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

It is yet again a pleasure to serve under your chairmanship this afternoon and this evening, Mr Bone. It is almost fitting in a way that one of our last debates on this Bill should have ended with the mental image of unpleasant substances going slowly down the plughole—[ Laughter. ] On a more serious note, I shall try to answer the points raised by my hon. Friend the Member for Bristol West.

As hon. Members may know, the fuel duty differential for biofuels derived from waste or used cooking oil was set at 20p a litre. That differential ended on 31 March. The proposed new clause seeks to retrospectively reinstate the differential, and I understand that the industry has expressed a similar wish. Indeed, I have been in correspondence about the issue with, among others, my right hon. Friend the Member for Bermondsey and Old Southwark. Unfortunately, however, we cannot support the proposed new clause tabled by my hon. Friend the Member for Bristol West.

The Government recognise that biodiesel derived from waste cooking oil can be a highly sustainable source of biofuel. However, if I explain some of the history of this differential, that will give the Committee the context for the Government’s decision to allow it to expire.  Until April 2010, all biofuels benefited from a 20p per litre differential. As my hon. Friend has said, in the 2009 PBR the previous Government announced that all differentials were to be scrapped, except for that for biodiesel derived from waste cooking oil, which was extended for two years and expired in March 2012. That was legislated for by the previous Government.

That extension gave additional temporary support to the industry while the Department for Transport amended the RTFO to implement the renewable energy directive in full. The directive requires all European Union member states to achieve 10% renewable energy in transport by 2020. The duty incentive was always intended to be a temporary support mechanism. The planned expiry date was well known by industry for some time, and we believe that the best way to support the biofuels industry in the future is through the RTFO. I shall briefly explain why.

The RTFO requires fossil fuel suppliers to produce evidence that a proportion of their fuel comes from renewable resources. It also rewards biofuels on the basis of their sustainability criteria. Each litre of biofuel produced is awarded a certificate, which suppliers can use as evidence that they have met the obligated proportion. The certificates are tradable. The RTFO has a sharper focus on sustainability than the previous duty differential system, which offered no mechanism for addressing concerns about the sustainability and sourcing of the biofuels supplied, and which treated all biofuels the same.