New Clause 3 - Fuel duty differential for biodiesel

Part of Finance Bill – in a Public Bill Committee am 8:30 pm ar 26 Mehefin 2012.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Chloe Smith Chloe Smith The Economic Secretary to the Treasury 8:30, 26 Mehefin 2012

Let me return to that point in due course to be sure that I can answer satisfactorily.

The key point about certificates is that they are given a double value for that particular biofuel. Giving twice the financial support to biofuels derived from waste compared with conventional biofuels provides a clear incentive for sustainability in the system, in particular for biodiesel derived from waste cooking oil.

A further important point is the fluctuation of behaviour in the system. The Department for Transport’s view is that a few months’ data on certificate prices cannot give a clear forecast of prices to come. This year is somewhat unique because of the transposition of the renewable energy directive and it is too soon to tell whether the recent crisis reflects a longer-term trend. However, we have committed to reviewing the double certificate system to ensure that it is having a positive effect on the biofuels industry, and I strongly believe that it is the right time for the RTFO to support and incentivise that industry.

Let me briefly consider the costs associated with the new clause and reinstating the duty differential. The previous Government estimated the costs of the duty differential to be £10 million a year, but here is the rub: the cost was much greater—£80 million in 2010-11, increasing to £160 million in 2011-12. Although domestic production of that sort of biofuel increased from April 2010, the majority of the supply was imported as international producers took advantage of the UK’s tax relief. Our analysis suggests that, if the rebate were continued, it could cost around £200 million in 2012-13 and continue to increase in future.