Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010) - Committee Stage 4th March 2010

Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010)- Committee Stage - 4th March 2010.
SECTION 3.

An Cathaoirleach: Amendments Nos. 3, 4, 6 to 8, inclusive, 12, 13, 28 and 32 are related and may be discussed together, by agreement. Is that agreed? Agreed.


Senator David Norris: I move amendment No. 3:

In page 6, between lines 15 and 16, to insert the following:

“ ’bioethanol’ shall only be deemed to constitute a biofuel in the case of ethyl alcohol ex CN (Combined nomenclature) sub-heading Taric code 2207 1000 with an alcohol content of at least 99 per cent volume the properties of which comply at least the requirements set in document EN 15376:2007 or any subsequent revisions to this document by the EU Committee for Standardisation CEN;”.

This is a series of related amendments which go right to the heart of the matter on which I have been lobbied effectively by a commercial company. I think the Minister of State will agree that in the current economic circumstances it is important that we foster and encourage potential indigenous industrial development. What we are looking for is a level playing field. It is similar to the position on Brazilian beef. I happen to love Brazil. Its people are very charming. It is a very beautiful place and I have been there on a number of occasions. Therefore, I am not anti-Brazilian, but we need a level playing field for those involved in our own industry. We have seen the agitation of farmers on the rules pertaining to beef production. We face a similar situation where the possible development of an indigenous industry may be stymied by the absence from the Bill of certain measures concerning tariffs which would bring us into line with at least eight other European countries which have introduced similar legislation. They have provided for such tariffs to create a level playing field.

Some of the language used is unattractive - natured and undenatured. “Undenatured” is one of the most ugly words I have ever come across, but, regrettably, it appears to be necessary to describe some of the technical processes involved. Undenatured or naturally produced bioethanol is the equivalent of a kind of poteen; additives are included to dilute it and so on. It is also sometimes needed for certain chemical processes and so forth. However, the transport of undenatured ethanol is a standard international practice. There is nothing against it; it is not dangerous. Therefore, there is no technical argument against it. To secure the type of investment required, which is very significant, it is essential that our domestic legislation mirrors the European legislation of which I have spoken. Sweden applies these tariffs to Brazilian ethanol, as do Belgium, Slovakia, Poland, Hungary, Austria and Spain. I urge the Minister to accept this amendment and to get involved in direct discussions with the agencies that wish to introduce this type of manufacturing into this country.

The impact of this would be to secure jobs and to provide for the security of our bio-fuel requirements within the European Union. At present, we use some of the major oil companies, which bring it in from various countries around the world. That does not confer any real benefit on the Irish industrial community. There would also be the development of plant infrastructure, and 4% of our fossil fuel requirements would be replaced by this indigenously produced material, which is very environmentally friendly. A total of 100,000 tonnes of fuel would be produced as well as 110,000 tonnes of the basic materials for animal feed. In that regard we currently import soya from various countries, including Brazil. It will also produce 60,000 tonnes of CO2 gas, which we must import at present through the British Oxygen Company. The proposed plant would be located in Waterford and would be a major industrial development for the area. It would help to alleviate the economic distress being experienced in Waterford, particularly in the aftermath of the closure of companies such as Waterford Glass. That must be a major argument for the Government.

What is being proposed is the adoption of the quality standard technically known as EN15376 which is also applied to externally sourced ethanol outside the European Union. The standard represents 99% volume purity, anhydrous - without water - and is the recommended standard used by the majority of EU member states to prevent tariff engineering of undenatured ethanol outside the EU or in bonded warehouses. The difference in both standards, in the main, is the water content of approximately 3%. The Brazilians would prefer to denature their own ethanol outside EU borders or within bonded warehouses inside the EU. This essentially means a lower bioethanol production cost per litre while obtaining maximum price within the EU. In other words, it is a tax dodge. This benefits the Brazilian domestic industry, without having to maintain EU standards of production.

We are talking about an improved security of supply and the development, construction and operation of a €100 million bioethanol facility. This is in addition to the indirect support of approximately 1,000 jobs in the Waterford area, which is an economic blackspot. It would also create new opportunities for the agriculture sector after the ending of the production of sugar beet. There is a serious problem in agriculture with the decline in sheep and cattle prices. This development would have the spin-off effect of producing feed. There would be a significant tax contribution through PAYE, corporation tax, rates and VAT to the Exchequer while there would be import substitution of 110,000 tonnes of soya animal feed through the utilisation of the distillers dried grains with solubles, DDGS, by-product, a product which is highly sustainable both in terms of environmental performance and greenhouse gas emissions savings. Furthermore, there is a knock-on effect in Brazil. Ireland, of course, will be a small player in this and Brazil is an enormous country. However, everybody is aware of the appalling impact on the rainforest. Millions of acres are destroyed partly for the production of soya. The production of bioethanol in Brazil is also having an impact. There are many environmental and commercial reasons for considering this proposal.

There appears to be a perception that there are technical problems relating to the importation of undenatured Brazilian ethanol for fuel use. It must be denatured before it can be transported. All Brazilian ethanol is produced and exported in an undenatured state. The denaturant is added within the EU borders, prior to the duty point, depending on the requirements of the individual end users and their national regulations. It is denatured as a result of European national customs requirements by adding a select number of additives listed in EN15376. Transport of denatured ethanol is rare and only happens if the end user requires it. Shipping undenatured ethanol has nothing to do with technical feasibility; it is a standard practice around the globe.

With regard to the water content in ethanol, EU oil and car companies do not want too much water in the ethanol. The Brazilians always complain about this and say that the standard is a non-tariff barrier. However, there has been an international inquiry into this issue and a tripartite committee was established, comprising membership from the United States, Brazil and the European Union. Last year, the official conclusions were reached and they were unanimous that the water content issue was not a barrier to trade. The Minister will be able to possess himself of this report.

There have been doubts about the economic viability of an Irish bio-fuel plant. There is the issue of economies of scale but this has been well researched and is supported by other major European, particularly German, chemical combines. The plant size suggested is optimised to match both Irish demand for fuel ethanol and the capacity to produce feedstuff. As an island, Ireland has a number of competitive advantages over other locations to make the plant viable. I accept that the economic viability of an Irish plant is an issue to concern the promoter. It is a market risk for the developer, but the developer will take this risk. I am asking that the Seanad create the market conditions through legislation that will enable these investors and potential Irish industrialists to develop it.

There are benefits with regard to carbon dioxide as well. We import all our carbon dioxide through the British Oxygen Company. I recall seeing its lorries travelling through Dublin transporting cylinders and my cousin was the company’s chief engineer at one time. The fact that we import all this gas makes CO2 capture at the plant viable and will provide the company with an additional revenue stream. It currently costs €60 per tonne in transport charges alone to import this gas into Ireland so it will be a significant revenue stream. The CO2 capture also greatly enhances the environmental performance of the plant. One of the other by-products is distillers dried grains with solubles, DDGS. It is a valuable by-product and is a direct substitute for imported animal feed. Once again, it would mean the replacement of imported material with Irish-produced material.

I have absolutely no commercial interest in this proposal. I merely met the people concerned but I considered the proposal so valuable I put forward these amendments. Ireland’s production costs per tonne are competitive within Europe. This is partly because we have the highest wheat yields in Europe due to the longer growing period. There are various other points concerning price and the impact at the fuel pumps which can be dealt with.

(12 o’clock)
In terms of sustainability, the demand for land in Brazil, in particular, has been driven by the increased demand for soya, sugar cane and beef. It can be expected that an increased demand for bioethanol worldwide to fulfil bio-fuel obligations will automatically create further pressure to convert rainforest to agricultural land. Saying bioethanol is produced using sustainable methods does not guarantee that the rainforest will not be knocked indirectly by beef farms as a result of an increased demand for sugar cane. As I said, the scale of destruction is absolutely vast. Millions of acres have been destroyed. The demand for bioethanol will increase and the question is where should it be produced. I made the argument that it should be produced here to generate jobs and very valuable materials. If the Government decides not to apply the tariff which eight other European countries have successfully applied and in so doing so secured their indigenous industries, it may be unknowingly promoting the destruction of the rainforest by creating increased demand which would be contrary to its intentions. I ask the Minister of State to ensure a level playing field which would require no investment on the part of the Government. It would at least open up the possibility of securing the development of a significant industry in what is an economic black spot.

I ask that Seanad Éireann employ all of its forces in requesting the Minister of State to take this matter very seriously, on which I believe I will receive support from other sections of the House. There would be no cost to the Exchequer. The Government would simply need to create the market conditions, whereby we could develop a viable, indigenous industry and give employment to our own people during this critical and difficult period.

Deputy Conor Lenihan: I propose to respond to amendments Nos. 3, 4, 6, 7, 8, 12, 13, 28 and 32 together. I thank Senators Norris, O’Reilly, Walsh, McCarthy, O’Toole and John Paul Phelan for contributing to the debate on this matter. I assure them the Minister is very much on board in relation to the spirit of the proposed amendments. The national bio-fuel obligation will incentivise the sustainable growth of the indigenous bio-fuel market, support indigenous bio-fuel producers and expand production. The EU sustainability criteria will also provide a competitive advantage for Irish and other EU producers by ensuring non-EU imports meet strict environmental guidelines. We must, however, remain compliant with EU and WTO guidelines on trade, meaning we cannot restrict imports unfairly.

The amendments largely suggest Ireland should mimic the fuel standards in place in other member states, including Germany and France, which serve as an effective barrier to outright competition from imports outside the European Union. Essentially, there are two separate tariff codes – one for denatured or industrial and the other for food grade or agricultural. The latter is significantly higher at 19.2 cents per litre versus 10.2 cents per litre. Many member states have done this with the explicit aim of protecting domestic production such as in the Germans’ bio-fuel quota Act and the French legislative equivalent.

The European Commission would have to be notified under Directive 98/34/EC as this type of initiative would be deemed to be a technical regulation. From a national perspective, the only substantial problem with the course of action is that the United Kingdom has not adopted such a measure. Given that we import 60% of our road transport fuel from the United Kingdom, such a measure could have the potential to substantially increase costs to Irish consumers, theoretically, as they would have to be supplied with a different blend of bioethanol.

The fact this standard is in widespread use across Europe means much of European production capacity is already geared towards producing the same. The bioethanol in use in Ireland probably already meets this standard. As such the Minister, Deputy Eamon Ryan, is considering this with a view to making an amendment in the Dáil. We are in the process of notifying the Commission about this change, as required. This is known as a technical regulation. Once notification is lodged, we can then make the amendment in the Dáil. We would prefer to do it on Report Stage in the Seanad but because of the timing factors involved, it will arise on Second Stage in the Dáil. It is key to ensure the consumer will not be adversely affected by cost increases stemming from any such measure in this area. The concept of a deferred introduction is one the Minister is considering in that regard. I do not propose, therefore, to accept the amendments on the grounds that it would be pre-emptive to do so. I do not propose to accept the amendment to the Title on the grounds that it already deals with this issue in so far it is possible or appropriate to do so.

I thank Senators for their contributions. The spirit and content of their amendments will be approximated to the Bill when it reaches Second Stage in the Dáil.


Senator Joe O’Toole: One cannot make amendments on Second Stage.


Senator David Norris: It is perfectly clear we have won the argument in this House, a fact with which the Minister of State has agreed. There is universal support for the amendments and I am glad we have had the opportunity to table them. Will the Minister of State examine as urgently as possible any facility for accepting them in this House rather than in the Dáil, as the arguments for their acceptance was made here? The Seanad is always attacked for being redundant. This, however, is a damn good day’s work, creating the possibility of 1,000 jobs being created in an economic black spot. We have met all the scientific, environmental and agricultural arguments. It is important, therefore, that the amendments are introduced in the Seanad, even if it is by the use of a deferred date.

The Minister of State knows there have been erred calls for the abolition of this House, yet today there is a scandalous absence of press representation – I accept The Irish Times is probably watching on the monitor - for one of the most vital debates in which I have ever taken part, as it secures jobs. I have received correspondence from people across the country in despair, as they are losing their jobs and houses. Today the Seanad has done something positive. We did not call for another head on a plate, blood on the walls or guts on the carpet, which is the routine in Parliament.

On competition law and tariffs, I have referred to the unanimous report from the United States, Brazil and the European Union which answered that argument. Since eight countries – Senator John Paul Phelan has suggested there are more - have introduced tariffs, I do not see any reason we should kowtow to the British. We should get on with it and have the amendments accepted in this House. Will the Minister of State give the Official Report of the Committee Stage proceedings to the Minister, Deputy Eamon Ryan, to highlight the unanimous approval for the amendments and inquire as to why it is not possible to have them passed in Seanad Éireann?