Bio Energy Obligation and Miscellaneous Provisions Bill 2010.

April 22nd, 2010 - Pat Breen

I welcome the opportunity to speak on the Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010.  The Bill amends the National Oil Reserves Agency Act 2007 in order to establish a bio-fuel obligation scheme with the result that 4% of transport fuels will comprise bio-fuels.

  The Bill establishes a bio-fuel obligation scheme.  Some 4% of transport fuels will come from renewable sources.  The EU has set a target of 10% of transport energy from renewable sources by 2020.  It is extremely important that the EU and Ireland have those targets and that Ireland sticks to them.  As was said last night in Private Members’ time, the country is over-reliant on imported fossil fuels to service its energy requirements.  Most Members spoke about that over-reliance and the fact fossil fuels account for almost 96% of Ireland’s primary energy mix.  The fact we must import those fuels makes us very reliant on energy sources from elsewhere.

  I acknowledge that some encouragement has been given to people to invest in bio-fuels through excise relief and tax incentives.  There is much more scope in that area.  Ireland is much more suited to developing second generation bio-fuels which use the entire plant or the waste part of the plant and, therefore, they do not compete with human food needs, which is extremely important.  First generation bio-fuels are vegetable oils, animals fats, starch, etc.  A small percentage of farmers in the agri-industry are already involved in the cultivation of elephant grass and willow.

  The biggest challenge facing Irish farmers, who would like to diversify and set aside some of their land to grow willow, is getting their crops from the field to the marketplace, as there are very limited markets.  Given the cost involved in trying to diversify and the way agriculture has gone, there is a huge burden on farmers who try to diversify to these second generation crops.  The initial planting costs are very high.  It costs approximately €2,600 to plant an acre of willow, although approximately 50% is grant-aided.  In the case of willow, profit margins are comparable with other sectors, such as beef and dairy.

  The development of willow is a three year cycle, so farmers can also face the same difficulties as many other businesses in the country.  They must try to convince the banks to support them which is not very easy given the state of the banks and the fact they are very reluctant to lend to farmers or to any other sector in society because they do not want to take a risk.  The farmer must wait for their product to grow.  Credit in the banks has dried up, so that is a big issue.

  In order to provide a bio-mass market, a local willow growers group, JHM, was established in west Limerick.  It has been very innovative in this regard.  It has developed miscanthus logs which are used in stoves.  They have proved very popular.  They are long-lasting, burn very slowly and are carbon negative, which is a very big seller in shops in my county.

 

   Deputy Ciarán Cuffe: I am a fan as well.

 

   Deputy Pat Breen: Good.  Some of my councillor colleagues use them as well.  The success of this product proves there is a market for miscanthus and, therefore, we should encourage more farmers to diversify and not to have all their eggs in one basket given the way the markets are currently.

  The other big problem facing Irish producers of bio-fuels is the fact that imported bio-fuels from countries like Brazil, China and Thailand are cheaper.  Like everything else, they are produced at lower cost.  I am told the cost of these bio-fuels is much cheaper in France and Germany, although they have a greater land mass.

  Many farmers with land which may not be suitable for anything else could grow energy crops.  However, if more farmers are to be encouraged to diversify into these products, adequate supports must be provided.  Training is needed for farmers who would like to get involved in growing these crops.  An issue for the Department of Agriculture, Fisheries and Food and the training bodies is to encourage young farmers, in particular, who want to stay on the land to consider this option.

  We must also learn lessons from what happened when we tried to produce bio-ethanol from sugar beet.  In 2005, Irish farmers produced 31,000 hectares of sugar beet for use in food production.  However, the cost of production was a deterrent for farmers who would have liked to have become involved.  In any event, the reform of the EU sugar sector in 2006 ended any case we had to convert sugar beet for bio-ethanol production. The development of first generation bio-fuels has added to the food versus fuel debate.  Teagasc estimates that between 75,000 and 100,000 hectares of land could be devoted to energy crops without having a negative impact on animal feed or food production.  The organisation needs to become more vocal in disseminating this message to farmers.

  Recent analysis by the Department of Agriculture in the United States suggests production of bio-fuels is impacting on world food supplies.  Figures show ethanol production increased to a record level in 2009, driven by farm subsidies and laws which require vehicles to use an increasing amount of bio-fuels.  Mr. Lester Brown, the director of the Earth Policy Institute, the Washington think tank which conducted the analysis, stated that the grain grown to produce fuel in the US in 2009 was sufficient to feed 330 million people for one year at the average world consumption level.  Last year, 107 million tonnes of grain, primarily corn, was grown by US farmers and blended with petrol.  This was twice the amount grown in 2007.

  Bio-fuel production presents a significant opportunity to develop rural areas, including, for instance, Kilrush in my constituency of County Clare.  Much of the shoreline of the Shannon estuary does not have beach.  Seaweed was traditionally collected in the area for use in medical supplements.  It would be possible to invest in the harvesting of seaweed for conversion into bio-fuel production if CO2 emissions from Moneypoint power station were filtered into seaweed in the estuary.  This process enables seaweed to grow much quicker than is ordinarily the case.  This option should be considered.

  Scientists believe Ireland could become a key player in the production of bio-fuels.  For bio-fuel production purposes, algae biomass must be produced at $1 or less per kilogramme.  Kilrush, County Clare, could become a centre of excellence in this area, especially given that Moneypoint power station is being retrofitted and is due to close in 2020 to 2025.  We must consider using other forms of energy to assist in our energy needs.

  To achieve the objective of becoming a key player in bio-fuel production from seaweed, one needs a reliable product throughout the year.  Ireland has 16 commercially useful seaweed species.  Our location at the edge of western Europe surrounded by clean water is a major selling point and many other areas as well as County Clare would be viable locations for this form of bio-fuel production.

  The Government introduced a carbon tax of €15 per tonne in last year’s budget.  While the tax does not apply to oil produced by rapeseed, it applies to bio-diesel produced from waste biomass.  The introduction of tax on agricultural diesel on 1 May next is bad news for farmers who depend on diesel for harvesting crops and other tasks.  The price of fuel is increasing, with a barrel of oil currently costing almost $85.  A further problem is that the value of the euro has declined against the dollar recently, although it gained a little last weekend after EU Ministers introduced a loan package for Greece.

  The introduction of a carbon tax on agricultural diesel imposes greater costs on farmers.  Costs in other areas, which are already high, will increase further as a result.  This is bad news for farmers and I ask the Minister to reconsider his decision to single out agricultural diesel.  Farmers are struggling and additional costs place them under greater pressure.  The carbon tax is being imposed at a rate of 8.7% on agricultural diesel and only 4.4% on road diesel, which is a further blow to farming and will drive up the price of diesel as well as production costs.  Agricultural contractors will have no choice but to pass on the increase to farmers.  These contractors provide jobs in rural areas for part-time farmers and young people seeking employment.  Agricultural diesel should be exempted from tax or, failing that, subject to the same percentage increase as petrol.

  As a result of the obligation introduced in the Bill, the price of fuel will increase by 1 cent per litre.  Fuel costs are already high, having increased by 20% in the past year.  Motor fuel distributors will pass on the new tax and hard pressed consumers, especially those in rural areas, will take a further hit.

  Novel incentives are required if we are to increase the use of renewable energy.  The bio-fuel obligation scheme the Minister proposes to introduce requires a specific amount of road transport fuel to be comprised of bio-fuels.  Concerns have been raised by the Irish Bioenergy Association and others that oil companies may resort to importing bio-fuels, as occurred in the United Kingdom when a similar scheme was introduced.  One is always concerned that cheaper imports will be brought in given that production costs here are high.  If we are to improve the business environment, energy, insurance and other costs must be reduced.

  When Britain introduced a scheme similar to that proposed by the Minister, 89% of bio-fuels were imported from Brazil, Argentina and the United States.  If Irish producers meet their bio-fuel obligations, it is estimated that approximately 1,700 jobs could be created and economic activity valued at €170 million could be generated.  This twofold benefit - the creation of much needed jobs in the economy and a reduction in our dependence on fossil fuels - makes it worthwhile to consider incentives for indigenous bio-fuel producers.  This is a win-win scenario. 

  Given that Ireland imports most of its energy needs in the form of fossil fuels, we must try to diversify into alternative forms of energy.  Bio-fuels have a role to play in assisting forestry and agriculture, industries that are currently under extreme pressure.  It is important to note that the renewable portion of industrial and urban waste can be used for feedstock in the production of bio-energy.  As I stated, bio-energy production is a win-win scenario for everyone involved.  I hope we are able to fulfil our obligations.