Eamon Ryan (Dublin South, Green Party)

I am glad to be here to debate this very useful motion which allows us to review what is happening in this complex and important area. It is important for a number of reasons. In a world where we will see increasing difficulty in accessing cheap, reliable supplies of oil we have to start providing for the security of our country and develop an alternative supply to light sweet crudes which have been available for the past 100 years. The provision of bio-fuels is a key strategic objective behind the develop of such a strategy. In terms of meeting our climate change targets, which include reducing our emissions, it is one of the elements which will provide us with an opportunity to cut back on our emissions to the extent scientists say is needed.

Transport and the other areas where emissions occur, especially in the energy area, are probably the most difficult, the fastest growing and therefore the most important for us to pay attention to in order to see how we can make reductions. We are doing a number of things. The changes in the VRT system have worked in terms of making our vehicles more efficient. Senator Brady referred to the switch to electric vehicles which will be a very significant component in our move away from the use of oil.

The sustainable transport plans in place will achieve the same objective. No matter what way one looks at it, even adding those initiatives and changes does not provide us with the reductions in emissions we need. On that basis, properly sourced bio-fuels which have real emissions reduction results in their production are an important part of our strategic intent.

In terms of where we are going, it is very much part of a European initiative. The European Union, as part of the overall 20-20-20 target of emissions reductions, renewables development and efficiency gains which was agreed by Heads of Government earlier this year, set out within that a target for 10% use of renewable energy in transport for all member states by 2020 which sets our objective in terms of what we wish to achieve and is the reason this new obligation scheme has been introduced.

It is recognised that this is a sensitive, difficult and complex subject. A number of developments in recent years have drawn attention to the complexity and sensitivity of the development of bio-fuels. There is a real concern bio-fuels may be connected to the recent spike in global food prices, particularly the effect of the American policy on the development of bioethanol and its effect on wheat prices. It is something of real concern and has to be examined.

It would seem that much of the speculative activity which took place in commodity markets during 2007 and 2008 is something of which we have to be aware and protect against. The fact that land use changes may occur in the development of bio-fuels which have a significant detrimental effect in terms of protecting biodiversity and the sustainability of communities in distant parts of the world is a real concern against which we have to protect. It is because of that reason, namely, the precautionary principle, that I revised our targets, which were set at 5.75% of bio-fuels in the supply in this country by 2020 to the new target of 4%. However, there is a difference. The target of 5.75% was not mandatory whereas the 4% target is obligatory and one which has real effect.

The role of the European Union is important because in addition to setting those targets it gives certain criteria for working with us in terms of developing sustainability criteria to address concerns such as land use changes and emissions reductions. Its suitability criteria will be in place early next year, in time for us to apply them in any new obligations scheme. It is clear they will include a provision whereby there must be a measurable 35% reduction in greenhouse gas emissions in any new fuels which are supplied. These will be done on a "well-to-wheel" or "field-to-well" basis, whereby one measures the entire supply chain in terms of the production, transportation and processing of crops for bio-fuels to find out the real emission reduction. The the effect of the use of fertiliser and chemicals is also taken into account.

The criteria the European Union sets also stipulates land use requirements to ensure we are protecting biodiversity and are not chopping down rainforests to grow palm oil to turn into bio-diesel here. That would be the most short-sighted approach we could take. Crucially, the European Union said it will include social conditions within the overall consideration of emissions reductions and the nature of the land use which is affected. That wide range of conditions are a crucial first step in any bio-fuel development and we must ensure they are introduced effectively and deliver on the protection criteria we have put in place.

In terms of what we will do in this country in that regard, we will live within those criteria. It will allow us to promote and see the development of indigenous fuel production which will meet the emissions reduction concerns and we will not have the same land use concerns which exist elsewhere. There are limits to what we do. A large amount of our fuel supply comes from waste products, which is beneficial in terms of emissions reductions and solving other waste problems.

There is an opportunity for us to switch to the use of arable land for the production of feed stocks for bio-fuels. However, the percentages and abilities are limited. Certain targets can be reached but we do not have endless capacity to switch to arable production. In response to what Senator O'Reilly and others said, we are intent on developing indigenous opportunities for economic benefit and the security of our supplies.

In terms of where we are going and what is changing, one of the main changes is a move away from the excise relief scheme which was termed the bio-fuels mineral oil tax relief scheme introduced in 2005 and 2006 and which awarded excise tax relief to 18 projects for the period up to 2010. That scheme will come to an end next year. The bio-fuels obligation scheme which will operate in tandem with it for a short period will eventually take over from it as the mechanism by which we will ensure the sustainable delivery of bio-fuel crops. It is already evident that the mineral oil tax relief scheme has led to the introduction of bio-fuels here. It is typically allowing for blends of approximately 5%. In 2008 the penetration or use of bio-fuels in the Irish oil market was approximately 1.6%. We expect that figure to increase to approximately 2.5% this year. The scheme has already served its purpose, which was to get businesses to set up here. Five bio-fuel plants have been constructed and a number of others are at an advanced planning stage. It has achieved its effect in terms of getting the supply chain up and running. The 2.5% figure I have mentioned is in our tanks, without motorists having to bear the cost. The price of oil has returned to a high level of between $80 and $90 a barrel. I do not believe the figures quoted by Senator O'Reilly for the cost of bio-fuels. One has to be careful in this regard. It largely depends on what is the price of oil. My prognosis, looking at the envisaged peak in global oil production, is that oil will become more expensive. These bio-fuels can be delivered without additional costs being incurred by Irish motorists. In effect, this mechanism will help to keep prices down.

One of the problems with our excise tax relief system was that it did not provide for a very stable market. The difficulty for Irish suppliers, or any supplier, was that they were bidding in a very volatile market, even with the tax relief system in place. It was impossible for companies, other than the 18 bidders, to actually get into the business. The benefit of the obligation system is that it provides a much more stable market because its graduated increases are mapped out. It is not a market that can go on the basis of changes in oil prices. It is guaranteed that a certain percentage of our fuels have to come from bio-fuels. That stability will help producers here. The tradeability of the certificates will allow small indigenous producers, in particular, to get into the market and develop their businesses.

We have engaged in a widespread public consultation process, in terms of how our new bio-fuel obligations will work. We have received approximately 40 submissions. We are following the examples of obligation schemes in other countries, including the United Kingdom, which have introduced similar schemes. We are introducing a scheme by applying in this jurisdiction the good experience of operations elsewhere. It is an effective and relatively easy system. It is not bureaucratic or complex. As I said, it is based on tradeable certificates. Every litre of bio-fuel brought to the market earns a certificate, regardless of who brings it. At the end of each year mineral fuel suppliers will be required to surrender certificates to a value of 4% of the volume of mineral fuels brought to the market.

The National Oil Reserves Agency, NORA, is responsible for ensuring Ireland complies with its EU and international obligations for emergency oil supplies. The agency is funded by a levy on mineral fuels collected from oil suppliers. It enters into contracts with oil suppliers for the purposes of leasing oil storage. On that basis, I determined that NORA was the best and most appropriate administrator of our new bio-fuel obligations. Oil companies and consumers currently make returns to my Department. The levy applicable to individual companies is articulated by NORA based on these figures. NORA charges companies accordingly. The cost of administering the bio-fuel obligation will be met by extending the NORA levy to cover bio-fuels currently exempt. Obligated parties will be required to apply to the scheme administrator for a bio-fuel obligation account and provide details of their fuel sales on a monthly basis. Obligated parties and other suppliers of bio-fuels may apply for certificates for the bio-fuels they place on the Irish road transport market. A bio-fuel obligation certificate is awarded for the supply of each litre of bio-fuel as long as certain conditions are met. If the administrator believes these conditions have not been met, or if the information or evidence on the basis of which the certificate was issued is subsequently found to have been false, he or she will have the power to revoke the certificate.

Bio-fuel obligation certificates may be traded across account holders. Obligated parties who have not been able to fully meet their obligations by supplying bio-fuels will be able to purchase credit certificates from other obligated parties and thereby meet their overall targets. An obligated party who has a shortfall in his or her number of certificates at the end of a defined calendar year will be required to pay a non-compliance levy, calculated on the basis of the number of certificates by which he or she is short, multiplied by the established amount per certificate. These certificates have a number of roles. Their most important role is to protect consumers from structural rigidities in the fuel supplies market which could result in episodic periods of high fuel prices. Crucially, as I said, the certificates have a secondary role in allowing small suppliers, usually of higher blend bio-fuels, to access the market, particularly when the environmental value of their products is recognised. As I said, we may have a large number of niche supplies from the waste system, or from agricultural products, which can meet the sustainability criteria and have a competitive advantage over other international products.

I do not have any difficulty with the intent of the Fine Gael amendment which seeks to set out how best we can develop our resources. We will have to look at a wide variety of options of how we can develop our bioenergy and biomass industry. When the new obligation certificate is in place and we can see how the European standard system is being applied, we will have a clearer understanding of how Irish producers will fit into the market as it evolves. I am committed to doing whatever I can to make sure Irish farmers and business people end up producing these supplies. In such circumstances, we will have local fuel supplies in the event of a future oil shock, which is the best protection we can have. The Government is committed to meeting its EU obligations and its equal obligation to provide and protect jobs and keep money in this country, rather than importing fuel supplies from elsewhere. That is one of the main objectives of our energy policy.

As I said, I welcome this debate. This is not an issue without controversy. It is not necessarily the case that bio-fuels are good and other fuels are bad. One has to be certain where the bio-fuels are coming from. One has to know what are the environmental implications of bio-fuel production, sometimes in very distant parts of the world. I am committed to ensuring we do not damage other ecosystems for the sake of meeting our fuel supply obligations. We can do this, while meeting our security and climate change emissions reduction objectives. I welcome the debate as a means of advancing a wider understanding of what we are doing.