Tuesday, 11 May 2010
Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010 [Seanad]: Second Stage (Resumed)
I wish to share my time with Deputy Ferris.
My party is in support of the obligation and see it as an opportunity. However, it is an opportunity that needs to be grasped fully if Ireland is to benefit in more than simply meeting our commitments as regards carbon emissions and putting us on the right road in terms of our climate change obligations. We have an opportunity here to develop an indigenous industry and I have great concerns because it seems that the Minister has not seen what a good opportunity this is.
There were concerns, particularly over the past year or so, about the danger that bio-fuels presented in the developing world where the race to grow bio-fuels was being done at the expense of food crops. I am glad that the Minister revised the target from his own target of 5.75% down to 4%, which was the Labour Party position. It is a target that we need to set about meeting. However, it is quite clear that unless things change, and unless the Minister adopts a much more proactive and progressive view, we will be dependent unnecessarily on imported bio-fuels. I would ask the Minister to be cognisant of the fact that we have people who are developing the idea of energy crops who see opportunities that are in the pipeline but that are being thwarted and prevented from realisation and resolution because of a lethargy at Government level.
With regard to import substitution and to ensuring we have a better approach to imported fuels, it cannot happen without assistance and support from the Government. I do not necessarily mean that this costs a great deal of money. The statutory framework, of which this legislation is part does not, according to those in the industry, appear to go far enough. I am not a promoter of any individual company but Ethanol Ireland made a very strong pitch when it presented its case to the Joint Committee on Communications, Energy and Natural Resources. It made a compelling case for ensuring a higher tariff regime based on good standards. The presentation was quite remarkable in that it showed how different tariff regimes apply across Europe. This could be described as protectionism but such regimes are allowed and are already in place in other countries. It would be a great pity if, because of Government failure, we do not realise this country's potential to institute a regime appropriate to our requirements, and appropriate to our indigenous development needs. For example, I refer to France as the most extreme case in that it does not import any bio-fuels. It can be seen that the statutory and taxation systems in place along with the tariff regime make a significant difference.
I refer to the Second Stage debate in the Seanad. I believe the Minister said that plants were not being developed in Britain. As I understand it, those plants will be solely for export rather than for the domestic market. The Minister made the point that if it is incorporated into law this would create a delay and I support his target of 1 July. However, this legislation needs to be as watertight as possible. I hope we can deal with this point more effectively on Committee Stage.
I refer to farmers and businesses currently dealing with energy crops, in particular, with the growing of miscanthus. This plant is a classic example of a fledgling industry which is growing. This crop can be used in power stations to replace peat which is a dirty fuel. This industry is being stunted very effectively by the Minister. I challenge him to deal with this now.
I was dismayed at the reply to a parliamentary question which related to the refit scheme that needs to be put in place to assist the development of miscanthus for use in the firing of power stations. The reply to my parliamentary question stated that there was no commitment to announce a renewable energy feed-in tariff price for biomass in January 2010.
I refer to a meeting of all the stakeholders at the farm centre in Dublin on 2 December 2009. The Department stated that the demonstration projects and refit changes to allow co-firing of biomass in peat power stations were being worked on and that there should be announcements on both by the end of January. There has been an announcement on one but not on the other. I am very concerned about the widespread impression, which may be unfair, that the Minister is deliberately holding back on the refit announcement in order to make his national renewable energy action plan look as if it has a bit more substance when it is produced in June. That is not good enough. That refit scheme can make all the difference. Already, farmers are refusing to participate in growing miscanthus because they are fearful.
Business needs certainty. This is a message the Minister preaches with regard to climate change and a change of practices and which is preached by all of us. In this instance he is in a position to provide certainty. It is not a significant sum of money but it will make a significant difference in getting what we now recognise as our potential to develop these kinds of crops, particularly miscanthus. Currently, a total of 3,000 acres is under miscanthus and it has been suggested that this could rise to 60,000 acres. I urge the Minister to get moving and not to wait until he has a grand plan. This is something that works. We have heard many presentations about wonderful schemes to harness our wind and waves and fill up our valleys with the spirit of Ireland projects. This is something that works, it is an indigenous crop, there is a market for it and we should just get on with it.
Even though I support what the Minister is doing, I do not agree with his piling on of amendments at a very late stage which have to do with unrelated matters. He does this with regard to other Bills. He is a serial operator and he is doing it with this Bill. Matters dealing with the carbon windfall levy are being tacked onto this Bill. This does not allow for proper scrutiny or for public awareness. The Minister has an obligation to undertake a regulatory impact assessment and to consult with the CER and with electricity producers and others.
I have received a letter - I am sure the Minister has also received this letter - from Endesa Ireland. This company states that it is very aggrieved about this measure. It is not clear to me whether this company is included and I ask for clarification from the Minister. This company is very fearful and it has not had a chance to see the amendments. This is where the issue of public scrutiny comes into play. The company has already paid for these allowances and now it is fearful it will be penalised and will be unable to expand its business as it would wish.
The fact that this Bill sets out the objective of achieving a 4% market penetration of transport fuel usage is in itself an admission that previous targets have not been met and is a less ambitious target than was referred to several years ago, with 2010 set as the target date. The figure of 5.75% was targeted as a staging post towards 10% by 2010, in line with EU targets. A figure of 2% was set as the target to be achieved by 2008 but this had only reached 0.5% by 2007. While current levels are not accurately known, one estimate I have heard is that it is around 2.5%, which is well behind the rate of growth that would be required if this country is to achieve those ambitious targets. It would be unfair to blame the Government totally for this, although I would question the overall strategy. However, it illustrates the difficulties related to this area. The same failure to achieve the 5.75% target also applies to the EU overall.
Some of the reasons for the shortfall have to do with the pricing of fuels which incorporates bio-fuels. It was estimated a number of years ago that bio-fuels for vehicles would only become economically viable when oil cost more than $73 a barrel. The current price is $83 per barrel but there has not been the predicted increase to the levels that would be required if the targets set for usage were to be met. There is also the issue of where the crops necessary for production and the plants to convert them into fuels will come from. There are concerns about the danger that food production, particularly in the less developed countries, might be affected. Some of the leading producers of energy crops are in that category and there would be a strong incentive on the part of countries like India, for example, to devote more land use to energy crop production if the value of those crops was greater than for food and if there was, as there is, a large demand from developed countries for bio-fuels.
The amount of land that would be required to meet the current 5.75% target and the 10% target set for 2020 is massive. For example, it was estimated that if France was to have met its target of 5.75% bio-fuels in vehicles by 2008, two years ahead of EU 2010 target, it would require some 2 million hectares to be used for production of energy crops. The total current agricultural area of France is approximately 33 million hectares. In other words, France would need to use 7.5% of its agricultural land for growing energy crops. The equivalent for Ireland would be 327,750 hectares, which is equivalent to current total crop area, to attain the same target.
It is highly unlikely that any EU country will devote so much of its agricultural area to energy crop production, but as the figures show, even if it did, domestic production would never meet the demand that would be set if even 10% of vehicle fuels was comprised of bio-fuels. The reality, then, is that if targets are to be met most of the demand will come from imports which replaces one form of dependency on fossil fuel imports for another. However, there is still scope for increasing the level of energy crop production in this country from the current low levels. There is land that is suitable for the growing of willow, for example, which would represent a better use and a potentially better return to the farmer. There is an ongoing debate about the incentives for farmers to be become involved in this area and few farmers seem to be interested in the area.
There is a clear need to increase that involvement. Only 200, or less than 0.1%, of farmers were engaged in the production of alternative energy in 2005, compared to an EU average of 0.4% of farms engaged in energy crop production. However, the area of willow and miscanthus grown in Ireland has increased. It was just 300 hectares in 2006 but grew to 1100 hectares in 2007. The area under oilseed rape, used to produce liquid bio-fuel, increased from 4000 hectares to 6000 hectares in 2007. I am not sure what the current figures are now, but they will have shown some increase on those years.
There are ambitious targets for the expansion of the sector in the western counties. Under its wood energy strategy and action plan, the western development commission forecast a 300% growth in the wood energy sector over the next ten years which would add approximately €15 million annually to the region's income and create up to 900 full-time jobs as well as saving 620,000 tonnes of CO2 emissions every year. When fully operative it would have a demand from local farmers for 472,000 tonnes of thinnings worth approximately €1.7 million annually.
The fact that grants are also tied to the farmer having a contract with an end user of the crop means that a more holistic approach needs to be taken in order to tie the production of the crops in with the actual production of the bio-fuels. That would involve either farmers as individuals, in co-operation with one another, or in a business relationship with a processor willing to take their crops, creating a local market for their produce, which would also be dependent on the processor of bio-fuels having a market for the end product.
With the restructuring of the European Union sugar market, which made the sugar production sector here redundant, there were suggestions that the existing crop and the old sugar factories at Mallow and Carlow could be used for the production of bio-fuels. The company in question, Greencore, had no interest in this and there are no existing plans for the growing of sugar beet as an energy crop. The potential for the redirection of the sugar crop, and even of the remaining processing plant has been lost. At the time Greencore closed the sugar factories the then Minister for Agriculture, Fisheries and Food, Deputy Mary Coughlan, said that she raised the possibility of using Mallow to process beet for bio-ethanol but that Greencore showed no interest. Greencore would have received only 75% of their compensation had they not dismantled the plant with the consequent loss of hundreds of jobs.
A study commissioned by Cork county council in 2006 concluded that ethanol production was viable at Mallow if there was price support for farmers producing beet and wheat, but that this price support would be less than existing incentives. It also pointed out that the cost of converting the factory to that use would have been approximately 25% if a new factory for ethanol production had to be built. The report said that if there was a reasonable margin for beet and wheat growers an estimated 40,000 hectares would be available for beet production for ethanol at Mallow and 12,000 hectares for ethanol at Mallow. This would have yielded 2 million tonnes of beet and 102,000 tonnes of wheat, and would have provided sufficient feed stock for an ethanol production capacity of 180 million litres from beet and 36 million litres from wheat.
The annual maximum production capacity of ethanol at the Mallow plant would have been 135 million litres from beet and 35 million litres from wheat, resulting in a full capacity of 170 million litres per year. This would have been twice the target for Irish production of 85 million litres by 2010 and 75% of the EU directive target of 220 million litres by 2010. I only refer to this as it demonstrates the great potential that was lost in favour of Greencore selling the properties with the loss of hundreds of jobs, many of which would have been saved as well as contributing massively to the meeting of plans for bio-fuel production and use.
It is too late to save those factories, but there is still scope for the development of a strong indigenous energy crop sector using various crops, and to use them as inputs into the production of ethanol in processing plants here. It is to be hoped that the sentiments contained in the Bill are supported by positive measures to encourage the production and processing aspects.
In the 29th Dáil I was chairman of the Joint Committee on Communications, Marine and Natural Resources. In June 2006 the committee published a major report on energy. The Minister, Deputy Ryan, was an important contributor to it at the time. The Vice Chairman of the committee, Deputy John Perry, also contributed significantly to it. In my preface to that report I observed that:
As the Irish economy develops one of the principal critical requirements is access to affordable and dependable supplies of energy. If Ireland is to meet the challenges of the future then it is essential that a co-ordinated energy policy be put in place as a matter of national importance. Ireland has a very heavy dependence on imported fossil fuels. The reality is that the transport sector is the largest energy consuming sector, is increasing at the fastest rate and is almost totally dependent on imported liquid fossil fuels.
I went on to note that Mr. Bernard Rice from Teagasc told the joint committee that:
[It] should be possible to get 5,000 miles per acre of rapeseed, roughly 100 gallons at 50 miles to the gallon. Therefore, in terms of using bio-fuels it will take upwards of two acres per car for every car in Ireland to continue to drive 10,000 miles per annum - the normal average. Accordingly, using land to grow bio-fuels so as to continue to give every Irish motorist that 10,000 mile driving per annum experience will take up to a very large part of the stock of arable land in Ireland.
This must be a wake-up call and it clearly shows that Ireland needs policies to address the changes that the future will bring.
During the Second Stage debate on the Energy (Miscellaneous Provisions) Bill 2006 I made reference to the appearance before the joint committee of European Union Energy Commissioner Piebalgs and I set out in my contribution how the Commissioner identified the six main issues facing Europe, namely, fully competitive energy markets in Europe, security of supply, energy mix, a climate change goal, technology and external energy policy. I made the point then and I make it again today that if these are the concerns of Europe, they must be the concerns of Ireland as well.
The Energy (Miscellaneous Provisions) Bill 2006 made a start on some of these issues. The Bill moved to facilitate full gas market opening, it sought to underpin the all-island energy market and it granted power to the Minister to provide for the taking of emergency measures by ministerial order in the event of a sudden crisis in the energy market. In addition, it conferred on the Minister the power to issue policy directions to the CER and it sought to expand the functions of the CER with the removal of the legislative constraints to facilitate regulated electricity interconnection not owned by the ESB.
The Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010 helps us to move another step forward, which I welcome. The Renewable Energy Directive 2009/28/EC has placed a requirement on all member states that 10% of the energy used in transport in each member state should be renewable by 2020. I welcome that bio-fuels will now play a central role in the delivery of this target and that it will also have the added benefit of reductions in greenhouse gas emissions.
The Government White Paper on energy policy committed to the introduction of a bio-fuel obligation which would underpin delivery of the national bio-fuel targets and which will take account of EU developments. The aim of the Bill is to introduce a bio-fuel obligation in Ireland which will compel road transport fuel suppliers to use bio-fuel in their fuel mix. The effective initial penetration rate will be 4% but it is envisaged that this will be increased over time in line with EU targets and to commitments on climate change and energy security. Many benefits would accrue from introducing this obligation. First, it will help us to meet our commitment under the 2009 EU directive to have a 10% penetration rate of renewable energy in transport by 2020. It will help reduce our greenhouse gas emissions from transport. It will improve our energy security. It will provide opportunities for job creation by encouraging the agricultural sector and industry into new areas. The Bill also ensures that we deliver on our commitment in the Government's programme and White Paper on energy policy to introduce a bio-fuel obligation.
When discussing the Bill, it is important that we are all clear about what the term bio-fuel means. It is a word sometimes bandied about without being fully understood. As such, the term deserves a quick explanation. Basically, bio-fuels are produced from biomass. Biomass is any organic material that originates in plants and animals which can be used as an energy source.
I refer to the many advantages that a bio-fuel obligation offers. One of the most important benefits of introducing the obligation is that it will improve our energy security and reduce our dependence on finite fossil fuels. Last week during a Private Members' motion in the Dail, we were reminded of the benefits of energy security. The bio-fuel obligation encourages us to develop alternative forms of energy. As it stands, some 90% of Ireland's energy requirements are currently imported. This means we spend more than €6 billion overseas ever year on imported fuels. It does not make economic or environmental sense. Transport accounts for a very significant and ever increasing proportion of our energy use in Ireland. It is the fastest growing sector in terms of greenhouse gas emissions. According to the EPA, transport accounted for almost 30% of energy use in 1990. This jumped to more than 40% in 2005. Put simply, it is not sustainable. The great dependence on fossil fuels means the sector is very exposed to oil price fluctuations. In this context, the promotion and use of bio-fuels is something to be welcomed.
Another advantage of introducing the bio-fuel obligation is that it will help us to lower our carbon emissions. We are all acutely aware of the consequences of climate change. The transport sector is responsible for over a third of energy-related CO2 emissions. Bio-fuels provides one of the few available and effective means of reducing emissions from transport. There are several economic advantages to introducing the bio-fuel obligation. It will give a boost to the bio-fuel industry generally by providing a guaranteed market to the bio-energy sector. Bio-fuels will also offer an additional outlet for agricultural products, enhancing farm incomes and creating possible enterprise opportunities for rural communities.
I refer to the example of the USA. No country in the developed world can afford to ignore the issue of energy supply and security. In March 2009, the US Government approved $780 million for an energy stimulus plan. Over two years, the $787 billion American Recovery and Reinvestment Act will allocate nearly $8 billion to energy efficiency. Most of the funding is dedicated to helping those on low incomes modify their homes to conserve energy and lower heating bills. Up to $6,500 can be invested in a home for energy upgrades. The Act also provides money for state energy programs, alternative electricity generation and to reduce energy use in Government and school buildings. The US Vice President, Joe Biden, stated the program will help make the country less reliant on foreign energy sources and will create jobs. The US Government will establish approximately 40 training centres to teach workers how to assess home heating and electricity usage and to make the modifications.
We have established our own energy stimulus plan in Ireland. We have extended the national insulation plan to include a new national energy retrofit programme. Under this programme, €90 million will be invested in 2010 with a substantial proportion of the funds ring-fenced for those suffering from fuel poverty. The retrofit programme will provide an estimated economic dividend of more than €400 million to the economy this year, as well as creating approximately 5,000 jobs next year.
There are many advantages to introducing the bio-fuel obligation. However, we must nonetheless ensure that we guard against any potential adverse consequences for the environment, consumers and those living where the products are sourced. Therefore, I welcome several measures aimed at sustainability included in the Bill. Strict requirements will be applied in respect of the type of land from which bio-fuel crops can be taken. There will also be strict reporting requirements on social conditions. For example, water cannot be diverted from local populations. The bio-fuels used must produce 35% less greenhouse gas emissions than their fossil fuel comparators.
The Bill also requires that measures are taken to protect bio-diversity. In this context, several review clauses have been built into the Bill. This shows the Government is serious about creating a sustainable future in terms of supporting green enterprise and tackling environmental issues head on. I commend the Minister, Deputy Eamon Ryan, on the vision, innovation and leadership in the policies he is producing to provide alternative energy sources. In conclusion, I reiterate that energy policy is critical to the Irish economy and the Bill is but one of a number of tranches of legislation we will deliver to the Irish citizen as part of an energy policy which will secure Ireland's future.
I welcome the opportunity to speak on the legislation. I wish the Minister well with the Bill. I am aware there are time constraints in respect of the implementation and enactment of the legislation and I hope it will have a speedy passage through the Houses of the Oireachtas.
It is staggering to note that Ireland imports 99% of its transport fuel requirements. More than 90% of our energy requirement is made up of imported fossil fuels. Clearly, this cannot continue. This generation may satisfy its requirements by importing fossil fuels but future generations will suffer as a result. It is important to acknowledge our obligations and it is important that the European Union and the Government do something positive in respect of energy. Bio-fuels represent just one aspect of the debate.
It is important to note that Ireland imports more than 2.349 million tonnes of petrol per year. Since 2006 a limited quantity of bio-fuels has been supplied under the MOTR excise relief scheme. The scheme has been marginally successful but in order to ensure there is significant investment in the area of bio-fuel production, something more substantial is required. A presentation was made recently to the Joint Committee on Communications, Energy and Natural Resources by a company which hopes to proceed with the development of a 100,000-tonne bioethanol facility in Belview Port in south Kilkenny. The delegates indicated clearly that for an investment of the type they are planning, they needed firm guarantees that the Government is committed to its policy in the area of bio-fuels. I compliment the Minister on the manner in which he has engaged with this and other groups and commercial organisations. I understand he gave this particular delegation a very sympathetic hearing. I hope, as a result of amendments we expect to see on Committee Stage, that the company will be able to get the comfort it requires so that the banks will back its project.
While ethanol can be imported at a competitive price, it is not possible to produce it here because of climactic conditions and labour costs. However, it is important that we have some type of protection and support for an indigenous bio-fuel industry. Some 70% of bio-fuels are currently imported, mainly from South America, Brazil in particular. There are no large-scale bioethanol facilities in the State and it is important from an economic point of view that we support the development of such facilities. We are committed under the 2009 renewable energy directive to have 10% penetration of renewable energy in transport by 2020. Even if we meet that commitment, 90% of energy used in transport will continue to be imported and will consist mainly of fossil fuels. The Government White Paper on energy policy commits to the introduction of a bio-fuel obligation for these same reasons. Of that 10% penetration, bio-fuels will comprise roughly 8.5%, with the balance provided by means such as electric vehicles. It is important that we begin now to work towards meeting our obligations as members of the European Union. We have ten years left to implement these requirements.
As well as being necessary in order to meet our binding European Union targets for 2020, the Bill will also reduce our greenhouse gas emissions from transport and will improve our energy security, albeit only marginally. Given the amount of wheat and barley produced here, we are ideally suited to develop a profitable indigenous bioethanol production facility. In 2008 wheat production on the island of Ireland was almost 1 million tonnes, all of which was used for animal feed. Barley production was approximately 1.25 million tonnes, of which 60% was used for animal feed and the remainder for malting. Last year all the wheat production was used for animal feed because of poor weather conditions, and we had to import 250,000 tonnes of wheat which was used mainly for milling. The fuel versus food debate has not arisen in the context of the Irish situation but it is an issue that must be addressed internationally.
Encouraging an indigenous bio-fuel industry will reduce the importation of petrol and other fuels by approximately 4%. This is a move in the right direction which will offer a significant tax contribution through the employment it provides and the payment of tax by commercial operators. The provisions in this Bill will reduce our greenhouse gas emissions and help to meet our Kyoto Protocol and European Union bio-fuel obligations. The legislation will offer a significant contribution to Ireland's fuel and energy security. The Bill enjoys the broad support of all parties in the House and I wish the Minister well as he steers it through the Oireachtas.
I am pleased to have an opportunity to speak on this important Bill. I begin by acknowledging the great contribution by Deputy O'Flynn as former Chairman of the Oireachtas Committee on Communications, Marine and Natural Resources in the 29th Dáil, particularly his contribution to the far-reaching report of 2006 which provided the groundwork for this legislation. The public meetings and consultations facilitated by the Deputy led to the production of a visionary document.
In his introductory remarks the Minister said that bio-fuels would play a central role in meeting our binding European Union targets for 2020 and in so doing, reduce our greenhouse gas emissions from transport, improve our energy security and provide a valuable opportunity for the agricultural sector and industry to diversify into new areas. The Minister also said that policy in this area must strike a balance between multiple objectives while also ensuring that bio-fuels must at all times come from sustainable sources and that increased market share for bio-fuel take place at least cost to the customer. The Minister also informs us that the Bill will ensure that consumers have access to appropriately priced, sustainable and reliable sources of bio-fuel in the coming years which also give an important incentive to domestic production.
The Bill starts with the simple premise that energy usage in the transport sector must make its contribution to global reduction in greenhouses gases. At European Union level we have the renewable energy directive 2009/28/EC, which places a requirement on all member states that 10% of energy used in transport come from renewable sources by 2020. This Bill transposes the directive into national law. From a scrutiny perspective, it is important that national parliaments debate these issues and ensure their transposition does not breach the requirements of subsidiarity. The target of 10% by 2020 is very substantial; whether it is achievable is another issue.
The energy policy objectives the Bill addresses seem reasonable. However, I have doubts on reading the detail. I am concerned that the complex detail of the technical and administrative issues is at variance with the simplicity and directness of the objectives.
The bill is complex in many ways. I am concerned that the simple objective of using bio-fuel in the transport system requires that bio-fuel producers and suppliers open bio-fuel obligation accounts, that commercial bio-fuel transactions use a parallel certificate system and that there will be a trading system for bio-fuel obligation certificates. We are setting up a complicated back-office system to make bio-fuel requirements work in practice. That must alert us to the fact that although the fundamentals of what we are trying to achieve are praiseworthy, the way we are going about it in practice is off target.
I have serious concerns about the establishment of another new trading system for bio-fuel obligation certificates. The danger is that they may change, as the financial trading system did over the years. We have all seen that pattern. That system started off with a small number of real trading products such as deposits and loans, and then changed fundamentally. The bill has no controls or limitations on the adaption of the bio-fuel obligation certificates into potential products such as futures, contracts for difference, hedges and derivatives. The bill is too complicated technically, administratively and legally.
We face real handicaps in developing bio-fuel crops. Our national capacity for processing those crops will be always marginal compared to what larger countries can achieve. There is a danger that the Irish bio-fuel industry will not be able to achieve significant scale. The sector will be always a marginal player in bio-fuel production and processing. We cannot ignore the large export potential of other world regions such as Brazil, China and Thailand compared with the Irish and EU markets. The production costs in those countries are significantly lower than in the EU. I am concerned that we will start up another struggling production sector - like the sugar sector - that will not survive in the real world.
Various reports in the past decade have shown that our basic bio-fuel feed stock availability will not enable us to reach bio-fuel targets. That would require part of the current food and feed crop production to be diverted to energy purposes. That would most likely lead to additional imports of food and feed.
If, as seems likely, our bio-fuel business can operate only on the basis of significant grant aid, excise relief, bio-fuel imports and other state support, we must question the entire project. The Minister tells us there are no Exchequer costs associated with the bill. However, there is an economic cost to the country, starting with the 2% per litre levy paid by oil companies. There will be other costs associated with the production, refinement and distribution of bio-fuel. There could be substitution costs if scarce national resources are misdirected as a result of any additional revenue costs or taxation incentives to the sector. Studies have shown that biodiesel is expected to cost roughly 30% more than diesel currently costs. All those costs are the real cost for the national economy. We must avoid them if we are to improve our competitiveness, which is important right now.
The carbon tax on farm diesel is now coming into effect. It is another cost increase for the agricultural sector and the retail business, including hauliers. Farmers claim it will reduce farm incomes by 2%. We cannot keep piling up costs on the productive sectors in the economy while hoping growth will recover. There is tax on tax, and it is taking more money out of the economy.
Small and medium-sized businesses and small domestic manufacturers are already paying too much for energy. In the retail business, the small companies are subsidising the large ones. The unit costs charged by the ESB for small companies show they are heavily subsidising the huge commercial companies. They are paying far in excess of what is charged in Northern Ireland. There is no level playing field regarding the direct costs of business. Those small companies are probably even subsidising energy costs for the multinationals sector, which is very unfair.
A better strategy would be for us to recognise reality and avoid putting scarce national resources into a marginal business. We would of course still have to meet our bio-fuel-related carbon requirements. I propose that we do that in a different way. We could trade the bio-fuel carbon for the carbon equivalent for energy crop production, which we as a country can do much better. Ireland will be better off environmentally and economically if we concentrate our scarce national resources on bioenergy crops.
Bioenergy is one of the most significant sources of renewable energy in Ireland. Bioenergy crops, especially forestry, are much more commercially viable than bio-fuel crops. The entire north-west of this country is well adapted to bioenergy production based on forestry and timber. We should consider moving our carbon renewals policy in that direction.
We can see the scale of forestry in the west of Ireland, but people want to thin it out at the moment. There are no grants - forestry involves 30 years of growing, and there is a massive cost disincentive for companies to thin out the forests. The State was giving huge incentives for people to plant forestry, but it appears there is no market for the timber. The thousands of acres of mature forestry could be harvested, but after all the effort and the incentivisation by the Government, it appears there is little or no reward or financial gain for that massive investment. The Minister might comment on that. We have the timber for bioenergy, but there is no plan of action to use it. Very few - if any - companies are prepared to facilitate that and transfer the timber, as there are currently financial constraints. There is a way to deal with the farming population and the thousands of acres of timber.
I am concerned that the bill is part of a wider Green agenda driving our energy policy. That policy is an example of the worst type of Green Party policy making: dogma driven solutions in search of real problems. There are many real problems in energy policy, but they require real solutions.
It is not enough for the Minister, with a majestic wave of the hand, to ward off those who are saying the energy asset investment approach is seriously unbalanced and getting worse. The Minister cannot tell them that they do not understand his vision, and that they will come on board when they see the light. The Minister has shown an unbelievable indifference to the views of those who do not agree with his policy perspective. They are serious people with serious views, and the Minister cannot wave them aside as a minor irritant.
The present situation regarding green energy policy reminds me of the property bubble. Vast sums of public and private money were invested in an inflated and unrealistic property sector. There were few significant objections to the property bubble investments. The Fianna Fáil Ministers, working hand in glove with the property speculators, told us it was okay - that the assets were sound and the sector was strong. Yet it all came crashing down in spectacular fashion. I am concerned we will repeat the financial sector bubble with a wind farm bubble if we are not careful. Far too many of our financial resources - billions - are being invested in wind farms and the associated grid links and interconnectors. The approach of the current Minister to investment in the electricity system is such that we will end up with three parallel and competing electricity systems. The danger is that we will have a grid system with an interconnector system, a wind-generation system and a conventional generation system, each with enough independent capacity to meet our electricity needs. Such a policy could certainly cause many problems.
There is much we can do by way of conservation to ensure energy is used wisely. It is necessary to make the best use of our renewable resources. In this regard, we must be realistic. One must remember the wind does not always blow, as I noted having passed many wind farms, and bear in mind the challenge of storing electricity when generated and the circumstances associated with the grid in the west.
I have heard many concerns expressed over Gates 3 and 4 and the application to join under Gate 3 in respect of a big wind farm, yet one cannot join under Gate 3 because it is closed indefinitely. The view that thousands of jobs can be created on wind farms does not stack up. We do not want to mislead people and I am very honest in saying so.
Renewable energy resources have a contribution to make but the true cost of heavy emphasis on wind energy resources must be acknowledged and explained to the public. The problem is that this is not occurring. People bought into the idea of a bubble in the past and had high expectations.
I am still awaiting the evidence. We are in business, employ a lot of people and know exactly the high cost of electricity we are paying at present. Small companies are now subsidising multinational companies in this country. Can the Minister explain that? That is the difficulty. Small companies are paying an excessive charge and are being penalised by comparison with those in Northern Ireland. How come we cannot have the same charges in both jurisdictions? How come the prices in the North are so low?
A realistic balance must be struck between real economic costs and wind energy options. The environmental and economic benefits of wind energy are not as great as the Minister and other proponents claim. We must have a prudent economic approach to any proposal for further significant national investment in wind farms. Wind turbines have a short life and require maintenance, which costs money. The maintenance and retrofit costs of offshore wind turbines are very significant. It is now time for the Commission for Energy Regulation to step up to the mark and do its job on energy capacity and energy asset planning. We must avoid the disaster of light touch regulation, which we had, in the energy sector. I call on the regulator to exercise its powers decisively and bring some economic sanity to the energy debate, particularly with regard to the amount of money we invest in wind farms.
I thank the Minister for introducing the Bill. It is quite timely in the present climate of high oil prices. The Minister, when replying, might comment on the high prices because I do not believe the cost of crude oil bears any resemblance to the price of oil in Ireland. Prices of diesel and petrol seem to be at an all-time high.
I worked in the oil business for 15 years before becoming a Member of this House and I have a fair idea of how it operates. There is certainly very little competition and there are many cartels in operation. The Minister for Communications, Energy and Natural Resources and the Minister for Transport should be demanding that the oil companies state why the price of oil is so high. The price is certainly having a major effect on transport operators. Many of them are in contact with me daily and state that because of the great increase in the price of oil, the fact that we are in a recession and the fact that they are unable to get increases from companies for which they operate, they find it very difficult to survive. We need to consider this very seriously.
In the south east, there is Green Biofuels in Marshmeadows, New Ross, and there is a bioethanol facility proposed for Belview Port. Glanbia has a pure oils development at Gorey in County Wexford. There are many opportunities in my county and the south east in general to develop the industry.
The legislation to introduce the bio-fuel obligation is very important and I am pleased to have the opportunity to speak about it. The Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010 will introduce a bio-fuel obligation in Ireland. Under the terms of the legislation, an initial bio-fuel penetration rate of 4.166% is being set, to be increased over time in line with EU targets and further commitments on climate change and energy security. This bio-fuel obligation will be administered by the National Oil Reserves Agency, NORA, on behalf of the State. Its introduction follows movement at European level, in particular the renewable energy directive by the EU Commission in 2008. This directive set out a mandatory target for bio-fuel penetration in road transport fuels within the European Union of 10% by 2020.
This legislation marks a significant step forward for Ireland. From the date of the introduction of the obligation, 1 July 2010, all petrol and diesel on sale in this country will Include at least 4.166% bio-fuel. This means that within the first year of the operation of the obligation, some 220 million litres of fossil fuels will be substituted with bio-fuels. This penetration is expected to increase to over 500 million litres by 2020, in line with EU regulations.
The introduction of this bio-fuel obligation is, therefore, excellent for Ireland's environment and each and every one of us. Ireland, like all European Union countries, has agreed to reduce carbon emissions as part of international environmental commitments. An important step towards reaching our goals in this regard will be to increase the use of sustainable and renewable energies, including bio-fuels, and this new obligation will be taking a considerable amount of fossil fuel out of our vehicles' engines and replacing it with green and renewable energy.
The introduction of the bio-fuel obligation will lessen Ireland's dependence on the importation of fuels. Bio-fuels can and are being manufactured in Ireland. By producing these fuels at home, we are helping to make the country more energy-independent. This is vital for our country, which at present is dependent to a large extent on the importation of various forms of energy from overseas and is, therefore, at risk should their supply be compromised.
In addition to these benefits, investing in renewable energy sources such as bio-fuels offers Ireland a considerable opportunity for growing an indigenous bio-fuel sector and generating employment with the sector. The twin concerns of environmental protection and energy security mean the development of a strong bio-fuels sector in Ireland should be a priority.
Much of our focus at present is, understandably, on matters concerning our economy, industry and unemployment level, but renewable energy and bio-fuel production do offer us potential for growth and job creation. Ireland's first and only commercial-scale biodiesel manufacturing facility is up and running in my constituency. The company, Green Biofuels Ireland, is based in New Ross and currently employs 22 people. It was established by a group including the Wexford Farmers Co-Operative Society, which comprises some 4,000 farmers. When I served in the Departments of Communications, Marine and Natural Resources and Agriculture, Fisheries and Food, I was very involved in helping and supporting this local group, along with Deputy Connick and all of the other Members of the Oireachtas from County Wexford. We agreed that there was a tremendous opportunity for County Wexford to lead the way in this area. The then Minister for Communications, Marine and Natural Resources, Deputy Noel Dempsey was fully supportive. He came to County Wexford to open the plant. I am happy to say that it is now up and running and providing good employment. This green energy is seen as part of what we should be developing for the future. The company deserves great compliments on investing such a huge amount of money in the plant.
Green Biofuels Ireland has the capacity to produce more than 34 million litres of biodiesel annually. The biodiesel produced by the company is largely produced from waste, including cooking oils and similar by-products. As a second generation bio-fuel, biodiesel is produced from waste and therefore does not have to compete with food production for land. Over the years, some people have expressed concern about suggestions that food production might be compromised by the development of bio-fuels. This form of bio-fuel will not have any effect on the use of land for food production. The use of the biodiesel produced in New Ross results in the saving of a minimum of 90,000 tonnes of carbon dioxide each year, which is equivalent to removing 25,000 cars from our roads. These reductions are helping Ireland to meet its commitments under the Kyoto and climate change protocols. While the current production capacity of Green Biofuels Ireland is 34 million litres, the New Ross facility has the potential to double in size. This could be of significant benefit not only to the local community, in terms of employment, but also the Exchequer. The company is currently involved in a research and development project with the support of the Marie Curie industry academia partnership and the Pathways Europe funding scheme. The project involves research into the use of algae and seaweed oils as raw materials for bio-fuel production.
It is important that this legislation is brought through the Oireachtas as quickly as possible. The Minister has met representatives of Green Biofuels Ireland, as we have on a number of occasions. They would be concerned if any delays in the passage of this legislation through the House were to be envisaged. They want to get on with the business of developing, expanding and creating jobs. As biodiesel is a clean burning alternative to mineral fuel, it is an immediate solution to the problem of reducing our dependence on imported fuels. As the Acting Chairman, Deputy Johnny Brady, comes from farming stock, he will be interested to hear that biodiesel works on heavy duty transport applications, such as farm machinery, as well as private cars and other vehicles. I have mentioned the Green Biofuels Ireland facility as an example of the type of high-tech job creation, growth and development that should be encouraged in Ireland at present. The Government and Deputies on all sides of the House are looking for alternative forms of job creation. This is certainly a possibility in that regard. I hope the introduction of the new bio-fuel obligation will encourage the ongoing development of a vibrant bio-fuel sector and lead to increased research into bio-fuel alternatives that can lessen further our dependence on imported fossil fuel.
I would like to mention another company, Ethanol Ireland, which is based at Belview Port, across the border in County Kilkenny. It is anxious to get its project, which involves the production of bio-fuels from wheat, up and running. We all know that farmers are going through a difficult period at present, as they try to sell barley and wheat. It is farcical that Diageo is no longer purchasing malting barley from farmers in counties Wexford, Wicklow, Kilkenny and Kildare. It is importing it from England instead. I do not agree with its claims that there are some problems with Irish barley. The quality of the barley that is grown in the counties I have mentioned has been recognised throughout the world for many generations. Diageo has taken great pride in proclaiming the virtues of beer, etc., produced from Irish malting barley. Farmers in County Wexford, who have been producing top-quality malting barley for many years, have led me to believe that Diageo is now importing barley from England and other European countries. Perhaps we can encourage Diageo to make a statement on the matter, which I hope to raise on the Adjournment tomorrow night.
It is important that crops of this nature are purchased, so that farmers will be encouraged to continue to grow them. The proposed bioethanol facility at Belview Port is important for the future of the bioenergy industry. The company in question is hoping to create 400 jobs during the construction of the facility over 24 months and to employ 50 people during its ongoing operations. It is clear that significant employment would be associated with harvesting and transporting crops and providing essential supplies and ancillary services. It is estimated that 40% of the revenues generated by the company will be consumed locally. In addition, significant rates and development levies would be paid to Kilkenny County Council, a stable €60 million market would be established for local tillage farmers and the large-scale regeneration of the wheat and barley growing industry in the area would take place. It is obviously an important matter.
I ask the Minister to respond to a document that has been made sent to all of us by the Irish Farmers Association in recent days, under the heading "The Time for Talking is Over, Co-Firing REFIT Tariff Must be Introduced Immediately". The IFA document calls on the Minister to honour his commitment to introduce a co-firing REFIT tariff immediately. According to the IFA, "the introduction of a REFIT tariff is essential to enable biomass crops to compete with peat and ensure that farmers earn a fair price for the crop". The document continues:
To achieve the target almost a million tonnes of peat will need to be replaced with biomass per annum. It is estimated that only 50% of the biomass resource is currently available mainly from forestry resource and that up to 25,000 hectares of bioenergy crops, either miscanthus or willow will need to be established to satisfy the shortfall.
It is not unusual for the IFA to criticise the Department in this manner. I know that the chairman of the relevant IFA group, Mr. J.J. Kavanagh, who is from my home county, is a very responsible person. He contacted me in the last few days to ask me to raise this issue. I ask the Minister to respond by outlining how he will proceed from here. It is important for us to encourage farmers to grow alternative energy crops. I appreciate that grant aid was provided in the past for the growing of miscanthus. Perhaps the Minister can tell the House when he intends to introduce the renewable energy feed-in tariff, which is important.
As a representative of County Wexford, which is the home of wind and wave power, I see tremendous opportunities for the development of wave energy facilities in Kilmore Quay and elsewhere in south Wexford. I ask the Minister to consider incentives that would encourage people to participate in such development. We need to encourage those investors who are interested in this sector, as it can be expensive to get involved. Wind turbines have been erected in Bunclody and throughout north County Wexford. They sometimes prove to be contentious in striking a balance between the desires of local people and the farming community, which has examined alternatives. It is an important energy source for the future and the stand off between those who want to develop wind energy and the ESB has continued for the past number of years over the price paid by the ESB and the encouragement it offers. Now that there is competition in the electricity market, perhaps it will open more. It is highly costly to get involved in wind energy projects and no impediments should be put in the way of those who want to develop these projects and who are prepared to invest in them. It is important for the future
I welcome this Bill, which will be important for the future of the bio-fuel industry. Many companies and individuals are willing to invest if the legislation is right and if the encouragement is there. Oil prices have gone through the roof. They are artificially high in Ireland and the Minister must intervene and call in the oil company representatives to see what is going on because the price at the pump for diesel and petrol is not justifiable or acceptable and fierce pressure is being put on transport operators.
I wish to share time with Deputy Bannon.
I welcome the Bill, which is a response to the EU directive which necessitates that 10% of transport fuel must be supplied by renewable sources by 2020. It should be viewed as an opportunity. The underlying core of the legislation is to create an opportunity but I sense it is a stick without a carrot in several ways. Ireland is at the bottom of the league in the production of farm energy. Tomorrow the Oireachtas Joint Committee on Climate Change and Energy Security, of which I am a member, will be addressed by the Minister for Agriculture, Fisheries and Food regarding greenhouse gas emissions from agriculture and their impact on climate change as well as the potential for bio-fuel production, which is key.
The Bill obliges oil companies to supply 4.5% of their product through bio-fuel but the 2% Government levy on petroleum products also applies to bio-fuels. There should be a tax break or other incentive for bio-fuels. A sum of €50 million has been set aside by the Minister to pay for carbon credits. Some of that money could be used to resource research, development and production of an agri-renewable energy industry and to encourage alternative energy investment.
Issues such as the feed-in tariff need to be addressed. There was unanimous agreement at a joint committee meeting that the tariff should be brought into line with the European norm to make it attractive for people to get into bio-fuel production on a sustainable scale. Unfortunately, the Bill does not provide an obligation for the verification of the source of the bio-fuel to ensure it is from a non-food source or from sustainable agricultural waste. There is also no requirement on oil companies to source a percentage of their supply from local producers of bio-fuel to assist the rapid development of the bio-fuel sector in Ireland. In addition, there are vague references to the critical issue of standards of bio-fuel to ensure safety for customers.
The message to the public is bio-fuel production must almost develop on its own with grants provided here and there. They are not guaranteed or sustained and there is no joined-up thinking. This casual intervention creates a top down layer. We have, on the one hand, an initiative where 600,000 gallons of ethanol is being produced from whey by Maxol in Cork but there is no national strategy to promote the co-ordination of this industry and, in particular, to ring-fence seed funding for smaller bio-fuel plants. The climate change committee has been inundated with different research. A Cabinet sub-committee on climate change and energy security is in place but we tend to forget the energy security issue. Ireland is at the end of a long pipe transporting fossil fuels, which leaves us dependent on everybody else in the chain being in supply in order that we continue to have a supply. Approximately 11 days of natural gas supply is on reserve. Following the winter we have had, it is not guaranteed that it could not run out.
It is all the more frustrating when the agriculture sector is undergoing huge change. There is serious uncertainty in light of the new CAP reform measures that will be introduced. There is volatility in supply of normal commodities but there is a potential to develop second generation production, which does not affect food production. The challenge is though land use to marry food production with the desire and requirement to produce alternative and renewable energy. The Common Agricultural Policy should be rechristened the common land use policy because in many ways the earth, the wind and the waves are the key to it. We can feed and give energy to our people. We can provide heat and light in their homes and fuel for their transport, if we do this right. Statistics are available and the number of people on the planet, how much they need to eat and how we can generate sufficient fuel and energy to accommodate them are not mysteries.
The EU, for instance, supports decentralised local production. Germany has 2,500 biogas plants. These are sustainable rural community initiatives. Dr. Gerry Murphy and others made a presentation to the joint committee about anaerobic digesters and they recommend that such plants be set up in local communities. They can serve a 5 km radius with local farmers producing grass to put into an anaerobic digester, which produces methane. They also use slurry which addresses two or three problems. It is an energy source. By transporting it to a digester and storing it, the nuisance of the smell of methane is eliminated. The product that results from the process is a fertiliser, which is more nutritious for the soil, thereby reducing the requirement for chemical or artificial fertilisers.
However, we are missing the primer to get everything going. The Minister is sincere about this but it is frustrating that there is no joined-up thinking. The Cabinet sub-committee has not put forward initiatives. The Bill has been introduced in isolation and it is not part of an overall picture. The 4.5% bio-fuel target was picked without putting an incentive or a carrot in place. That is the result the Minister wants to achieve but it will not be done in such a way as to allow the development of an entire industry and a resource much more effectively and without threatening people. All this will do is add to the cost of bio-fuels. The carbon tax could have been used in a different way so that an exemption was given to anyone producing fuel. I note the Minister is grimacing. We could fuel our bus fleet from methane gas.
A carbon tax will be paid if we do not reduce the amount of carbon expelled by the transport sector. People could be incentivised to produce methane gas thus reducing the carbon output. A total of €50 million is set aside every year to pay a carbon tax. Why do we not use that money to prime the sector?
Why does the Minister not use the €50 million specifically in this area? We are bottom of the league for farm energy production. We could prime that sector by providing certain guarantees, securities and incentives to get it going.
In only three years of the past decade has the employment attracted to this country by the IDA and Enterprise Ireland provided a surplus of new jobs over those lost. In one year the number of jobs created almost cancelled out those lost. That was in the boom years. Combined with the food sector, this sector could provide sustainable jobs and meet a host of other obligations and targets.
In reference to what Deputy Browne said about Diageo, as the Acting Chairman, Deputy Johnny Brady, is aware, in another guise I have been pushing for the provision of country of origin information for food products but perhaps we need to have country of origin information on our pint of plain in terms of the source of the barley.
I welcome the Minister, Deputy Eamon Ryan. I am pleased that the Minister with responsibility for this area is present for the debate on the Bill. The main objective of the Bill is to ensure that 4% of transport fuels would come from renewable sources. The Minister's announcement in November 2009 that fuel suppliers would be obliged to include 4% of bio-fuels in their annual fuel sales under the bio-fuels obligation scheme will be enforced from July of this year. As always, there is a European Union input to the legislation as the reform comes under the renewable energy directive 2009. The EU has set a target that 10% of fuels would come from renewables by 2020. I do not believe that target will be reached if it is left to the Green Party and Fianna Fáil. I am pleased that elections will take place in the intervening period. I have every confidence in our party implementing those policies when we get the opportunity.
-----and the Department of Agriculture, Fisheries and Food on the growing of miscanthus, better known as elephant grass. Farmers have been badly let down by the Government. The pilot bioenergy scheme failed to deliver for them. I know many farmers across the midlands who were refused payment on the grounds that a crop was not deemed to have reached a satisfactory level of establishment, despite the pilot nature of the scheme. I met with those farmers and posed many parliamentary questions to the Minister for Agriculture, Fisheries and Food on the issue but I did not receive satisfactory answers. In view of the experimental nature of the first miscanthus crop and the work carried out by farmers in terms of necessary and prescribed work to ensure a full crop establishment in 2010, the failure to reimburse farmers by way of entitlements to grants is a huge indictment of the Minister and the Department. It was odd that the Minister launched a new bio-energy scheme without ironing out the problems associated with the first launch which was made with great fanfare in County Monaghan.
The other problem that comes to mind in terms of bio-fuel production is the availability of sufficient acreage for the necessary bio-fuel production. That brings me to the food versus fuel debate. There is sufficient availability of under-utilised land that would be ideal for the production of bio-fuel. In fact, Teagasc has reported that there are more than 100,000 hectares of land that could be utilised for the production of bio-fuels.
My biggest concern about the Bill, which Fine Gael supports on the basis that certain areas will be ironed out on Committee Stage, is that the necessary consultation will not take place between the Department of Communications, Energy and Natural Resources and the Department of Agriculture, Fisheries and Food. While the farming sector is at an all-time low, the production of bio-fuels could, if handled properly, inject new life blood into the industry. The exciting aspect of the Bill is that it will mean energy will be produced on our own farms and by our own farmers.
The statistic of 90% of our energy requirements being currently imported is something I hope will change in the not too distant future. It is also disturbing to think that we spend €6 billion per annum on imported fuels. What we must not forget is that this obligation will add 1 cent per litre to the cost of petrol and diesel. It is therefore doubly important that there is a native input into the production of bio-fuels to counter the increase. If the Minister can meet our obligations while maximising bio-fuel production we will meet our commitments to farmers and the environment.
The importation of raw materials for bio-fuels raises some interesting environmental issues. It is not only the case that we must consider transportation costs and the impact of such transportation on the environment, we must also consider the implication for the countries from which the fuels are imported, especially if they are developing countries.
I came across some interesting literature at the Young Scientist of the Year exhibition in 2008 or 2009 which indicated that in America the use of maize for bio-fuel can be more polluting than petrol. I would welcome a comment from the Minister in that regard. Two years ago food riots took place in Central America, Africa and other places. Some countries are seeking a ban on bio-fuel production because it will lead to a further shortage of food, although we do not have that problem in Europe yet. We should take a similar approach in this country to the forestry scheme. It was not a great scheme as some of the best land was taken out of food production. A certain type of land should have been designated for the growing of trees. Some of the best land in the midlands is covered with forestry and it will be generations before it is cleared again and is free to be used for food production.
The Government's national bio-fuel strategy has been a failure.