interest. Many people are out of work and farming is at a low ebb. Business people need and want to diversify because business has slowed. We need to keep the spirit of enterprise in our business people, young people and farmers, who are always willing to rise to any challenge. We will revert to the spirit of the late, great Canon Hayes, ní neart go chur le chéile. We would rather light a candle than curse the dark. We must return to basics, that is, our communities.

Current events regarding Glanbia are interesting. The Minister of State would be familiar with Glanbia, which began as a small co-operative of south County Tipperary farmers before expanding into Avonmore and becoming huge. However, it has been proven that big is not wonderful and Glanbia is being divided. We must revert to the co-operative methodology and its ideals and move bio-fuel production into small plants in parishes.

This brings me to the matter of creameries and co-operatives. Every day, buildings are becoming derelict in every community throughout rural Ireland. It is still a matter of great sadness to me that Glanbia Co-op's creamery in my village was closed down. A local community group tried to purchase the creamery to convert it into both an enterprise centre and a heritage centre. It was the first fully electrified creamery in rural Ireland and was opened by Seán Lemass in 1959 when, as my mother informs me, I was a small baby in the pram. The creamery was still thriving up to ten years ago, when the co-ops literally decided to abandon rural areas and the people who live in them. At that point they also decided to abandon their own ideals.

There are many empty buildings, factories, etc. - some of which are owned by IDA Ireland - in rural areas. If we used nearby lands, including some of that which has been transferred to NAMA, to grow the necessary crops, when harvested, these could be refined and used to produce fuel in the buildings and factories to which I refer, which could be converted for that purpose. The partnership companies - including the south Tipperary partnership - have access to funding. They are among the only companies which have such funding and submissions in respect of bio-fuel production can be made to them. However, there is a need for leadership from those on high. We must change people's philosophy and encourage them to buy in to what I am suggesting.

I am not opposed to wind energy or wind farms. However, big business became involved in this sector at the outset and this led to division, argument and protest in many communities. The position with regard to wind energy production is that a "them and us" scenario applies. It is similar to when the landlords held sway in this country. We must reverse what has happened and involve community development organisations, supported by the partnerships and the Government, and private individuals. By doing this, we can grow business. We must learn from the mistakes that were made in respect of wind energy.

Part of the problem with regard to wind energy production is that people did not understand what was happening. The other part was that they were not provided with information relating to the major conglomerates that became involved. In addition, a proper consultation process was not put in place. The Irish people are always ready to take up a challenge. However, they were not involved in the process relating to wind energy production. Companies were established and high flyers became involved. Wind turbines were erected willy-nilly and arguments arose.

Irish people are not willing to be led around by their noses. They will, however, walk any road with anyone in the interests of creating employment, stimulating business or developing badly needed alternative sources of fuel. Such fuels should be "of the people, by the people, for the people" and should be produced locally. That is the only way we will succeed in respect of this matter.

I have a passionate interest in this matter. A large part of County Tipperary was zoned as being unsuitable for wind energy production. This was not for any technical reason, rather it occurred because a group came together in a community and divisions arose. In fact an entire parish became divided, which was a pity, and legal costs were incurred by groups which opposed a wind energy project. We must return to basics and make not tosach maith leath na hoibre but tosach beag. After all, a small start is a good start.

I appeal to the Minister of State, Deputy White, in respect of this matter. She was involved with the Ring a Link project and understands the level of involvement and consultation that took place with communities in respect of it. This project, which relates to south Tipperary, Kilkenny and Carlow, is run by an excellent manager, a couple of paid staff and three voluntary boards. It is a wonderful model on which to base any community development project. As already stated, it is run by voluntary boards whose members must be fully versed in employment, health and safety and road transport legislation. Anyone involved in business would employ someone to deal with such matters on their behalf. However, voluntary boards - I am proud to be a member of one - are obliged to deal with such matters on their own.

The Ring a Link projects, which operate in many counties, have resulted in great value for money for the taxpayer and has provided freedom to people in rural areas and allowed them to leave their homes. A number of the buses operated by the project in my county have been converted to bio-fuel. At the outset, however, there was a problem with regard to the availability of bio-fuel in my county. We did not have access to it and travelling to Kilkenny in order to obtain it was not feasible.

As already stated, bio-fuel production must develop from small, humble beginnings. The relevant crops must be grown and harvested before being transferred to a local plant in order that they might be refined to produce bio-fuels. This might be a simple plan but at least it is manageable. We could expand from the type of small, local operations to which I refer to a larger co-operative model. We must ensure we do not go mad, as did those who were in charge of the dairy co-operatives, and make questionable foreign investments. There is a bitter legacy with regard to the latter.

bio-fuel production could assist in getting people back to work. There is a huge level of talent among the ranks of the unemployed at present. Those to whom I refer, including graduates, could be used to draft development plans, to carry out research, to draw up business plans, to form companies and then to train farmers in how to grow and harvest the relevant crops. As already stated, the abandoned buildings and factories that are still owned by the co-operatives and other interests - Glanbia, Dairygold and other major conglomerates - could be converted for use as refinement plants and this would create employment locally. These structures could be sold back to communities for a nominal price in order that they might be redeveloped.

A model such as that to which I refer will have to be adopted across many aspects of society if we are to meet the challenges we face. It is terrible to see the buildings to which I refer, which were previously the hubs of their communities, lying derelict. People met and transacted their business in and around these buildings. However, sin scéil eile. We must rediscover the ideals that obtained in the past and then work our way forward anew.

We have been joined by the Minister of State at the Department of Agriculture, Fisheries and Food, Deputy Cuffe. I wish him well in his new position and offer him my total co-operation in respect of his work on the issues to which I refer. There is an agreed programme for Government in place and I look forward to implementing it with the Minister of State. He, his party colleagues and I may have our differences of opinion, but anything in the programme for Government is agreed. I have no difficulty in defending my beliefs or in outlining my love of rural pursuits.

I am firmly of the view that we will be able to develop, at a reasonable cost, a clean green fuel source that will serve our communities. If such a fuel source is developed locally, the costs involved will be reasonable. I am sure that, like me, other Members are anxious to get operations up and running. Public meetings should be held to gauge the level of interest in this matter. As already stated, farmers are interested in growing the relevant crops. I salute their efforts but we must now support them. We must ensure the refining of these crops and their use in production proceeds on a local basis. From this base, we can move towards introducing electric cars and other innovations. As I say all the time, we will have to have reasonable administration. It will have to be user-friendly and we will have to use a carrot rather than a stick. We must not be heavy-handed and say people must do something.

I refer to the carbon tax. The situation is very difficult currently. There is widespread annoyance, especially in the haulage business, in agriculture and in many other areas, about the price of fuel. I ask the Minister to postpone the tax for some time in view of the high cost of oil. Why does oil cost so much at the pumps? I understand the idea behind the carbon tax and its objectives, which I support. I voted for it in the budget. However, there are pressures on agricultural contractors given the tough year last year and the tough winter. There were losses with frost and so on and there are high costs involved.

People will not mind paying this carbon tax if they see tangible results. I accept there can be no gain without some pain. People will come with us but we must show them where this carbon tax is going. The plastic bag levy was introduced some time ago. Great strides were made but we lost our way. Unfortunately, the countryside has never been as dirty. I have been involved in spring cleaning campaigns and I salute all the people who help the national organisations and the local councils. We will have to do something to address the rubbish problem.

I visited a number of schools which won tidy schools awards last Tuesday morning. I compliment the children because they will show us the way forward. They will tell their parents or relatives not to throw litter out the window because it is wrong. We must also educate people about the carbon tax. We must ask the young people to show leadership because they will educate us. I wish these projects well and I hope the Minister will respond to my comments.

Photo of Pat BreenPat Breen (Clare, Fine Gael)
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I welcome the opportunity to speak on the Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010. The Bill amends the National Oil Reserves Agency Act 2007 in order to establish a bio-fuel obligation scheme with the result that 4% of transport fuels will comprise bio-fuels.

The Bill establishes a bio-fuel obligation scheme. Some 4% of transport fuels will come from renewable sources. The EU has set a target of 10% of transport energy from renewable sources by 2020. It is extremely important that the EU and Ireland have those targets and that Ireland sticks to them. As was said last night in Private Members' time, the country is over-reliant on imported fossil fuels to service its energy requirements. Most Members spoke about that over-reliance and the fact fossil fuels account for almost 96% of Ireland's primary energy mix. The fact we must import those fuels makes us very reliant on energy sources from elsewhere.

I acknowledge that some encouragement has been given to people to invest in bio-fuels through excise relief and tax incentives. There is much more scope in that area. Ireland is much more suited to developing second generation bio-fuels which use the entire plant or the waste part of the plant and, therefore, they do not compete with human food needs, which is extremely important. First generation bio-fuels are vegetable oils, animals fats, starch, etc. A small percentage of farmers in the agri-industry are already involved in the cultivation of elephant grass and willow.

The biggest challenge facing Irish farmers, who would like to diversify and set aside some of their land to grow willow, is getting their crops from the field to the marketplace, as there are very limited markets. Given the cost involved in trying to diversify and the way agriculture has gone, there is a huge burden on farmers who try to diversify to these second generation crops. The initial planting costs are very high. It costs approximately €2,600 to plant an acre of willow, although approximately 50% is grant-aided. In the case of willow, profit margins are comparable with other sectors, such as beef and dairy.

The development of willow is a three year cycle, so farmers can also face the same difficulties as many other businesses in the country. They must try to convince the banks to support them which is not very easy given the state of the banks and the fact they are very reluctant to lend to farmers or to any other sector in society because they do not want to take a risk. The farmer must wait for their product to grow. Credit in the banks has dried up, so that is a big issue.

In order to provide a bio-mass market, a local willow growers group, JHM, was established in west Limerick. It has been very innovative in this regard. It has developed miscanthus logs which are used in stoves. They have proved very popular. They are long-lasting, burn very slowly and are carbon negative, which is a very big seller in shops in my county.

Photo of Ciarán CuffeCiarán Cuffe (Minister of State , Department of Agriculture, Fisheries and Food; Minister of State , Department of Transport; Minister of State , Department of Environment, Heritage and Local Government; Dún Laoghaire, Green Party)
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I am a fan as well.

Photo of Pat BreenPat Breen (Clare, Fine Gael)
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Good. Some of my councillor colleagues use them as well. The success of this product proves there is a market for miscanthus and, therefore, we should encourage more farmers to diversify and not to have all their eggs in one basket given the way the markets are currently.

The other big problem facing Irish producers of bio-fuels is the fact that imported bio-fuels from countries like Brazil, China and Thailand are cheaper. Like everything else, they are produced at lower cost. I am told the cost of these bio-fuels is much cheaper in France and Germany, although they have a greater land mass.

Many farmers with land which may not be suitable for anything else could grow energy crops. However, if more farmers are to be encouraged to diversify into these products, adequate supports must be provided. Training is needed for farmers who would like to get involved in growing these crops. An issue for the Department of Agriculture, Fisheries and Food and the training bodies is to encourage young farmers, in particular, who want to stay on the land to consider this option.

We must also learn lessons from what happened when we tried to produce bio-ethanol from sugar beet. In 2005, Irish farmers produced 31,000 hectares of sugar beet for use in food production. However, the cost of production was a deterrent for farmers who would have liked to have become involved. In any event, the reform of the EU sugar sector in 2006 ended any case we had to convert sugar beet for bio-ethanol production.

The development of first generation bio-fuels has added to the food versus fuel debate. Teagasc estimates that between 75,000 and 100,000 hectares of land could be devoted to energy crops without having a negative impact on animal feed or food production. The organisation needs to become more vocal in disseminating this message to farmers.

Recent analysis by the Department of Agriculture in the United States suggests production of bio-fuels is impacting on world food supplies. Figures show ethanol production increased to a record level in 2009, driven by farm subsidies and laws which require vehicles to use an increasing amount of bio-fuels. Mr. Lester Brown, the director of the Earth Policy Institute, the Washington think tank which conducted the analysis, stated that the grain grown to produce fuel in the US in 2009 was sufficient to feed 330 million people for one year at the average world consumption level. Last year, 107 million tonnes of grain, primarily corn, was grown by US farmers and blended with petrol. This was twice the amount grown in 2007.

Bio-fuel production presents a significant opportunity to develop rural areas, including, for instance, Kilrush in my constituency of County Clare. Much of the shoreline of the Shannon estuary does not have beach. Seaweed was traditionally collected in the area for use in medical supplements. It would be possible to invest in the harvesting of seaweed for conversion into bio-fuel production if CO2 emissions from Moneypoint power station were filtered into seaweed in the estuary. This process enables seaweed to grow much quicker than is ordinarily the case. This option should be considered.

Scientists believe Ireland could become a key player in the production of bio-fuels. For bio-fuel production purposes, algae biomass must be produced at $1 or less per kilogramme. Kilrush, County Clare, could become a centre of excellence in this area, especially given that Moneypoint power station is being retrofitted and is due to close in 2020 to 2025. We must consider using other forms of energy to assist in our energy needs.

To achieve the objective of becoming a key player in bio-fuel production from seaweed, one needs a reliable product throughout the year. Ireland has 16 commercially useful seaweed species. Our location at the edge of western Europe surrounded by clean water is a major selling point and many other areas as well as County Clare would be viable locations for this form of bio-fuel production.

The Government introduced a carbon tax of €15 per tonne in last year's budget. While the tax does not apply to oil produced by rapeseed, it applies to bio-diesel produced from waste biomass. The introduction of tax on agricultural diesel on 1 May next is bad news for farmers who depend on diesel for harvesting crops and other tasks. The price of fuel is increasing, with a barrel of oil currently costing almost $85. A further problem is that the value of the euro has declined against the dollar recently, although it gained a little last weekend after EU Ministers introduced a loan package for Greece.

The introduction of a carbon tax on agricultural diesel imposes greater costs on farmers. Costs in other areas, which are already high, will increase further as a result. This is bad news for farmers and I ask the Minister to reconsider his decision to single out agricultural diesel. Farmers are struggling and additional costs place them under greater pressure. The carbon tax is being imposed at a rate of 8.7% on agricultural diesel and only 4.4% on road diesel, which is a further blow to farming and will drive up the price of diesel as well as production costs. Agricultural contractors will have no choice but to pass on the increase to farmers. These contractors provide jobs in rural areas for part-time farmers and young people seeking employment. Agricultural diesel should be exempted from tax or, failing that, subject to the same percentage increase as petrol.

As a result of the obligation introduced in the Bill, the price of fuel will increase by 1 cent per litre. Fuel costs are already high, having increased by 20% in the past year. Motor fuel distributors will pass on the new tax and hard pressed consumers, especially those in rural areas, will take a further hit.

Novel incentives are required if we are to increase the use of renewable energy. The bio-fuel obligation scheme the Minister proposes to introduce requires a specific amount of road transport fuel to be comprised of bio-fuels. Concerns have been raised by the Irish Bioenergy Association and others that oil companies may resort to importing bio-fuels, as occurred in the United Kingdom when a similar scheme was introduced. One is always concerned that cheaper imports will be brought in given that production costs here are high. If we are to improve the business environment, energy, insurance and other costs must be reduced.

When Britain introduced a scheme similar to that proposed by the Minister, 89% of bio-fuels were imported from Brazil, Argentina and the United States. If Irish producers meet their bio-fuel obligations, it is estimated that approximately 1,700 jobs could be created and economic activity valued at €170 million could be generated. This twofold benefit - the creation of much needed jobs in the economy and a reduction in our dependence on fossil fuels - makes it worthwhile to consider incentives for indigenous bio-fuel producers. This is a win-win scenario.

Given that Ireland imports most of its energy needs in the form of fossil fuels, we must try to diversify into alternative forms of energy. Bio-fuels have a role to play in assisting forestry and agriculture, industries that are currently under extreme pressure. It is important to note that the renewable portion of industrial and urban waste can be used for feedstock in the production of bio-energy. As I stated, bio-energy production is a win-win scenario for everyone involved. I hope we are able to fulfil our obligations.