Contribution
My Lords, for the benefit of noble Lords who have not become totally enmired in the question of sustainable aviation fuel, it might be appropriate at this stage to spell out that there are, essentially, three sorts of aviation fuel. Of course, everything I say on this topic is, to some degree, a simplification that may be subject to correction and refinement, but broadly speaking there are three sorts. One of them goes by the inelegant name HEFA. I will not tell noble Lords what it stands for, because I cannot remember the very long sequence of syllables that comprise it, but, essentially, it is recycled cooking oil.
There is no real shortage of HEFA in the world. The Government have said that it is not the intention of the Bill for the financial support mechanism it contains to be used to subsidise the production of HEFA. None the less, the Bill allows for HEFA to be subsidised; one of the amendments in my name in this group would preclude that. Another amendment, in the name of the noble Lord, Lord Ravensdale, would have a very similar effect to mine, although his is worded much more elegantly and elaborately. Its effect is also slightly more impenetrable than mine but, if one follows the chain of words, it comes to a very similar effect. He and I are at one in saying that the Bill should preclude the subsidisation of HEFA.
There is, higher up the chain, a further form of sustainable aviation fuel, which we can describe as non-HEFA. The difference is that the source material, the feedstock, has to come from sources other than used cooking oil. Municipal waste, for example, would be non-HEFA fuel. There is in place, prior to the Bill, a sustainable aviation fuel mandate that was introduced by statutory order about 15 months ago, under this Government. It requires an increasing amount of HEFA to be mixed into aviation fuel over the next few years, but at a certain point, the mandate says non-HEFA has to be mixed in as well. In other words, the sustainable aviation fuel requirement cannot be satisfied by using simply HEFA and adding more and more HEFA over the years—at some point, some non-HEFA fuel has to be added as well.
As I understand it, it is largely the case that the Bill is aimed at stimulating the production of non-HEFA fuel, which is currently not in production. We will come back at a future stage to whether it is sensible and necessary to subsidise this—at the moment, we are simply discussing what the fuel consists of and what the Bill should be directed at.
Again, while I do not wish to steal the Minister’s thunder, my understanding is that the Government are clear that the main aim of the Bill is to subsidise this non-HEFA fuel. Beyond HEFA, if one goes right to the top of the chain, there is a form of fuel that is not entirely speculative, but is in production in a small, experimental way in the United States and is called power to liquid. PtL, as I understand it—and I speak in a simplified way because I am not technically qualified—captures carbon from the atmosphere and turns it, through some wonderful process, into a liquid fuel that can be mixed in with standard aviation fuel.
It is true that the sustainable aviation fuel mandate that has been in place for 15 months requires that a certain amount of PtL is added in years into the future. That would mean HEFA in the early years, then more non-HEFA, which has to build up, and some PtL added later. That is the progression envisaged by the sustainable aviation fuel mandate.
The Bill would allow the subsidisation of PtL, but I have an amendment in this group which would prohibit that. The whole question of PtL is so speculative that we have no idea what it would cost to subsidise, and it is far distant. I remind noble Lords, who I am sure have been attentive to this, that a sunset clause is introduced in Clause 1(7) and that no contract, by way of a subsidy, can be let
“after the end of the period of 10 years beginning with the day this Act is passed”.
If we are to have long-term subsidies for sustainable aviation fuel—and it may well be 10 years before PtL production is feasible—the Bill will probably be useless for that purpose in any event because, unless amended, it will have expired. My amendment to remove PtL would be a safeguard against the subsidy regime envisaged by the Bill, whose mechanics we will turn to in later amendments, being abused and run away with as we finance and support a very speculative and potentially very expensive fuel.
In the meantime, I understand that the Government take the view that the very small amounts of PtL required and envisaged by the mandate can be secured by import at the due time in the future—again, the Minister can correct me if all this is wrong—so there will be no damage to the mandate if the Bill excludes PtL. That is the substance of these groups of amendments.