16:30 Jesse Norman (Conservative)

That the Committee has considered the draft Renewable Transport Fuels and Greenhouse Gas Emissions Regulations 2018.

It is a delight to serve under your chairmanship, Ms McDonagh. The regulations contain important changes to two existing schemes that place requirements on suppliers of fuels. The schemes are provided for by the Renewable Transport Fuel Obligations Order 2007 and the Motor Fuel (Road Vehicle and Mobile Machinery) Greenhouse Gas Emissions Reporting Regulations 2012. Those require suppliers to reduce greenhouse gas emissions from fuels supplied in relation to transport, including through the supply of biofuels, and to report those reductions accurately.

The proposals before us today are the result of extensive consultation and input from industry, fuel experts and environmental organisations. In 2015 my Department and the low-carbon vehicle partnership’s transport energy taskforce, comprising more than 50 organisations, reported on how the UK might meet its EU 2020 greenhouse gas emissions reduction and renewable transport fuel targets. The taskforce’s report also considered how low-carbon fuels could help to reduce greenhouse gas emissions from UK transport in the period to 2030 and beyond. That work informed public consultations on the proposed amendments.

The greenhouse gas reporting regulations currently require designated fuel suppliers to report the amount and type of fuel that they supply, and its greenhouse gas intensity. The regulations operate in parallel with the RTFO scheme. As a consequence, information reported by suppliers under the RTFO order is for the most part sufficient to discharge a supplier’s obligation to report.

Since the RTFO was introduced in 2008, the greenhouse gas emissions savings of the renewable fuels supplied have improved year on year. Last year the average greenhouse gas saving of a litre of renewable fuel was 71% compared with petrol and diesel. That is in no small part due to the approach that the Government have taken to encourage the supply of renewable fuels from wastes and residues. The most recent statistics show that 66% of biofuels supplied in the UK were made from a waste or residue, and so they did not compete for land with food crops.

The draft regulations before us would build on that success. They would amend the RTFO order to increase the targets for renewable fuels to 9.75% of fuel supplied in 2020, with further incremental increases to 12.4% by 2032, providing long-term policy stability to industry and investors. They would also set sub-targets, starting in 2019, for the supply of renewable fuels classified as “development fuels”. That would increase incentives to supply new types of advanced fuels that are of strategic future importance to the UK. In line with that strategy, the draft regulations make certain renewable aviation fuels, renewable fuels from non-biological feedstocks, and renewable hydrogen eligible for reward under the RTFO order. They mitigate the risk that biofuels supplied will not deliver reductions in greenhouse gas emissions by placing a limit on the contribution that biofuels produced from food crops can make to meeting targets to supply renewable fuels. That limit is set at 4% in 2018, 3% in 2026, and 2% in 2032. Finally, they ensure that wastes that would be disposed of are eligible for greater incentives than those with other productive uses.

The draft regulations propose extensive changes to greenhouse gas reporting regulations in order to create a new GHG credit trading scheme. The new scheme will be familiar to suppliers as it copies many aspects of the RTFO scheme. The two schemes will be administered jointly, and the Department is aligning much of the reporting required so as to minimise burdens on suppliers.

The new GHG credit trading scheme will replicate the protections afforded under the RTFO scheme, both to smaller suppliers through equivalent deductions in obligation, and to motorists through a buy-out mechanism. Key features of the new GHG credit trader scheme include a greenhouse gas emissions reduction obligation on suppliers of fuel and energy for use in road transport and non-road mobile machinery, and suppliers will be required to reduce the overall greenhouse gas emissions of the fuel they supply, compared with 2010 levels. They must achieve a 4% reduction in 2019, and a 6% reduction in 2020. The scheme also provides incentives to suppliers by rewarding GHG credits for the supply of renewable and fossil fuels that have lower greenhouse gas emissions than ordinary petrol and diesel, for electricity use and electric road vehicles, and for reductions in upstream emissions from the extraction of crude oils. The GHG trading scheme aligns with the strategic objectives of the RTFO by offering rewards for the supply of renewable fuels used in aviation.

The draft regulations do not mandate E10, in the sense of requiring that 10% bioethanol must be blended in petrol. Instead, they allow fuel suppliers to determine how best to meet their obligations. Moving to E10 fuel could make achieving our renewable energy targets easier and provide an economic boost to domestic producers of bioethanol and UK farmers in the supply chain. The Department therefore remains committed to working with industry to ensure that any future introduction of E10 is managed carefully, and that E5 remains available for vehicles that are not compatible with E10.

To round up, the draft regulations will begin the implementation of the ambitious strategy for renewable fuels that the Government set out last September. That strategy seeks to accelerate the delivery of sustainable alternative fuels for aviation and other sectors that are hard to decarbonise, thus enabling the UK to lead in developing and deploying those fuels. The draft regulations also take into account the wider economic importance of existing UK biofuel production and seek to maintain that market. I therefore commend them to the Committee.

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16:41 Karl Turner (Labour)

The Minister and I met briefly before the Christmas recess, I think it was, and I lobbied him very hard. I am grateful to him for doing what he said he would, which was to work hard to ensure that the draft regulations were brought forward swiftly. That is very much what has happened. The draft regulations are a step in the right direction for the UK to decarbonise transport. As hon. Members will know, transport is the single largest greenhouse-gas-emitting sector. This is a worrying issue, and we must deal with it as soon as we can.

The draft regulations set out to increase the target level for renewables to just under 10% in 2020 and well over 12% by 2032. That will satisfy existing renewable fuel providers. However, I think it is fair to say that the proposals lack ambition. Perhaps the Government can look at further increasing the targets in the very near future. They aim to incentivise the development and take-up of new types of green fuels, as well as revising a crop cap for these types of biofuels. We are aware that the Government have taken that decision because these fuels could eventually result in a net increase in greenhouse gas emissions. The Opposition would therefore like the Government to answer some brief questions and clarifications that I will place on the record. I do not expect the Minister to respond fully today; perhaps he could do so in writing.

I would also like to hear from the Minister about what the Government are doing to support the introduction of E10. He mentioned it briefly in his opening speech, but what are they doing to support the introduction of E10 and when will it be moving forward? It is already used successfully in other countries. We should be at the forefront of adopting new, environmentally friendly fuels in order to tackle climate change, but the Government seem to be dragging their feet on that important issue. Currently, the option of adopting E10 is open to suppliers in meeting their targets under the obligations. Previous Governments have shown the way in mandating unleaded petrol and low-sulphur fuels. Perhaps the Government should look at that model.

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16:46 John Hayes (Conservative)

It is right that we address emissions from transport—as the shadow Minister said, they are significant—and the principal way of doing so is to move to low or zero-emission vehicles. However, there is a strong case for biofuels, and it is perfectly possible to continue with our ambition to encourage the purchase of low or zero-emission vehicles—electric vehicles being the obvious case in point—while taking a generous view about the contribution that biofuels can make. That is not only because the biofuels industry is, as has already been said, significant in particular places, but because it is increasingly well established and invested.

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16:52 Jesse Norman (Conservative)

So far, UK suppliers have responded to the challenge by supplying renewable fuels that have increasingly higher greenhouse gas reduction benefits and are sustainable. My Department is confident that suppliers will also respond to the opportunities presented by these regulations.

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