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Volume 408: debated on Tuesday 7 October 2003

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If he will make further changes to duty rates to facilitate the development of biodiesel fuel.[124653]

Biodiesel already benefits from a duty incentive of 20p per litre below the rate for ultra-low sulphur diesel. As my hon. Friend is aware, duty rates are kept under review as part of the Budget process.

I thank my hon. Friend for that reply. Is he aware that nearly all the biodiesel produced in this country is made from used cooking oil and tallow, but that it could be produced in large quantities from rapeseed if it were economic to do so? The industry estimates that a further duty reduction of some 8p to 10p a litre is necessary for the economics to be right. Will he look again at the figures with the industry? Would not the reward be not only a new, environmentally sustainable fuel from a new type of oil field in places such as East Anglia, but new jobs in a new biodiesel production industry and a new market for farmers, who definitely need new markets?

I welcome the points that my hon. Friend makes; he is the very effective Chairman of the all-party group on the offshore oil and gas industry, so he has not only a constituency interest but industry expertise. I have looked at those arguments very carefully, met industry representatives and gone through their figures and arguments. Our principal consideration in assessing appropriate rates of fuel duty to support cleaner fuels is the environmental benefits that they can bring. We have looked at the figures from the sources that he cites and from others, at the environmental benefits and at the cost of production. However, as yet, we are not convinced that a bigger duty incentive for biodiesel is justified.

Is the hon. Gentleman aware that a further reduction in biodiesel rates may come too late for the ARBRE project that took willow coppice from the Vale of York to be treated at its plant near Selby, and which regrettably has gone into receivership? What discussions has he had with his counterparts in the Department for Environment, Food and Rural Affairs on the benefits not just of lowering duty on biodiesel production, but of the helpful grants that DEFRA gives?

I am aware of the ARBRE project, as the hon. Lady would expect—it was undertaken in the region in which we both represent constituencies—and I was sad to see its collapse and closure. What she is really directing my attention to is the greater environmental gains that may be achieved from biofuels when they are made from woody, ligno-cellulosic feedstocks. We are in close discussion with DEFRA because we want to consider effective ways in which we can support the development of these new technologies. They are currently in the pre-production stages, but they offer much more potential for the future.