Tuesday, 30 November 2010
Alternative Energy Projects
Question 17: To ask the Minister for Communications; Energy and Natural Resources his policies and those of the EU on alternative fuels; the steps he has taken to introduce a mix of fossil fuels and alternative fuels for the haulage industry; and if he will make a statement on the matter. [42720/10]
Question 40: To ask the Minister for Communications; Energy and Natural Resources the percentage of biofuels used here that is imported; the percentage of the 4% biofuel obligation that he envisages will be imported to reach that target; and if he will make a statement on the matter. [45002/10]
I propose to take Questions Nos. 17 and 40 together.
The Government's policy on renewable transport fuels is underpinned by the EU renewable energy directive of 2009, which sets a binding 2020 target of 10% renewable energy in transport for all EU member states. The most achievable and promising means of introducing renewable energy into the transport system are liquid bio-fuels and electric vehicles. In respect of renewable energy for the haulage sector, the mineral oil tax relief schemes, MOTR, and the bio-fuels obligation scheme are the most relevant measures.
The mineral oil tax relief schemes, which expire at the end of the year, were designed as an interim measure to enhance the level of bio-fuels in the fuel mix and to encourage the development of an indigenous bio-fuels industry. The objective was to establish and develop the potential of domestic bio-fuel production and to introduce early volumes of bio-fuels into the supply chain. MOTR II involved the granting of more than 660 million litres worth of excise relief to 16 companies, following an open tender competition in 2005. Prior to the introduction of the schemes, market penetration of bio-fuels in Ireland was almost non-existent. In 2007, market penetration was 0.6% and by 2009 it had increased to 2.2%, approximately 42% of which was imported.
The bio-fuel obligation scheme, which came into effect in July of this year, establishes a clear, stable and long-term framework for the delivery of the national target of 10% renewable energy in transport by 2020. The obligation delivers the best balance available in providing a stimulus to the market. It will underpin the ongoing development of an indigenous bio-fuels industry, while keeping the cost to the consumer as low as possible. The legislative basis for the obligation is provided for in the Energy (Biofuel Obligation and Miscellaneous Provisions) Act 2010. The Act is the framework for ensuring that Irish consumers have access to appropriately priced, sustainable and reliable sources of bio-fuel by creating a guaranteed market that will require in excess of 200 million litres of bio-fuel in 2011.
Domestic producers can access the market by a number of means, including sale of bio-fuel direct to obligated parties or alternatively, producers can sell into local markets or sell certificates earned to obligated parties. This trading mechanism allows the scheme to provide a stable market, protecting consumers from structural rigidities in the fuel supply market, which could result in episodic periods of high fuel prices, while also ensuring delivery of targets.
The level of obligation set for 2011, at 4%, represents almost a doubling of size of the existing bio-fuel market in Ireland. I am confident that the obligation will promote the sustainable growth of the Irish bio-fuels market, thus supporting the growth of sustainable indigenous production of bio-fuels. In the first few months of the obligation, the 4% market penetration target is already being achieved. This is early testament to the effectiveness of the obligation mechanism. The bio-fuel is primarily reaching the market blended with mineral petrol and diesel. The vast majority of Irish motorists are now using bio-fuels in their fuel mix at blends of up to 7%. A number of road haulage operators have already converted trucks to run on pure plant oil. Each litre of pure plant oil brought to market is eligible for a bio-fuel obligation certificate, which can be traded to obligated parties. This incentive will underpin further development of the sector.
I thank the Minister for his response, which in many ways indicates the point I was making. The pre-budget submission of the Irish haulage industry states that it is extremely disappointed with the amount of alternative fuel that has been made available and does not discern the provision of any viable alternative to them. At the same time, one should recall this is an industry through which 99% of all goods are transported throughout the country and for which fuel costs amount to 30% to 40% of the total. Last year, there was a 5% increase in excise duty, as well as the imposition of a further 5% carbon tax on diesel from 1 July, yet the haulage industry finds it impossible to source alternative fuels. The Minister stated that penetration was 2.2%, most of which is imported, whereas the target is 10%.
The scheme is designed to develop a stable bio-fuel supply in Ireland using a market mechanism that does not lead to huge price spikes and that is consistent. As I stated, the evidence from the first few months is that it is starting to deliver the level of targets I set. I acknowledge that it is primarily blended, rather than pure plant oil or other single fuel systems. However, the critical point is to provide a stable market that will allow alternative suppliers, where they wish to contract with a haulage company or anyone else, to trade in obligation certificates. The creation of such a stable market and the placing of a value on an alternative fuel supply is the best mechanism for Ireland to try to set up that developing industry and to enable local producers here to supply to local transport providers. One must be careful with regard to the development of bio-fuels. Their purpose is to be a strategic backup reserve to try to provide some stability or security against future oil shocks but not necessarily to take off in a massive way that would have huge land use or other environmental implications globally. It must be developed sensitively. We have to monitor and review it. In particular, we have to look at the development of second generation bio-fuels that have fewer land use concerns. We have to do all of that within the EU obligation structure we have set up. I sense that it is working.
Given that no viable alternative to the carbon tax has been provided, is it not a punitive tax? Carbon emission targets have been set in the absence of a viable alternative. The haulage industry, which has experienced a drop of 40% in its activity already this year, is being penalised. Heavy fuel costs are being encountered within the industry, which is necessary for the distribution of goods throughout the country. The Government is not providing a meaningful alternative source of fuel. The Minister is sitting on his hands, in effect, in regard to the haulage industry.
One of the purposes of this approach is the security purpose I mentioned. To my mind, it is the primary purpose in terms of security of oil supply. A secondary purpose is carbon reduction. As I understand it, one of the aims of the scheme that has been designed is to cut 700,000 tonnes of carbon from our transport budget.
This year's measure is the first step in the roll-out of that scheme. The scheme is meeting its target for the first year. We have to continue to review it to make sure the planned carbon savings accrue. We need to ensure new technologies, such as those relating to second generation bio-fuels, are fed into it. It is providing a mixed fuel supply system that helps to provide a more stable, clean and secure transport fuel solution, which is what it was meant to do. That will benefit the haulage industry in the long run.
Will the Minister accept that although the carbon tax has a nice name, it is just another tax? It is nothing more than a new tax with the word "carbon" stuck in front of it. Does the Minister intend to develop a facility to make progress with the development of alternative fuels? The Government has already wrecked the sugar company facility that would have served such a purpose neatly. Does the Minister intend to commend to his Cabinet colleague, the Minister for Finance, the introduction of a landing tax for our natural resources? He should do so while he is still there. The Green Party needs to exercise influence on the capture of some of the wealth associated with our natural resources. The people of this State certainly need such wealth at this time.
Revenues from the carbon tax have been used for the retrofitting of homes, which is an issue we discussed earlier. The fuel bills of people suffering fuel poverty have been cut. This money has been used in a range of other energy areas to create jobs and develop the new economy. It is starting to work. We have been able to get a competitive and clean energy supply, which is crucial. We have started a process that will allow this country to tap into the comparative advantage it enjoys through its renewable resources. That will facilitate real national self-sufficiency, provide for long-term income streams and create jobs. As it is the clever economic thing to do, all parties in this House should row in behind it and ensure we continue to develop it.
The record speaks for itself. We have set a short-term target of 10%, but we have achieved just 2.2%. I do not know how we will fulfil that target. We are importing half of it already. The haulage industry is simply not getting any assistance in reaching its targets. As this industry has huge fuel costs, it should be a priority for the Minister. I would like to know why it is not.
We are meeting our target. We have reached a level of 4%. We have to work on the measures that were included in legislation in this House to try to ensure these fuels are home-grown and Irish producers and farmers can benefit as a result. The legislative measures we introduced were supported on both sides of the House. We need to put them into action so that Irish farmers benefit from this as well. At the same time, we need to be careful. While bio-fuels give us security benefits, we do not want their land use effects to distort the price of food. We will have to keep an eye on both aspects of the matter. We will have to make sure the obligations system, which is working, develops sustainably.