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Alternative Transport Fuels

Volume 597: debated on Wednesday 17 June 2015

Motion made, and Question proposed, That this House do now adjourn.—(Charlie Elphicke.)

I am delighted to have secured this Adjournment debate and I hope that I have not misled the House with its title, because today I want to ask about a specific fuel. I want to ask the Department for Transport about its position on the new diesel substitute fuel, aqua methanol, and its potentially vital role in reducing diesel exhaust pollution.

The previous Labour Government’s diesel-friendly policies have led to a serious diesel particulate and nitrogen oxides pollution problem, and there are dreadful health consequences. Ministers will be aware of the recent Supreme Court judgment indicating the urgency of the Government’s acting to alleviate this health problem. That would also mean that the UK could avoid incurring extremely large fines for failing to meet EU air quality standards.

On a day when we have had a very large environmental lobby at the House of Commons, I want to ask the Under-Secretary of State for Transport, my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones), whom I welcome to his role and to the Front Bench, what he will do to support a fuel that will contribute to reducing emissions and improving our air quality.

In 2001, my constituent Peter Dodd and his company Zero-m drove a senior official from the Department for Transport along Oxford Street in a very special London black cab. That cab was unique because it ran on aqua methanol and emitted virtually no poisonous particulates or nitrogen oxides. In the following six years or so Zero-m, sponsored by the Department for Transport and the Treasury, converted vans and heavy goods vehicles to run on aqua methanol so that those other major sources of diesel pollution could be cleaned up.

The resulting report, delivered in 2009, confirmed without doubt that aqua methanol could have a major impact on diesel pollution, could reduce carbon dioxide, could reduce UK exposure to oil prices and, most importantly in these continuing times of austerity and unlike nearly all other alternative fuels, would require only modest Government financial support during its introductory phase even if oil prices stayed low.

Does the right hon. Lady agree that there are other alternatives, such as electric cars? That is a new way of reducing pollution across the whole community. Does she feel that the Government should emphasise that as well?

The hon. Gentleman has pursued that issue, and I hope that the Minister will have taken note. It is important that the Government consider alternative fuels, particularly in the light of the detrimental effect on our environment of the fuels that are currently in use.

The report concluded that aqua methanol should be introduced as soon as possible, so the question is why there are not yet any clean aqua methanol vehicles on our city streets. The answer is that the Europe-wide fuel tax rules are blocking their introduction. They mean that aqua methanol would cost some £1.90 a litre at the pump and, obviously, that is a commercially impossible price.

Fortunately, after thorough investigation and confirmation of the report’s findings under the coalition Government, the Treasury has now agreed to make the tax changes necessary to enable the new fuel to be competitively priced against diesel in the UK by putting it on a level playing field with other gas-based fuels. It announced its intention to do so in the two most recent Budgets and autumn statements and finally included the necessary legislation in the last Finance Bill, just before the recent election. However, the change has still not been enacted, because in the wash-up process the Opposition objected to it despite the fact that the entire green fuel challenge project to demonstrate the need for aqua methanol and prove its worth in exchange for the tax change was initiated and completed during their time in government.

I am now hopeful that the Chancellor will take the measure through on 8 July, so the debate is meant to emphasise the importance to health of enacting this new fuel tax measure immediately. Equally importantly—we have yet to have an undertaking from Government on this—we must integrate the fuel into the DFT’s fuel strategies and funding programmes to accelerate its introduction. The importance of doing that as soon as possible can hardly be overstated.

It is unlikely that many people will have heard of aqua methanol until now, but those with long memories will remember the green fuel challenge, which aimed to foster the development of greener transport fuels. Of the three groups selected for support, the highest award was given to Zero-m Ltd, a company in my constituency. Its proposition was that converting commercial diesel vehicles to aqua methanol offered many advantages, including reducing particulate emissions from diesel engines and lower NOx, which is the diesel exhaust gas responsible for forming smog and acid rain, and which is central to the formation of tropospheric ozone.

Further, the company also discovered that renewable aqua methanol could be made more easily and cost-effectively than most, possibly all, other proposed green transport fuels. In addition, as if that were not enough, it discovered that substituting aqua methanol for diesel would improve UK fuel security and reduce our exposure to politically volatile crude oil prices, because aqua methanol is derived not from crude oil but from the huge and growing global resource of natural gas. Importantly, from the climate change point of view, it can also be made from a wide range of renewable sources, including, rather amazingly, renewable electricity and the carbon dioxide in the air, turning that controversial little climate change bugbear into a jolly good friend.

By introducing methanol made from plentiful natural gas in the short term—so-called brown aqua methanol—we can immediately strengthen the fight against diesel pollution, and at the same time, relatively quickly, win CO2, fuel security, exports and job benefits. Once brown aqua methanol is established, it can be replaced down the track by chemically identical green renewable methanol once that form becomes economically viable when compared with diesel. Brown natural gas-based methanol paves the way and acts as that solid bridge to near-zero-CO2 green methanol, without requiring the massive Government subsidies that would be incurred in trying to go directly to the green form without using the brown bridge.

Between them, the members of the Zero-m team have the most amazing experience. Together they have more than a century of expertise in alternative fuels, so these constituents of mine really do know what they are talking about. They particularly understand how oil markets work and the importance of minimising the need for Government subsidies, because oil prices can go down as well as up. When they go down—and history shows that they can stay low for a long time—subsidies that looked fairly short-term and affordable can suddenly look very high and indefinite. In fact, they can become, as they often have in the past, completely unsustainable economically.

With long experience of seeing high-cost alternative fuel projects fail because Governments cancelled the subsidies when oil prices fell, Zero-m’s approach throughout has been to find a way to introduce a fuel that will be commercially viable when oil prices are low. It is interesting to note, anecdotally, that before the second world war it was believed that there was only 12 years’ worth of oil left at the then consumption rate of about 8 million to 10 million barrels a day. Today, the numbers in BP’s June 2015 statistical review show that apparently we have 52 more years of reserves at the 2014 global consumption rate of 92 million barrels a day. Therefore, we are using about 10 times more oil today and it is going to last four times longer than they thought it would last in 1935.

Although it is probably true that oil could run out at some distant point in the future, the oil industry has a habit of finding new deposits and even cheaper means of extracting ever more from them, extending today’s problem with pollution into the future.

Zero-m believes that aqua methanol could be the earliest commercially viable alternative, because it only needs launch support to begin replacing diesel made from oil. Of course, it has to be remembered, but rarely is, that the more that subsidised alternative fuels displace oil, the greater the over-supply of oil will become and the lower the oil price is likely to go. That is the Catch-22 of developing alternative fuels: they look good when the oil prices are high, but if they succeed they will almost inevitably cause oil prices to fall.

Biofuels are one of the key planks of the European Union strategy to reduce emissions, but a 2015 departmental report on options for energy transport policy to 2030 showed that crude oil prices in excess of $250 a barrel are needed before most anticipated renewable biofuels can become commercially viable on a stand-alone basis. Even the Government are expecting bioethanol and biodiesel to need heavy taxpayer subsidy far into the future through the renewable transport fuels obligation.

It is surely worrying that even that Government report accepts that biofuels are not expected to be commercially viable even by 2030, and possibly far beyond. Add to that the fact that including biodiesel in diesel fuel does virtually nothing to reduce particulates and NOx, the key city street-level pollution issue, and that, even worse, including biodiesel in normal fossil diesel actually reduces miles per gallon. It seems to me that aqua methanol is one initiative that can definitely be foreseen to be commercially viable at today’s low oil prices of around $65 a barrel, which is massively below the over $250 a barrel that the Government are expecting biodiesel to cost in 2030, as set out in the report I referred to earlier.

Zero-m has calculated that, in terms of particulates and NOx reduction, converting one diesel van to aqua methanol, at an estimated cost of £5,000, is equivalent to converting five cars to electricity, which costs the Government at least £25,000 in subsidies. Converting one heavy goods vehicle, at an estimated cost of £15,000, would deliver the same diesel fume reductions as converting 30 cars to electricity, at a cost of more than £150,000. If the Government funded, say, £5,000 for each van and £15,000 for each HGV converted to aqua methanol, that investment could save them £20,000 and £135,000 respectively, versus what it would cost via the electric car route, and still achieve the same result.

When it comes to cutting street-level diesel pollution, aqua methanol has the ability to give us a significantly bigger bang for our tax pound than relying mainly on the introduction of electric vehicles—or indeed of hydrogen vehicles, which are likely to be even more expensive, with commercial viability even further into the future. However, despite all that promise, aqua methanol is still not an integral part of the Department for Transport’s published alternative fuels strategies and funding plans, even though all common sense suggests that it should be strongly backed to accelerate and bolster current efforts to tackle the awful diesel pollution problem. Waiting for electric cars or hydrogen buses to fix the problem is being tried, and has been tried for some time, but still the diesel pollution worsens, with consequential health problems compounding the costs to the Government.

Tonight I am asking the Minister to add this potentially powerful new string to the Government’s bow in the urgent battle to improve air quality. The proposed tax change is the culmination of over 14 years of Government-initiated and sponsored work to investigate this exciting new fuel and then enable its introduction. The new tax measure has been approved by all relevant Government Departments, including the Treasury, the relevant legislation has been drafted and all necessary consultations have been completed successfully. There is nothing further that the Treasury needs to do now beyond including the measure in the Finance Bill on 8 July, with an early implementation date.

I have worked alongside my constituents on this journey, and it has been a long and painful one. We are very grateful that the Treasury has now heard the message. Aqua methanol can and should be a major and effective part of the solution to this problem, and it would require no financial support from the Government after the introductory phase.

I am sure that the Government will now enact the promised deferred tax change. Tonight I am asking the Department for Transport to complete the picture and integrate aqua methanol fully into its published strategies and funding policies. Without the tax change, the launch of aqua methanol is economically unviable and will not occur, and all the fine opportunities and valuable benefits will be forgone. However, without the other half of the equation—the Department for Transport—supporting aqua methanol, both financially and with publicity, our city air will continue to be full of dirty diesel particulates and NOx for much longer than it need be. With both those steps in place, Ford, Mercedes, Iveco, Scania and DAF, to name just a few of the most popular van and HGV manufacturers in the UK, could start making and importing clean aqua methanol-capable vehicles into the UK.

I would like to applaud the Minister and the Chancellor of the Exchequer for having the foresight to see that aqua methanol deserves to be put on the same taxation footing as other natural gas-based transport fuels. Now I also urge them to redirect funds from some longer-term, higher-cost initiative, such as hydrogen, just as the Department is already doing for compressed and liquid natural gas. Given the severity of the pollution problem, continuing with the status quo is not an acceptable or justifiable option. By being an early adopter, we can improve our environmental credentials. I hope that the Minister will give a response that encourages my constituents and enables us to kick-start the introduction of aqua methanol, so that we can clean up our air as quickly as possible.

I congratulate my right hon. Friend the Member for Chesham and Amersham (Mrs Gillan) on securing this debate about alternative transport fuels, and specifically aqua methanol. It is very topical because Governments across the world are looking to reduce their reliance on foreign energy imports, clean the air in their towns and cities, and reduce carbon emissions. We are seeing increasing urbanisation, and there is a recognition that fossil fuel is not only finite but increasingly carbon intensive.

My right hon. Friend is correct to say that the UK faces significant environmental challenges. In 2013, our domestic transport greenhouse gas emissions accounted for 21% of overall domestic greenhouse gas emissions. Road vehicles are responsible for 92% of CO2 emissions from transport and 80% of roadside nitrogen dioxide. Every year, about 29,000 early deaths are attributable to poor air quality.

There is also an EU legislative context. The UK has a legal requirement to meet EU limits on exposure to air pollutants. As an EU member state, we are committed to reducing greenhouse gas emissions in road transport by 20% by 2020 and 40% by 2030.

In the recent general election, my right hon. Friend and I stood on a manifesto that reaffirmed our commitment to the Climate Change Act 2008, and road transport has to play its part if we are to reduce emissions by 80% by 2050. The manifesto also committed us to do even more to tackle air pollution, to back green energy that is value for money, and to continue to foster an economy that supports high-knowledge job creation. We made those commitments because the Government continue to see the environmental challenges for transport as an opportunity. Alternative transport fuels will have a role to play in helping us to deliver those commitments.

We have made much progress towards meeting the challenges we face. Air quality has improved significantly in recent decades. Harmful particulate matter emissions from road transport have fallen by 31% since 1990. Between 1992 and 2012, total nitrogen dioxide emissions and background concentrations more than halved. Through the supply of sustainable biofuels under the renewable transport fuel obligation, we are making significant carbon savings. In 2013-14, the use of biofuels was equivalent to taking 1.35 million cars off the road.

All that is just part of a wider strategy through which we are working with other Departments, industry and local authorities to reduce harmful emissions across transport modes. Some £2 billion has been committed since 2011 to increase the uptake of ultra-low emission vehicles, fund greener transport initiatives and support local authorities to take action. What we are doing goes much wider than providing grants to support the uptake of electric vehicles, although I must mention that I will be making my debut behind the wheel of an electric vehicle tomorrow morning, as Nissan is lending the Department a Leaf. I am looking forward to driving it.

The wider action that we have taken includes making £30 million available so that bus operators and local authorities across England and Wales can bid for low emission buses and supporting infrastructure. A further £8 million has been awarded to 23 local authorities for cutting-edge, pollution-reducing technologies, which will be fitted to more than 1,200 vehicles. That included £500,000 of funding for Birmingham City Council to convert 80 taxis from diesel to liquefied petroleum gas. As was announced on 26 March, there is £6.6 million to support the establishment of an initial network of 12 hydrogen refuelling stations, heralding the imminent arrival of hydrogen fuel cell vehicles on UK roads. The Government are addressing the environmental impacts associated with road freight through the low carbon truck trial, which is providing more than £11 million to part-fund about 350 low-carbon commercial vehicles. Sustainable biofuels are also likely to have an important role to play in reducing carbon emissions in other sectors, such as freight and aviation, where there are limited alternatives for decarbonisation. We are considering options to support this.

In aviation, the UK is working hard, through the International Civil Aviation Organisation, to try to secure agreement on a global market-based measure to reduce international aviation emissions. In the meantime, the UK continues to support the use of regional measures, in particular the Aviation EU Emissions Trading System.

In rail, we are tackling greenhouse gas emissions through a major electrification programme, along with the procurement of new electric and low emission trains that will replace older diesel trains.

In shipping, we are pleased that a number of major ports in Europe have now declared their intention of establishing liquefied natural gas bunkering infrastructure in the next couple of years, given that LNG emits fewer harmful emissions than marine diesel fuel. That is essential, because ship owners are unlikely to invest in LNG-powered ships unless there are adequate refuelling facilities.

Returning to road transport, we expect to announce this summer the winners of an advanced biofuel demonstration plant competition. This will award up to £25 million of capital funding over three years to support the construction of plants in the UK.

I mention those initiatives to show the range of Government actions across different fuels and across different modes of transport. It is clear that our approach is about providing support in a technologically neutral way, focusing on the range of evidence available. This approach has been successful in encouraging the most sustainable fuels and low emission vehicles. I am also confident that, given the UK’s strengths in innovation and research, we are well placed to succeed in the global market place in rising to the environmental challenges we face.

Further to the lower duty rate for methanol announced in last year’s Budget, my right hon. Friend suggested that we should look to support innovation by further integrating aqua methanol into the Department’s funding policies and published strategies. We of course recognise that, while overall air quality has improved over the past 20 years, much more needs to be done, in particular to reduce roadside concentrations of nitrogen dioxide. The fuel industry is complex, diverse and rapidly developing. Fuel production and supporting infrastructure are also at different levels of maturity. As policy makers, we must therefore give careful consideration to a range of possible solutions for tackling air quality, such as potential improvements in vehicle technology and fuels, and other sustainable travel policies and options.

I understand that the actual air quality benefits of aqua methanol are dependent on the vehicle technology— for example, particulate traps—in which it is used. The vehicle technology will determine the extent to which methanol replaces diesel and any potential reduction in air quality pollutants. I would like to reassure my right hon. Friend that, as we move forward with our policy development, aqua methanol will most certainly continue to be considered among all the other options on its merits, as is the case with all our funding programmes. I agree that aqua methanol is potentially a stepping stone to securing greenhouse gas emissions savings. However, if aqua methanol is to deliver greenhouse gas emissions savings, it is important that the right feedstock is used to make it. These need to be renewable and sustainable to deliver significant greenhouse gas emissions savings we are seeking.

My right hon. Friend mentioned the opportunity to produce sustainable methanol from CO2 and renewable electricity, which I have to say is a very attractive policy option. Further to a call for evidence on advanced fuels at the end of 2013, the Department has considered the potential role of such non-biological renewable fuels and possible support mechanisms for advanced fuels, as they may deliver the significant greenhouse gas reductions we are seeking. Our examination of advanced and alternate transport fuels has continued through to the report produced in March by the Transport Energy Task Force, entitled “Options for energy transport policy to 2030”.

The task force was set up by the Department and the Low Carbon Vehicle Partnership in October last year, and is made up of experts from industry and non-governmental organisations. Primarily, it considered a range of scenarios to meet our 2020 greenhouse gas emissions reduction and renewable transport fuel targets, as well as considering how low carbon fuels can help to reduce greenhouse gas emissions from UK transport in the period to 2030 and beyond. We are considering the report carefully as part of work to transpose amendments to the fuel quality directive, which have recently been agreed, and the renewable energy directive, which we hope will be finalised very shortly.

As evidenced by the Transport Energy Task Force report, we will clearly need sustainable biofuels to meet our renewable energy and greenhouse gas reduction targets. I therefore welcome the investments made by UK biofuel suppliers to date in what has been a very difficult investment environment, and I will shortly be meeting with a number of them. The delay in agreement of measures to address indirect land use change at EU level over the past several years has caused uncertainty for biofuel suppliers, and I recognise from my own business career that nothing deters investment more than uncertainty. I am therefore keen that we now get on with the business of implementing these measures as soon as possible.

This debate is timely. The issue of air quality is rising up the agenda and is certainly a priority for me. I have already met colleagues from the Department for Environment, Food and Rural Affairs, and I expect to have further such meetings as we take our plan forward. I recognise that aqua methanol can play a role in tackling that problem.

I thank the Minister for taking a positive approach to a fuel that could play an important part in his strategy. Will he do me the honour of meeting my constituents and the directors of Zero-m to look at this in much greater detail? I appreciate that he is new to his post, but it would give me great pleasure to bring them into the Department to talk to him about the benefits of aqua methanol.

I happily make that commitment and would be delighted to meet my right hon. Friend and her constituents. My approach to this and all issues within my area is to have an open-door policy and to work with the industry, so I would be delighted to have such a meeting. My officials will contact her to set it up.

The progress ahead, with the take-up of electric and ultra-low emission vehicles, is more in the area of cars and light vans; HGVs are harder to crack, and it is interesting to see how aqua methanol could again play a role. My right hon. Friend asks that the Department take the initiative. I will be doing just that, and aqua methanol will be included in all our considerations.

Once again, I thank my right hon. Friend for securing this debate. The Government recognise that vehicles are likely to require liquid and gaseous fuels for decades to come and that not all modes of transport are viable for electrification in the near future. It is therefore crucial that the UK develops a range of technologies to produce alternative low carbon fuels, reduce air pollutants from road transport and grow the UK’s green economy.

We shall continue to work closely with experts from the industry and environmental non-governmental organisations on future support mechanisms, and we will continue to review the support provided, with a view to securing the best environmental outcomes, supporting a competitive market, minimising the cost to the industry, the taxpayer and the motorist, and making our environment a priority—particularly the cleaner air my right hon. Friend mentioned. Aqua methanol will be a part of that review, and I again thank her for highlighting its importance to tackling the issues we face.

Question put and agreed to.

House adjourned.