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Renewable Transport Fuel Obligation

Volume 468: debated on Thursday 29 November 2007

To ask the Secretary of State for Environment, Food and Rural Affairs what effect the Renewable Fuel Transport Obligation has had on crop prices; and if he will make a statement. (167853)

[holding answer 26 November 2007]: As part of the Government’s Climate Change programme, a Renewable Transport Fuel Obligation (RTFO) will be introduced in 2008. It will require transport fuel suppliers to ensure that 5 per cent. of their fuel sales are from a renewable source by 2010.

It is unlikely that the RTFO has had any discernable effect on crop prices to date. Current high cereals prices are due to global factors, including two successive lower world wheat harvests, low global stocks and increased demand for cereals from the food, feed and fuels sectors. Growing global demand for biofuels can be expected to increase crop prices but also the supply of crops in the future.

Analysis by the European Commission assessing the impact of the 10 per cent. (by energy) biofuel target for 2020 indicates that prices for agricultural raw materials in the European Union (EU) would increase by 3 per cent. to 6 per cent. for cereals and 5 per cent. to 18 per cent. for oilseeds. This took into account, potential in the EU to increase production in response to additional demand, and a future contribution from second generation biofuels which can use non-food feedstocks, including waste.

The Government recognise that a balance is needed between using available land for food and non-food purposes. We will monitor how markets are affected by growing biofuel demand and will tailor policies accordingly.