Seanad debates

Tuesday, 9 February 2010

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

 

Question proposed: "That the Bill be now read a Second Time."

4:00 pm

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
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I am very pleased to return to the Seanad to present the Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010 for its consideration. The main purpose of the Bill is to introduce a bio-fuel obligation in Ireland to underpin the achievement of a number of important national and EU targets around renewable energy and transport in an affordable and environmentally sustainable manner. With all other member states, Ireland is required under the 2009 renewable energy directive to have a 10% penetration rate of renewable energy in transport by 2020. The Government programme and White Paper on energy policy also commit to the introduction of the bio-fuel obligation for similar reasons.

Bio-fuels offer a real, immediate and cost-effective way of simultaneously meeting a number of energy policy aims. Replacing fossil fuels with sustainable bio-fuels results in immediate and noticeable reductions in carbon emissions and an improvement in security of supply. It also opens up new opportunities for existing industries.

Ensuring the cost-effective and sustainable integration of bio-fuels into the fuel supply chain is not an easy task because of the difficulty in balancing the need to keep costs to the consumer to a minimum with the need to ensure a consistent supply of fuels. Therefore, it is imperative we put the right policy in place now to set a clear and transparent framework to facilitate progressive increases in volumes used and to give industry and investors the certainty they need to commit funds. Experience in this country and elsewhere has shown that short-term fiscal measures cannot provide this type of certainty and that only a system of obligation can ensure Ireland seizes the opportunity, takes advantage of bio-fuel and exploits the opportunities for its indigenous production.

It is important to note that policy for bio-fuel fuel use in the future is ambitious but is tempered by a determination, shared among all European governments, to ensure there are no adverse consequences for consumers, the environment or those living where the products needed are grown or extracted. This is critical, given that it seems likely that bio-fuel penetrations of up to 8.5% by energy will be required by 2020, with the remainder coming from renewable energy used in electric vehicles. This determination is reflected in two central aspects of national policy, as reflected in this Bill, and in the 2009 renewable energy directive. The first of these relates to the sustainability criteria regime set out in the directive and incorporated in this Bill. This set of rules, which will come into force across the EU this year, will compel suppliers to ensure every unit of bio-fuel counted towards national targets meets a stringent series of criteria, including life cycle greenhouse gas emissions savings versus fossil fuels, the type of land from which bio-fuel crops can be taken, and ecosystem preservation. This desire to mitigate any additional adverse effects is also reflected by means of a number of review clauses built into the Bill and the directive. These involve scheduled reviews of the effect increased bio-fuel use may have in terms of the market and any environmental and social consequences. In the case of this Bill, it includes the requirement for a review of the ongoing impact of bio-fuel use before any change in the suggested penetration rate.

This is not the first initiative in the bio-fuels sector in Ireland. The mineral oil tax relief schemes, which were introduced to incentivise the production of bio-fuel in Ireland as an interim measure, have proven very successful in getting initial volumes to the market. The market penetration rate for bio-fuels as a percentage of road transport fuels was 0.0003% prior to the schemes being introduced. The figure rose to 1.6% market penetration in 2008 and although final figures for 2009 are not yet available, we expect the figure to be approximately 2.5%. The schemes were designed as an interim measure to increase the level of bio-fuels in the fuel mix and to encourage the development of an indigenous bio-fuels industry in advance of the introduction of the national bio-fuel obligation. There is considerable potential for growth and we can now build on a base we did not have prior to the introduction of the schemes in 2005.

The National Oil Reserves Agency, NORA, will be the administrator of the scheme. I have chosen NORA because the agency has an existing business relationship with the obligated parties, namely, suppliers of transport fuels to the Irish market. NORA is responsible for ensuring Ireland complies with its EU and international requirements for emergency oil supplies. The agency is funded by a levy on mineral fuel which it collects from oil suppliers. It also enters into contracts with oil suppliers for the purposes of leasing oil storage. On that basis, it was deemed that NORA was by far the most appropriate administrator for the bio-fuel obligation. The cost of administering the obligation will be met by a bio-fuels levy on oil suppliers to cover bio-fuels, which are currently exempt. This will ensure the smooth operation of the obligation.

The principal role of NORA will be to administer the bio-fuel obligation on behalf of my Department. The administrator will be responsible for the opening of accounts for obligated parties and bio-fuel producers and suppliers who wish to be part of the scheme. The administrator will have the power to ask for evidence to support all the conditions of the scheme. If the administrator deems that the evidence does not support the information provided, it will have the power to reject the application for certificates for some or all of the fuel in a submission. The administrator will also have the power to revoke a certificate that has been issued if the information or evidence on which the certificate was issued is subsequently found to be false. The administrator will also have the power to certify trading of certificates among account holders. This means obligated parties who have not been able to meet their obligation fully by supplying bio-fuel themselves can purchase certificates from other obligated parties or from bio-fuels suppliers who have registered with the administrator. An obligated party who has a shortfall in the number of certificates at the end of a defined period — the calendar year — will be required to pay a non-compliance fee, calculated on the basis of the number of certificates short multiplied by the established amount of 45 cent per certificate. All of the transactions on accounts will be in electronic format to reduce the administrative burden on those participating in the scheme.

The Bill also has a number of other provisions that do not relate to bio-fuel. It amends the National Oil Reserves Agency Act 2007 to provide for some changes in respect of strategic oil stocks policy. These include provisions on consultation on the rate of the NORA levy, management of NORA's funds, procedures in respect of levy overpayments and increased penalties for non-compliance with legislation in the event of an emergency.

The Bill also proposes to assign additional functions to the Commission for Energy Regulation, which is the independent body responsible for regulating and overseeing the liberalisation of Ireland's energy sector. These new responsibilities relate to the safety regulation of the activities of liquid petroleum gas installers. Established as the independent regulatory body with responsibility for electricity under the Electricity Regulation Act 1999, the CER's powers and responsibilities were extended under the Gas (Interim)(Regulation) Act 2002 to cover regulation of the natural gas market. As the independent regulator for the electricity market, the CER has a range of statutory functions including the licensing and authorisation of electricity undertakings and infrastructure and the regulation of certain tariffs. Within the gas sector, the CER has a similar regulatory role and also has the power to regulate prices charged to BGE's residential and SME gas customers. The Energy (Miscellaneous Provisions) Act 2006 amended the Electricity Regulation Act 1999 to extend further the functions of the CER to provide for electrical and gas safety, including LPG safety. The gas safety regime is now fully operational. However, following legal advice to the Department, it is necessary to address identified gaps in the 2006 amending legislation so that the LPG provisions adequately address the regulation of LPG safety. Given its statutory responsibility to carry out gas safety functions, the CER is evidently best placed to take on the LPG safety functions and responsibilities as provided for in the 2006 Act.

The amending provisions of this Bill represent phase 1 of a two-phase approach to LPG safety. The focus of the phase 1 proposals as set out in the Bill is on LPG installer safety provisions. The second phase will require the undertaking of a detailed consultation by the CER on the appropriate options available for the safety regulation of LPG distribution networks, LPG appliance related incidents reporting in a domestic setting and LPG promotion by the CER. I understand that the CER published the phase 2 consultation document on 4 February. The outcome of that process will inform thinking on phase 2 legislation requirements which will need to ensure there are no regulatory overlaps with the role of agencies such as the Health and Safety Authority. The overall objective is the achievement of first-rate safety standards for the LPG sector.

To place the phase 1 provisions in context, it is important to note there is also legislation outside the scope of my Department which relates to the transportation and storage of LPG. The regulation of the transportation of LPG by sea is a matter for the maritime safety directorate under maritime safety legislation. Transportation over land and the safety regulation of storage facilities are covered by regulations governing the transportation and storage of dangerous substances and by the Safety, Health and Welfare at Work Act 2005.

The safety provisions of the Bill will deliver benefits to LPG consumers and to the public in general. I look forward to working closely with the CER on ensuring the speedy implementation of the Bill's provisions, following enactment. There are no Exchequer costs associated with this Bill.

I now propose to outline the main provisions of the Bill. For the convenience of the House, a detailed explanatory memorandum has been published and this provides a synopsis of the provisions of the Bill. The Bill consists of 27 sections and four Parts. It establishes that a bio-fuel obligation will be introduced in Ireland which will compel road transport fuel suppliers to have an average of 4% bio-fuel included in their fuel sales each year. The obligation will be administered by the National Oil Reserves Agency, NORA, as an additional function to its current remit. Part 1 contains standard provisions concerning Short Title, commencement, definitions and making of orders connected with the Bill.

Part 2 sets out how the bio-fuel obligation will work. Section 3 outlines how the National Oil Reserves Agency Act 2007 will be amended by the insertion of an additional Part to the Act to allow for the introduction of the bio-fuel obligation. The section sets out the manner in which the scheme will operate, to whom it will apply, and the definitions to be used in respect of the bio-fuel obligation. It also details penalties which will be enforced relating to non-compliance. The section also sets out the accountability of NORA and the account holders relating to the obligation, along with the powers and functions of NORA relating to said obligation.

Part 3 of the Bill sets out the amendments required to the principal Act to ensure that all powers conferred on NORA in the existing Act are extended to include administration of the bio-fuel obligation. Sections 4 and 5 provide for amendment of specific sections of the principal Act to allow NORA to administer and operate the bio-fuels obligation as an additional function to the current remit. Section 6 provides that directors appointed to the board of NORA have knowledge of the bio-fuel area and that the directors, including the chairperson and chief executive, shall be paid by NORA out of the levy and bio-fuel levy such remuneration and allowances for expenses as the Minister, with the consent of the Minister for Finance, may decide. Sections 7 to 10 provide that the bio-fuel levy collected can be used by NORA to pay for consultants' fees or expenses incurred by a subsidiary of NORA if required and that the bio-fuel levy can be used to pay for staff and the chief executive of NORA.

Section 11 provides that the National Treasury Management Agency, with the consent of the Minister for Finance, may act on behalf of NORA in respect of investments, borrowings and related financial transactions. Section 12 provides that reference to expenses shall also include any costs incurred by NORA in administering the obligation or in collecting the bio-fuel levy. Section 13 provides that the Minister for Communications, Energy and Natural Resources shall consult with the Minister for Finance in setting the rate of the NORA levy.

Sections 14 and 15 provide for the amendment of the enforcement and penalties provisions in the principal Act in order that the bio-fuel obligation is also covered. Section 16 provides for the procedures in respect of reclaiming overpayments of the bio-fuel and NORA levies and specifies that claims for overpayment must be made within 18 months of the end of the year in which the overpayment was made. Section 17 provides that should a dispute arise with an account holder over whether the payment of the bio-fuel levy is appropriate, the onus is on the account holder to prove otherwise, as is currently the case for the NORA levy.

Section 18 provides that NORA or the Minister for Communications, Energy and Natural Resources may prosecute offences that relate to the bio-fuel obligation and that a court may order a person convicted of an offence to recompense NORA for its costs in investigating, detecting and prosecuting the offence. Section 19 amends the principal Act to clarify that notices may be served by electronic means.

Part 4 deals with miscellaneous amendments to three Acts, namely the Fuels (Control of Supplies) Act 1971, the Electricity Regulation Act 1999 and the Energy (Miscellaneous Provisions) Act 2006. Section 20 updates the fines on summary conviction and on conviction on indictment for offences under section 4 of the Fuels (Control of Supplies) Act 1971.

Safety is, and must remain, a matter of highest priority. The phase 1 proposals contained in this Bill propose to provide for the extension to LPG installers of the existing natural gas installers safety regime. These provisions are addressed under sections 21 to 27 of the Bill. Section 21 of the Bill provides that references in the Bill to "the Act of 1999" mean "the Electricity Regulation Act 1999", described as the 1999 Act. Section 22 amends section 2(1) of the 1999 Act by inserting definitions in regard to LPG and LPG fittings. It also extends the definition of "gas installer" to include LPG installers. Section 23 amends section 9 of the 1999 Act to extend the functions of the CER to include regulation of the activities of LPG installers with regard to safety. It also provides for the establishment by the CER of an LPG safety framework. Section 24 provides a definition of LPG works.

Section 25 amends section 9H of the 1999 Act to extend the functions of the CER to the making of regulations relating to LPG safety. Such regulations may provide for specifications regarding the installation or maintenance of LPG fittings, the conditions to be fulfilled before LPG may be connected or re-connected to a premises following installation, maintenance or repair of an LPG fitting. The penalty provision set out in the 1999 Act, which applies in regard to non-compliance by a person with the natural gas regulations, is to be extended to LPG. In the case of domestic dwellings, an amendment is provided to extend responsibility to the landlord for ensuring an LPG fitting is safely maintained. In the case of a premises used as a place of business similar responsibilities are set out.

Section 26 of the Bill amends section 9J of the 1999 Act. This provision relates to the appointment of gas safety officers. The amendment proposes to extend the powers of gas safety officers appointed by the CER to the inspection of LPG fittings, to the issue of directions, to the taking of measures for the protection of the public from any danger arising from LPG and to the disconnection of LPG supply. Section 27 of the Bill provides for the repeal of section 14 of the Energy (Miscellaneous Provisions) Act 2006.

This Bill is an important measure in delivering on our targets for renewable energy in transport. Furthermore, the safety provisions of the Bill will deliver benefits to LPG consumers and to the public in general. I look forward to working closely with the CER on ensuring the speedy implementation of the Bill's provisions following enactment. I commend the Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010 to the House.

Photo of Joe O'ReillyJoe O'Reilly (Fine Gael)
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The objective of the Bill is to amend the National Oil Reserves Agency Act to ensure 4% of transport fuels will contain bio-fuel. Apart from any efficacy of policy, this is necessitated by the EU target of 10% of transport energy coming from renewables by 2020. Both climate change policy and the EU directive necessitate the legislation. In that context my party has no objection in principle to the legislation. However we have concerns, the first of which centres on the fact that there is insufficient commitment in the legislation or in the Minister's speech on Second Stage to the principle that we must produce bio-fuels domestically. We must achieve much higher levels domestically rather than importing bio-fuel. This is the critical weakness in the Minister's presentation and in the legislation.

At present, 90% of Ireland's energy requirements are imported. Some 70% of our requirements in bio-fuels are imported and we spend €6 billion per year on imported fuel. We do this at a time when farm incomes are on the floor and farmers could do with second incomes, when some 437,000 people or 13 in every 100 people are without work and when the potential for green energy jobs in this country is enormous. There should be a system of much greater incentivisation of farmers to grow raw materials for bio-fuels. This is a first step. There have been tax incentives for the manufacture of bio-fuels and I accept these have had a modest level of success initially in getting us onto the pitch but they are inadequate for the future.

Given that the obligation will increase the price of petrol and diesel by 1 cent per litre, it makes it more imperative that there be a large domestic element to the production. The Irish Bioenergy Association estimates that meeting the bio-fuel obligation from Irish production will lead to €170 million in direct economic activity and create 1,700 jobs. The option of domestically producing bio-fuels is becoming more attractive as fossil fuel prices increase. Fine Gael set out a roadmap for domestic production of bio-fuels in its job creation strategy. We propose that Bord na Móna, Coillte and the National Council for Forest Research and Development should be brought under the same umbrella to create a new State energy company called BioEnergy Ireland which would invest €800 million between 2010 and 2013 in next generation bioenergy technology such as biomass, combined heat and power generation and transport. We would develop five new production plants to produce an additional 150,000 tonnes of biodiesel, a reforestation programme on an estimated 20,000 hectares and biomass combined heat and power plants at high energy demand locations such as hospitals, industrial estates and hotels. The return on this investment would come from diverting the resources we currently spend on imported fuels in these sectors and this would be the bonus.

It is worthy of mention that Teagasc has carried out considerable empirical and academic research on this matter. In a recent Teagasc report it was stated that 100,000 hectares of Irish land could reasonably be set aside for producing the ingredients for bio-fuel without interfering with food production and I will deal later with the national and international sense. A total of 100,000 hectares could be committed to the production of bio-fuels and this would provide a very significant injection to the economy and to hard-pressed farmers.

If our distinguished Acting Chairman, Senator Paul Bradford, makes a contribution later I presume he will draw the attention of the House to the sugar beet industry in his area of County Cork and in the south of Ireland which has gone by the wayside and to the great potential to replace that industry with bio-fuel production and growing crops for bio-fuel. I refer to incentives for the growing of willow and maize. I suggest the Minister goes to Cabinet to obtain a package to match this legislation in order to create a domestic bio-fuel industry for the production and processing of the raw materials. I refer to the need for tax incentivisation to be expanded and this is an important dimension.

The legislation contains a commitment to ensure sustainability but I ask the Minister in his reply to give the House the necessary assurances on where the imported bio-fuels will come from and the sustainability criteria applicable. EU law provides mechanisms for the measurement of sustainability and also for monitoring processes but I ask the Minister to assure the House these will be transparent and will work. I have the privilege of succeeding our distinguished Acting Chairman as a member of the Council of Europe. The issue is raised constantly in discussion of bio-fuel, biomass and bio-energy, that in many instances the production of bio-fuel raw materials has displaced food production and is a source of inflation of food prices. This was notably the case in 2008. While there are other factors in the acceleration of food prices, such as harvests and inflation, the displacement of food production by the production of bio-fuel raw materials is as ongoing issue and has caused a major problem. The FAO, the agricultural food organisation of the UN, has established this as a cause of the increased price of food. Oxfam and a number of non-governmental agencies have issued appeals to restrict the growing of bio-fuels in some areas.

The cutting down of the rain forests has been a significant issue in Brazil and this is another consideration. I ask the Minister to comment further on where material will be sourced internationally and what controls and transparency will be put in place. In fairness to the Minister I know he accepts we cannot tolerate a situation where we would be importing bio-fuels from countries where there was a lack of sustainability measures in the production process and I am concerned this should still be the case. It is the concerned view of the few people I spoke to who have a relative level of expertise that we cannot import the level we require without causing a lack of sustainability in areas and I ask for the Minister's comments.

The importation of raw material for bio-fuels incurs not only transport costs but also carbon emissions as a result of the ferrying of this material so in a perverse way, the overall climate change objective is being defeated. There are also the issues of the effects on indigenous populations in the countries from which they come, particularly in developing countries, and the effect on international food prices to be considered.

This serves to make my original point that the entire thrust of Government policy should be on domestic production of bio-fuels and on developing a micro-generation of wind energy for farms and the co-operative movement. The traditional co-operative movement organised creameries and was founded by Horace Plunkett and I refer to co-ops such as the Dromcollogher co-op. There is a new co-operative movement where communities come together to acquire a local generator to manufacture their own energy and to sell the excess on to the grid. The same would apply in the growing of maize, willow and other raw materials for bio-fuel production.

There are compelling arguments regarding employment needs, the needs of the domestic economy and best international practice and climate change policy to focus on domestic production. I refer to my constituency which is very proud of Senator Martin Brady who is one of our emigrés to Dublin. The constituency has no internal railway system, a limited bus service outside of the N3 and therefore cars are a necessary part of going to work. Any increase in the price of petrol or diesel is of significant economic importance in those areas and is a disincentive to employment and economic recovery and activity. Consequently, anything that would cause that should have a corresponding beneficial impact and hence the compelling need to develop domestic bio-fuels.

I acknowledge the legislation proposes to deal with this but there are questions about the level of carbon emissions to be prevented by bio-fuels. It is said that the carbon absorbed in the growth of the raw materials is then burned out at processing and is carbon-neutral in that sense. There is also an assertion that the level of efficiency is just 35%. I am aware that there are mechanisms in the legislation. I would like the Minister to comment on that point. It is important for us to achieve that. I am pleased that it will be possible to sell the certificates. They will be a marketable quantity. A company that produces extra bio-fuel will be able to trade its surplus in a reasonable manner to a company that is producing less bio-fuel. That is a good proposition. I am reasonably satisfied with the policing mechanisms in the legislation. We will examine that further on Committee Stage.

I will conclude by setting out my essential view of the legislation. In principle, it is correct that we provide for the 4% obligation. In practice, however, we are putting the cart before the horse. We are not placing a sufficient focus on the indigenous production of raw materials for bio-fuels. It should not be beyond the genius of the Government to ensure it becomes a native industry. It is an indictment of the Government that it has acquiesced in importing to such a degree. That is my essential concern. My secondary concern is to ensure we do not import to the detriment of vulnerable people, as we did over 100 years ago.

Photo of Martin BradyMartin Brady (Fianna Fail)
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I welcome the Minister, Deputy Ryan, and his officials. I am glad that my colleague, Senator O'Reilly, is present for this debate. He mentioned that there used to be many train stations in County Cavan. Some time ago, the Senator and I discussed the possibility of reopening the railway line to Kingscourt. We might revisit the matter now that the Senator has raised it again.

Photo of Joe O'ReillyJoe O'Reilly (Fine Gael)
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Yes.

Photo of Martin BradyMartin Brady (Fianna Fail)
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Senator O'Reilly has covered many of the issues I wanted to raise. I will make a few general points. The potential gains associated with bio-fuels were recognised by the Minister for Communications, Energy and Natural Resources in November 2009 when he announced the bio-fuels obligation for the industry. When the Minister made the reduced reliance on fossil fuels argument, he said that over €6 billion is sent overseas each year to import fossil fuels. As Senator O'Reilly said, that figure is likely to increase in the future. The Minister said at that time that access to an alternative energy supply is vital to provide security, particularly in light of Ireland's vulnerable position. He advocated the bio-fuels obligation approach that is being taken in this Bill. He argued that this measure will provide a guaranteed market for the bioenergy sector. He also said that our forests and farms will be able to provide the fuel of the future through the new scheme. That will help us to reduce our carbon emissions and thereby tackle climate change. These goals have been echoed by an EU Commissioner, who has said the growth in greenhouse gas emissions from the transport sector, which was mentioned by Senator O'Reilly, threatens to cancel out savings made elsewhere. He has contended that increased vehicle efficiency, coupled with the move towards vehicles powered by renewable energy including bio-fuels, has the capacity to make a big difference. He has also referred to the potential of bio-fuels to contribute to employment in rural areas and to the scope for research and development, in terms of second generation bio-fuels. As Senator O'Reilly said, it is important to be conscious of the importance of domestic bio-fuels production too.

I would like to speak about the food versus fuel argument. In January 2008, maize prices increased by 300%, wheat prices increased by 127%, rice prices increased by 170%, and vegetable oil prices increased by 200%. It needs to be recognised that such price increases were caused by various factors. The World Bank has argued that the most important factor was the large increase in bio-fuel production from food stocks in the European Union and the United States. When considered alongside the depletion of stocks as a result of the production of bio-fuels, the contribution of other factors, such as poor yields and bad crops due to drought, to price increases would have been moderate. In the US, the increase in fossil fuel energy costs, which feed into agriculture production costs, accounted for between 15% and 20% of crop prices. The food versus fuel debate was to the fore in a recent Seanad motion on the proposed bio-fuels obligation scheme. Senator O'Reilly mentioned Teagasc's estimate that up to 100,000 hectares of land could be used for bioenergy crops without damaging, interfering with or putting at risk our food production targets. Even if Ireland could produce bio-fuels without damaging food production, it is important to remember that this is a global issue. It is possible that some of the imported bio-fuels will come from areas where food production is displaced.

The European Union's energy import dependency is forecast to reach 64% in 2020. That is why the Commission is doing all it can to improve EU levels of energy-efficient renewables, including bio-fuels. Energy efficiency is one of the least costly ways of reducing our impact on the environment. The use of renewables, including bio-fuels, is seen as an important means of increasing energy security, diversifying our energy mix and using locally available clean sources of energy. Greenhouse gas emissions from the transport sector are increasing rapidly. This growth threatens to cancel out the savings being made elsewhere. On present trends, transport will account for more than 60% of the Union's increase in carbon dioxide emissions between 2005 and 2020. At EU level, there are just two policies with the capacity to make a difference to this trend. We must strongly and simultaneously promote both improvements in vehicle efficiency and vehicles powered by renewable energy, most importantly bio-fuels. Such developments can contribute to employment in rural areas in the EU and in developing countries. They can offer scope for technological developments, for example in second generation bio-fuels. A renewable transport fuel obligation has been in operation in the UK since April 2008. The Irish Bioenergy Association has cited evidence that the UK scheme has led to the importation of 89% of bio-fuels used in the UK. It further claims that the certificates issued in the first year are now worth just 6p per litre. The conclusion reached is that there is a future for sustainable bio-fuel production. However, feed stock production must avoid exploiting land which otherwise would be used for food production. If the land use change is not checked, there is a concern that it will reduce biodiversity. It has been suggested that it even has the potential to cause, rather than reduce, greenhouse gas emissions. Irish farmers will not grow bio-fuels unless it is financially attractive for them. I am glad a scheme of grant assistance along those lines has been announced in recent days. That is very good news.

I am sure the Minister will clarify the various points, as he always does. This Bill is necessary, as Senator O'Reilly said. If the points for clarification are taken on board, the Bill will satisfy and meet the requirements of all concerned.

Photo of Feargal QuinnFeargal Quinn (Independent)
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I welcome the Minister to the House for this interesting debate. I mentioned to him previously that when I was interviewed on television three years ago, I was asked what business I would go into if I was going into business now, and I said I would go into sustainable energy. After that interview, I was impressed to receive many letters and a great deal of information from enthusiastic people throughout the country who have all sorts of ideas in respect of sustainable energy. Since then, I have been approached by people involved in nuclear energy who believe that sustainable energy should include nuclear energy. While that is not the subject of our discussion, it is a topic of interest.

It strikes me that there is insufficient debate on the many side effects of growing bio-fuels. Enthusiasts, including those in the green movement, are quick to advocate the purported great benefits of such fuels. The green movement uses fear as one of its main offensives as it seeks to have governments change their policies, even in cases where the theory behind their initiatives is flawed.

I note the Minister's claim that "the obligation [for bio-fuels] will be on the companies in question and at no cost to the taxpayer". While his statement is correct, the cost will borne by the consumer, specifically the person who is travelling. This cost is in addition to the carbon tax which will be introduced next month. While these green ideas look good on paper, we cannot accept as fact the arguments used to promote the green agenda. We should consider, for example, the numerous ways in which a person who is travelling by bus to collect his or her social welfare payment will be taxed.

Although the carbon from bio-fuels does not contribute directly to global warming when such fuels are burned, there are several well known side effects such as competition with food crops, the need to clear virgin land to grow them and the energy costs of processing them. An interesting study was published recently by Dr. Jerry Melillo of the Marine Biological Laboratory in Woods Hole on how bio-fuels could change world agriculture during the 21st century. It is worth noting that 53 scientists affiliated to the laboratory have been awarded the Nobel Prize. Dr. Melillo's study concentrates on the likelihood that bio-fuels will be made from whole plants such as fast growing grasses, rather than the food cum bio-fuel crops used today. The study shows that the widespread growth of bio-fuel crops is likely to cause a net global release of greenhouse gases during the first half of the century, as land is cleared and fertilisers are scattered liberally. I had not heard this theory previously. According to Dr. Melillo, in the correct circumstances the CO

A recent United Nations report states the use of maize for bio-fuel in the United States can also be inefficient. Properly planted and processed, maize for bio-fuel contributes to the cutting of emissions but, done poorly, this form of bio-fuel is more polluting than petrol. The report also found that the use of bio-diesel from palm oil plantations grown on deforested peatlands resulted in greenhouse gas emissions up to 2,000% greater than those generated from fossil fuels. These observations must be taken into account in the long term.

Two papers published last year in the journal Science show that carbon released by ploughing new farmland to grow bio-fuels takes many years to repay. As the green movement argues, preventing climate change requires immediate and significant cuts in emissions. On that basis, the current policy does not make sense.

When one considers the other greenhouse gases produced by growing crops, the position appears to be even more futile. Nobel laureate Paul Crutzen has estimated that emissions of nitrous oxide, a greenhouse gas arising from the use of nitrogen fertilisers, wipe out all the carbon savings produced by bio-fuels. This finding is not taken into account in overall calculations. Many experts calculate that the gross energy input in bio-fuels, including fertilisers and so forth, is greater than the energy produced. If that is the case, bio-fuel production does not make sense. Dr. Tim Searchinger of Princeton University has made the point that the rules for assessing compliance with the Kyoto Protocol are biased in favour of bio-fuels because they fail to account for emissions from land cleared to grow such fuels.

Last year food riots occurred in Morocco, Mexico, Mauritania, Senegal, Uzbekistan and Yemen, among other countries. Mr. Jean Ziegler, the United Nations special rapporteur on the right to food, has called for a five year moratorium on bio-fuel production. His call is based on the view that a moratorium would also protect the interests of some of the world's most vulnerable citizens.

At the start of this month the World Bank, the United Nations and politicians from a number of countries met in London to discuss food security. Considerable concern was expressed that global population growth, climate change, pressure on water supplies and increasing use of bio-fuel crops would spark a new wave of food shortages and rising prices in the developing world. This view is supported by figures from the United Nations Food and Agriculture Organization which indicate that the number of starving people has risen from 830 million to 1 billion in the past two years. I recall citing in a previous debate the figure that 830 million people go to bed hungry every night. The World Bank is stepping up its investment in agriculture after decades of largely ignoring the sector. In other words, it has decided action must be taken on this issue.

I question whether the Minister's initiative will spur domestic production of bio-fuels. Perhaps instead of stimulating domestic production of bio-fuels, businesses will source these products from where it is cheapest. If we end up importing all our bio-fuel needs from South America, the carbon footprint from transport will surely increase. Visiting Brazil three years ago I was astounded to discover that every petrol station sold both fossil fuels and bio-fuels. When I asked about the issue, I learned that bio-fuels accounted for approximately half of fuel consumption. As has been noted, however, the generation of bio-fuels in Brazil is causing significant damage to rainforests.

A recent report by the United Nations environment programme states categorically that bio-fuel adoption targets in developed countries such as Ireland are contributing to land use changes in developing countries. This argument has been made by environmental groups which state bio-fuel demand is indirectly contributing to deforestation in countries such as Brazil and Indonesia.

I question whether the crops used to make bio-fuels are an emerging market and inexpensive. Figures published by the International Monetary Fund show that oilseed rape cost $398 per tonne in October 1999. By September 2009, however, the average price had increased to $857 per tonne. Are bio-fuels as cheap as the Government contends or will prices continue to rise? Their price appears to be increasing much faster than prices for other commodities.

The national bio-fuels strategy has been a disaster. Having set a target of achieving a 2% bio-fuels penetration rate by 2008, it had only reached a figure of 0.5% in 2007. On what basis will the new strategy be different?

We must consider the massive impact of bio-fuels on water consumption, which is a major challenge. It is estimated that it takes more than 9,000 litres of water to grow sufficient soy to produce one litre of bio-diesel and up to 4,000 litres for corn to be transformed into bio-ethanol. While bio-fuels have been strongly criticised for their role in causing food shortages, the strain they place on water resources should also be acknowledged. The figures I have, which I hope are correct, suggest the production of beef does not make sense as it takes 10,000 litres of water to produce a certain number of kilograms of beef. The world has not faced up to the water shortage. I know it is of concern to the Minister and I have heard such concern expressed by members of the Green Party. We must seriously examine it. We are not giving enough attention to the water problem. We have a different problem in the west with water.

Should we not examine producing electricity at local power stations using wood, straw, seed oils and other crop or waste materials which the United Nations says "is generally more energy efficient than converting biomass to liquid fuels"? Going green is all very admirable but we must seriously question whether bio-fuels will make things worse rather than better. Friends of the Earth states that bio-fuels often lead to more emissions than the petrol and diesel they replace. There is a real danger that the current fixation on bio-fuels could be misplaced and we should not be bullied into supporting something which lacks much crucial scientific support. Doing so could have serious consequences in the future.

I understand from where the Minister is coming and what he is trying to achieve but I question in general whether this is the right direction to go. Are there other solutions by which we could achieve what we are setting out to do? The Minister's heart is in the right place and all of us are aiming at the right direction but I question whether this is the right thing to do.

Debate adjourned.