Eamon Scanlon (Fianna Fail)

I commend the Independent Senators on proposing this motion on an important issue. The increasing price of oil, the need to significantly reduce our carbon and greenhouse emissions and the growth of dynamic new economies has placed the need for alternative energy firmly on the Government agenda. The Government is aware of the importance of the matter and has made progress on it. The €27 million greener homes initiative launched by the Minister for Communications, Marine and Natural Resources has been a major success. The scheme allows individual householders to receive grants for the installation of renewable technologies including wood pellet stoves, boilers, solar panels and geothermal heat pumps. Grant aid of €1,100 to €6,500 is provided, depending on the technology used. Some 1,600 applications were received in the first month. Of these, 1,100 have been approved. The scale of this programme and the level of grant available, typically 40% of the capital cost, underlines the Government's commitment to encourage people to install renewable heat technology in their homes. The programme will support the conversion of renewable energy in more than 10,000 homes.

Biofuels are being developed because we need to decrease our dependence on fossil fuels. Growing energy crops for the development of biofuels offers new opportunities to rural communities and economies. Irish agriculture has a major role to play in the development of a sustainable bio-energy industry. I commend the Ministers for Agriculture and Food and Communications, Marine and Natural Resources on pursuing a coherent approach. Agriculture and forestry have the potential to be the source of many feedstocks for biofuels. Rapeseed oil, wheat and sugar beet have the potential to be used for the manufacturer of liquid transport biofuels. Forestry, farming and food by-products such as meat, bonemeal and tallow can be used for heat generation. Tallow can also be used for biodiesel production.

Brazil has processed sugar beet and sugar cane into ethanol since the 1980s. Today, it is the lead producer of ethanol. Recent tax breaks and technological advances have provided the industry with greater impetus. In 2003 the Brazilian Government cut tax to 14% for cars using ethanol compared to 16% for those using petrol. Flex fuel cars have been developed that can run on alcohol, petrol or any blend of the two. Drivers can fill their cars with ethanol at 29,000 locations. Last year flex fuel cars accounted for 50% of the market of new cars.

Many countries can see the wisdom of the Brazilian approach. British Sugar has signed a contract with Green Energy, a private company, to produce bioethanol blended petrol to retailers in England, including Tesco. The US is producing almost as much ethanol as the Brazilians, although the raw material used is maize rather than sugar cane.

Support for energy crops may only be granted to farmers in accordance with EU regulations. Such support is currently provided by the energy crop scheme, introduced under the CAP reform programme and administered by the Department of Agriculture and Food. Under this scheme energy crops may qualify for aid of €45 per hectare if they are intended primarily for the production of biofuels and electric thermal heating produced by biomass. The EU has agreed that sugar beet will be eligible under the scheme and may also be grown as an energy crop on setaside land. This may not be seen as a great deal of money but the Minister for Agriculture and Food assures me that the European Commission has undertaken to review the operation of the scheme. The commitment was reiterated by the Commissioner for Agriculture and Rural Development, Mariann Fischer Boel, in Dáil Éireann last week. Ireland has an excellent climate for growing a supply of raw materials for wood fuel. Wood residues are used to produce heat for sawmills across the country. The wood energy market is poised for growth with the emergence of new commercial start-ups and supply chains. The €27 million greener homes grants will help to drive demand for wood biomass. The levels, which will be announced in the coming weeks, will stimulate demand further. The Department of Agriculture and Food is actively promoting the use of wood biomass through grants to promote and develop sustainable forestry, including alternative timber uses. The Department of Agriculture and Food, in conjunction with Teagasc and COFORD, has examined the potential of energy crops, wood biomass and farming food bi-products. Last year it started to provide direct funding on a competitive basis to support priority research projects relating to biofuels. Three of the projects selected in 2005 contained proposals relating directly to biofuel energy crops. They received grant assistance of nearly €900,000. The funding available under the programme has been substantially increased. A further call for projects was recently advertised in the national press. This call also relates to non-food uses of agricultural land.

The Government's policy to integrate renewal energy with the development of the rural economy is particularly evident in the development of renewal transport fuels. Biofuels offer major potential to support the development of the rural economy. In the Finance Act 2004, the Minister for Finance introduced a relief for mineral oil tax for biofuels produced or used in certain pilot projects. The relief has been granted to eight pilot projects for a period of two years. In this year's Finance Bill, the five-year scheme of mineral oil tax relief to commence in 2006 and end in 2010 was greatly expanded. The scope of the relief now extends to projects which are not of a pilot nature. This relief scheme, when fully operational, is expected to support the use and production of 163,000 million litres of biofuels per year. In budget 2006, provision was made for VRT relief of 15% for flexible fuel vehicles. The scheme is intended to encourage the purchase of a series of production flexible fuel vehicles able to use bioethanol — a blend of a minimum of 85% bioethanol and 15% petrol.

The Minister of State referred to ocean energy, which is important. Much work is taking place in Galway. The hydraulics at the marine research centre in UCG have been significantly upgraded and it has developed a 37 hectare site in Galway Bay to ensure that devices can move up to the next level of testing in their development and cycle.

The Corrib gas field was mentioned. I was heartened to hear the Minister for Communications, Marine and Natural Resources state yesterday that a feasibility study will be done on the Corrib gas and on supplying the north west through Sligo to Donegal. We should support the Government in every way we can in that regard.