Enda Kenny (Mayo, Fine Gael)
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Question 38: To ask the Minister for Agriculture and Food the steps she is taking to develop the biofuel sector; the discussions she has had with the Department of Communications, Marine and Natural Resources; and if she will make a statement on the matter. [5651/06]

Mary Coughlan (Donegal South West, Fianna Fail)
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The Minister for Communications, Marine and Natural Resources has overall responsibility for energy policy and is primarily responsible for the promotion and development of renewable energy, including biofuels. Nonetheless, the development of the biofuels sector is a matter that impinges on several other policy areas, including agriculture, transport and taxation, and involves various Departments and agencies. My Department has been represented on a number of interdepartmental groups considering the matter and there is also ongoing contact between my Department and the Department of Communications, Marine and Natural Resources, for example, in regard to the EU Commission's biomass action plan and strategy for biofuels, which will be discussed at next week's Council of Agriculture Ministers' meeting.

I am very conscious of the central role that agriculture can play in supplying the necessary raw materials for the production of biofuels. Oilseed rape, wheat and sugar beet can be used for the manufacture of liquid transport biofuels, while forestry by-products and other farming and food by-products, such as meat and bonemeal and tallow, can be used for energy-heat generation. Tallow can also be used in biodiesel production. Factors such as the increasing cost of oil, the need to reduce carbon dioxide emissions and the opportunity for farmers to explore alternative land uses following CAP reform, mean that the potential of this area must be fully explored.

For the purposes of contributing to the development of policy on biofuels, my Department, in conjunction with COFORD and Teagasc, has examined the potential of energy crops, wood biomass and farming and food by-products. In general, the production of energy crops for biofuels will have to be demand led and production by farmers will only occur if the economic returns are greater than those offered by traditional crop enterprises. In the absence of fiscal incentives, the production of liquid biofuels from energy crops is not economic at current oil price levels. The budget announcement by the Minister for Finance of a major extension of the mineral oil tax relief scheme to cover, when the relief is fully operational, some 163 million litres of biofuels per year should further stimulate the production of crops for the manufacture of liquid biofuels. This initiative will benefit the environment in terms of a reduction in CO2 emissions and it will enhance security of supply of fuels and create jobs and outlets for agricultural production.

Within my own area of responsibility, a range of developments are already under way or in the pipeline that will encourage the production and use of biofuels. These include: grants to promote and develop sustainable forestry, including alternative timber use to reduce dependence on fossil fuels; promoting the use of wood biomass, for example, by the installation of a wood heating system at my Department's offices at Johnstown Castle; funding of forest-to-energy pilot projects; willow planting promotion; supporting biofuels research under the research stimulus programme; grant aiding the application of new technologies such as anaerobic-aerobic digestion and fluidised bed combustion, with a renewable energy dimension; and the use of by-products for incineration and co-incineration in place of fossil fuels.

A number of important developments are also on the horizon at EU level. The Commission has recently produced a biomass action plan and a strategy for biofuels. These are on the agenda for next week's meeting of the Council of Agriculture Ministers. In this context I will be seeking a review of the operation of the energy crops scheme.