Wood Panel Industry

Anne McGuire Excerpts

Wednesday 16th March 2011 Westminster Hall

[Mrs Anne McGuire (Stirling) (Lab)]

It is a pleasure to take part in this debate under your chairmanship, Mr Weir. I do not think that I have had the pleasure of being on a Committee that you have chaired. We go back a long time in this place, so I am delighted to see you here today. I am also very pleased to see both the Minister, with whom I have had conversations on this issue in other parts of the Commons, and my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger), who is representing the Opposition.

I am delighted that we have secured the debate, because we are at a crucial juncture for the wood panel industry. It is the UN international year of forests, which presents a good opportunity to review policies that affect our forests and associated industries. Last week’s announcement on the renewable heat incentive was a great blow to Norbord, a panel manufacturer in my constituency and one of seven plants that constitute the UK’s wood panel industry. The industry produces, wholly from UK-sourced wood, two thirds of the UK’s consumption of wood-based panels—chipboard, MDF and oriented strand board. Much of that wood is post-consumer waste wood, with Sonae UK in Merseyside now making chipboard from 98% recycled material. All virgin material is certified by the Forest Stewardship Council. The industry plays a valuable, if somewhat understated, role in carbon abatement, by locking carbon into the product, often for decades, as is the case with housing.

Norbord plays a vital role in my constituency. It employs more than 250 people directly and is one of the few large private sector employers in the area, offering a valuable apprenticeship scheme in addition to manufacturing. Its campaign to highlight the detrimental impact of large-scale biomass energy is fully supported by the workers at the factory, under their trade union Unite.

Let me be very clear to the Minister from the outset: neither Norbord nor the wood panel industry has any objection to the aims of the RHI. Indeed, the sector accounts for a third of the British industry’s generation of renewable heat. However, that huge contribution is threatened by exclusion from the RHI of the industry’s existing capacity. This is, in many respects, an issue that does not gain the headlines, so I want to put on record the fact that we have support from organisations such as the United Kingdom Forest Products Association, Timcon, Valpak and other wood supply outlets that have fears about some of the issues that I will raise this afternoon.

As the Minister knows full well from meetings with the industry and with the all-party group for the wood panel industry, of which I am chair, biomass is unlike any other major form of renewable energy because of the ongoing fuel costs involved and the potential for serious distortion of the wood market. I appreciate that the Government do not want to support all early adoption of renewable technologies. That is perfectly understandable, but I hope that the Minister recognises that the industry has an important contribution to make to renewable heat. If we do not get some resolution to the current situation, that important contribution will be jeopardised by subsidies to new entrants to the wood market, and by the arbitrary nature of the July 2009 cut-off date for installed installations.

I have to be frank with the Minister. The wood panel industry feels particularly aggrieved by the apparent lack of consideration given by the Department of Energy and Climate Change to its well-evidenced arguments about the impact of subsidised biomass demand on the UK wood market. I would, therefore, like the Minister to tell us why the wood industries are not even mentioned in the RHI impact assessment, despite the submission to his Department of data on timber prices and availability. The four paragraphs devoted to competition assessment make no mention of the wood market, which, as the Minister knows full well, will be the source of most of the biomass feedstock. There appears to be little point in conducting an impact assessment when adverse impacts that are clearly detailed to the Department are, apparently, studiously ignored. If assessments are not objective, who will trust them? I am sure that my all-party group colleagues who are here today can, like me, attest to the clarity of information and evidence that the Wood Panel Industries Federation has produced for the Department’s scrutiny.

I am not sure whether the Minister heard the recent BBC “Today” programme’s coverage of the RHI announcement. It picked up on the sustainability question: will biomass demand prove as unsustainable and environmentally damaging as biofuels? Roger Harrabin, the environmental analyst, raised the important issue of the double-counting of land when assessing potential biomass availability. That relates not just to the UK; it appears to be the case across Europe as well, where the combined biomass demand from EU member states, as declared in their national renewable energy plans, is just short of 1 billion tonnes of wood every year. That would require the total global harvest of wood to increase by a third. Does that sound sustainable?

On the renewables obligation, although the Government’s decision on the RHI is a further crushing blow to the competitiveness of the sector, the core problem remains the unsustainable and flawed support for large-scale electricity from wood. The wood panel industry has long argued that the renewables obligation has had the unintended consequence of distorting the UK wood market. That was not done deliberately, but we now have to deal with it. Several cumulative factors contributed to the distortion. First, demand for UK wood is beginning to outstrip supply; secondly, energy crops have not been planted in significant volumes, despite there having been generous incentives for a decade; and finally, the scale of biomass plants is huge. For example, Port Talbot’s Prenergy plant will burn about 3 million green tonnes of wood per annum, with no guarantees that the material will be exclusively imported. That represents close to a quarter of the biomass available today in the UK. The consequences for the wood-processing industry are extremely serious, and will only be compounded by the introduction of an RHI that does not support the industry’s existing renewable heat generation.

I hope that the Minister will accept that one of the most important myths that has to be confronted is that biomass plants will satisfy their demand from overseas—from imports. That is hugely inaccurate, misleading and irresponsible for three main reasons: first, the global pressure on wood supply; secondly, the differential in price between imported and domestic wood fibre; and thirdly, the fact that biomass plants are not committed to any supply chain when they receive planning permission.

Let me start with global wood supply and demand. Investment in biomass and biofuels is increasing significantly around the world, as the Minister undoubtedly knows. Canada and the US, which are frequently cited as potential sources of fuel for the UK, are seeing more and more biomass plants proposed, as the cost margin between energy generation from oil and from wood decreases. The Government know well how difficult it is to estimate how much wood will be available from abroad in the next 10 or 20 years, yet they are somehow confident that energy companies will be able to secure imports and will, therefore, not impinge too greatly on domestic wood. Many organisations are a great deal more sceptical about the sustainability of such global demand. They include Friends of the Earth, WWF and BirdLife International, to mention but a few. Furthermore, does the building of numerous import-reliant biomass plants not have serious ramifications for UK energy security?

The second factor undermining wood imports is price. As long as domestic wood is significantly cheaper than imported wood, which is currently about double the price, any energy company worth its salt will source as much cheaper UK wood as it can. That is just business. Forth Energy, for example, which is trying to build four large electricity plants close to my constituency in central Scotland, has been more open than most in stating that it intends to burn as much indigenous biomass—that is British wood—as possible.

The consultancy E4tech produced a report for DECC’s renewable energy strategy in 2009 that considered international biomass supply. E4tech concluded that the UK could import significant volumes of woody biomass to supply UK demand, but that import costs would remain high. It predicted that in 2010, all imported material would be more expensive than domestic wood, and would still be more expensive even by 2030. That was true in each of the four scenarios that the report used, from business as usual to high growth.

E4tech produced another report for DECC earlier last year on biomass prices in the UK electricity and heat sectors. On wood chip prices, the report concluded:

“In 2020, imported chips are estimated to be much more expensive…than chips from UK energy crops…hence are unlikely to be used for heating. The UK biomass heating sector is therefore likely to only see the UK energy crop chip prices.”

I hope the Minister will accept that that goes to show that the RHI will only add to pressure on domestic wood supply and drive up prices above levels that the wood panel industry can absorb or pass on to customers. Biomass energy companies will buy wood from established wood markets, such as the market for small roundwood, unless they are specifically encouraged not to do so. Why would they seek out twisted branches, stump and brash when they can outbid existing industries for small roundwood, sawdust and even logs?

The final and crucial factor concerning imports is that biomass plants, once built, can source material from wherever they see fit as long as the wood is certified under a forest management scheme. The fact that many such plants are situated at ports does not mean that they will not buy huge amounts of wood from the UK. As I have explained with the aid of DECC-commissioned reports, there is no prospect of international woody biomass becoming cheaper than domestic wood.

On carbon balance, my fundamental question to the Government is this: what is the best possible environmental outcome for this precious and limited resource? The Government must not simply weigh the carbon balance of energy generation from fossil fuels and wood; they must also consider the environmental benefits of competing uses of wood. It is a well-established fact that wood products are an important carbon sink that can be burned for energy after their useful life.

According to the Forestry Commission’s Biomass Energy Centre, direct CO₂ emissions from combustion of wood chips for electricity in a large-scale plant are more than five times as high as emissions from the combustion of hard coal. I acknowledge that life-cycle CO₂ emissions from large-scale wood-fired electricity production are considerably less than coal, but there is a considerable and crucial time lag, or carbon debt. It will be between 30 and 40 years before new plantings in coniferous temperate forests can reabsorb the carbon released through combustion. I represent a constituency with large forests—a landscape you will recognise, Mr Weir, as someone from Scotland—so I know that is not a short-term fix. In the short to medium term, new large-scale biomass plants will massively increase carbon emissions. If climate change is to be taken seriously, how can we be comfortable with such a perverse outcome?

[Roger Williams (Brecon and Radnorshire) (LD)]

I congratulate the right hon. Lady on securing this important debate. She is making a powerful case for which I have a lot of sympathy. A lot of wood ends up in landfill that could be used in biomass facilities, which would be of benefit in reducing carbon.

[Mrs McGuire]

That chimes with the views of the industry. Some of that wood could easily be used for biomass energy generation, instead of the wood currently used by the wood panel industry and other industries. The hon. Gentleman makes a powerful point. An appropriate comment might be that we must look beyond the trees so that we can see the wood.

The Environment Agency’s 2009 report “Biomass: Carbon sink or carbon sinner?” got to the nub of getting the best environmental outcome from the material. Although I accept that the introduction of a heat incentive is a good step in principle, wood will continue to be consumed in massive quantities for electricity production as long as financial incentives make it attractive. Because wood supply is limited and displacement of the wood panel industry is a realistic outcome, it is vital to compare the carbon emissions of electricity from biomass with those produced by panel board manufacture.

A study by Carbon River submitted to DECC last year demonstrated that CO₂ emissions from the wood panel industry equate to 378 kg of CO₂ per tonne of timber processed. By comparison, CO₂ emissions from the biomass industry consuming domestically sourced timber equate to 1,905 kg of CO₂ per tonne of timber processed. The wood panel industry’s annual consumption of timber is between 4 million and 4.5 million tonnes per annum. If it were displaced by the biomass industry, the increase in net CO₂ emissions would equate to 1,527 kg of CO₂ per tonne of timber processed. That works out at about 6 million tonnes of CO₂, or a 1% increase in the UK’s net CO₂ emissions each year.

If the UK is to burn 50 million tonnes of timber a year to satisfy its energy requirements, direct CO₂ emissions could increase by 95 million tonnes per annum. Will the equivalent capacity of fossil fuel plants be retired to compensate, or will the carbon reduction policy in fact increase our carbon footprint? Large-scale growth of biomass usage for electricity production will not only be detrimental to the wood processing industries, including sawmills; it is also likely to put even greater pressure on land in the UK and abroad that is currently used for farming food crops.

I hope that the Government can accept some responsibility for elements of that powerful challenge. In response to a Channel 4 news exposé of biomass and timber prices last week, the Government stated:

“It is not our intention for our renewable support mechanisms to adversely affect other industries. We believe this can be minimised by increasing the supply of wood and forestry residues available, better management of our waste wood”—

that chimes with the comments of the hon. Member for Brecon and Radnorshire (Roger Williams)—

“and the increased use of other biomass resources such as food waste and perennial energy crops.”

Frankly, it is not good enough for the Government to say that it is not their intention to affect industry. If they are interfering in the market, which they are, they must make certain that they obey the golden rule: do no harm. Therefore, I respectfully suggest that it is negligent of the Department to omit the industry from its RHI impact assessment.

The Government’s answer to concerns about the sustainability of biomass energy is to cite the proposed sustainability criteria. With regard to wood, those are simply measures of good forest management and in no way provide a picture of sustainable levels of demand and supply, or of the impact that biomass will have on carbon sinks and recycling. The Government say that they will act if distortion occurs, but frankly, any action will be far too late. Distortion is occurring today, and these industries are already at their competitive limits.

No one doubts the complexity of the problem. However, we have to recognise that there is a better way of making decisions about the use of wood. At present, no other country in the European Union encourages wood-fired electricity generation on the scale seen in the UK. Countries with much greater forest cover, such as Germany and Austria, have sensibly instituted minimum efficiency standards that preclude electricity generation from wood alone, thus encouraging the development of high efficiency heating and small-scale combined heat and power. The Minister does not even need to look beyond these islands. You will love this sentence, Mr Weir: we could follow the lead of the Scottish Government, who have expressed a preference for those processes over large-scale electricity from biomass. I am pleased to tip my hat, on this occasion, to the Scottish Government’s lead on the issue.

Despite the introduction of the RHI, the Minister cannot deny that the current incentive regime still makes burning virgin timber for electricity an attractive proposition. The best way to end market distortion and to achieve the best environmental outcomes is to end support for electricity-only generation from wood, and to exclusively support quality CHP, heat generation and energy from treated wood waste. That would ensure high energy efficiencies, protect current and future wood recycling, and reduce landfill. It would also greatly reduce the impact on wood processors, who play a vital role in carbon abatement, through the manufacture and recycling of low-carbon, sustainable construction and furniture materials.

If the Minister recognises the valuable contribution made to the carbon agenda by the panel board industry, will he please comment specifically on how the creation, through a subsidy, of a four to fivefold increase in the demand for limited biomass cannot but distort that market and impact detrimentally on that industry? Finally, does he feel that the loss of the UK’s wood panel industry is acceptable collateral damage for hitting renewable targets? That is what appears to be happening. It would be a sad conclusion, not just because of the jobs and skills that would be lost in a rural industry, but because, perversely, such displacement of wood would actually increase carbon emissions, which is the very thing that I am sure the Minister would not want. I welcome this opportunity to put these issues to the Minister and look forward to the response of my hon. Friend the Member for Liverpool, Wavertree for the Opposition, as well as that of the Minister himself.

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[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I apologise for not being present at the commencement of the debate, and no discourtesy was intended. I was participating in a debate on the Floor of the House on fuel prices, an issue that will be of some interest to the wood panel industry and the wider timber industry.

I want to make a brief contribution because others will already have covered a number of points. The issues raised in the debate are of concern to me because I represent an Ayrshire constituency, which borders the constituency of Ayr, Carrick and Cumnock. The Egger plant at Auchinleck is on the border between the two constituencies, although, technically, it is in the constituency of Ayr, Carrick and Cumnock. I have had the privilege of looking around the plant on a couple of occasions in my capacity as MSP for Carrick, Cumnock and Doon Valley, although I will become the former MSP when the Scottish Parliament breaks up for the election in a few days. However, I continue to take a close interest in what happens at the plant and in Government policy on the industry in Scotland and the UK.

As Members will have heard, some very high-quality products are made at the Egger plant. I was certainly amazed, as a consumer of all things DIY at various stages in my life, to see how high-quality chipboard was made, finished and then used to make the doors that we have all seen in new housing developments. However, the important point for me was that this was a high-quality product and created high-quality jobs in my constituency, which has particularly high unemployment and which has suffered for many years because of the loss of the mining industry and other parts of the manufacturing sector. The plant is therefore crucial, and the then Cumnock and Doon Valley district council was quite brave to pursue moves to locate the plant in the area. To be fair, it had to persuade the local community a little that it would be a good thing, and the company certainly worked with the council on that. I should add that the plant’s work force have been retrained and upskilled to keep them up to date with what is required in this modern industry.

I was therefore somewhat disconcerted when I first heard that the supply of the waste wood that was being recycled and used to produce the new items at the plant might dry up if a significant amount were channelled for use in biomass. It seemed slightly perverse, at a time when we are trying to make the best use of recycled products, that there would be more incentive to burn waste wood than to recycle it, reuse it and turn it into something much more useful and productive. Obviously, I hope that we will hear about that from the Minister.

It is also slightly perverse that there seem to be incentives to use all waste wood in biomass. There should be some way of incentivising people to sort it and to strip out the treated wood from the wood that can be reprocessed sensibly. The Scottish Government, for example, support a proposal to ban the production of energy from materials that could otherwise be recycled. That would also reduce landfill. That is a particularly sensible approach. I am not sure whether I should be standing up for the Scottish Government, given that we are about to have elections.

[Mrs McGuire]

I should just let my hon. Friend know that, in the spirit of solidarity on this issue, I also took the opportunity to congratulate the Scottish Government, and I think you, Mr Weir, were delighted.

[Mr Mike Weir (in the Chair)]

Twice in one debate.

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[The Minister of State, Department of Energy and Climate Change (Gregory Barker)]

I am delighted to participate in the debate under your chairmanship, Mr Weir. I congratulate the right hon. Member for Stirling (Mrs McGuire) on securing the time. She has a commendable record for keeping the issue at the forefront of debate at Westminster. I had the opportunity to meet her and other colleagues in September for a productive meeting with the all-party group on wood panelling. I met industry representatives on numerous occasions before that, particularly while in Opposition.

A range of important issues has been raised, not only by the hon. Lady but by my hon. Friend the Member for Hexham (Guy Opperman), who is also an articulate champion, not just for his constituency but for this industry in particular. We also heard thoughtful speeches from the hon. Members for Clwyd South (Susan Elan Jones) and for Kilmarnock and Loudoun (Cathy Jamieson). I have anticipated in my remarks many points made in the debate and I will seek to address those questions raised as best as I can in the time that I have at the end.

I appreciate that very serious issues have been raised, and if I am not able to cover all of them in this time, I will be happy to follow up with more detailed answers. I can assure all hon. Members that I understand their concerns about the wood panel industry. The coalition Government value the significant investment made in the UK wood panel industry, and we certainly acknowledge the important benefits it delivers, including the real carbon benefits of locking carbon into new buildings. It also provides the benefit of offering jobs—skilled, sustainable jobs—right across the UK, often in rural areas where there is no alternative employment. I think it is not unfair to say that there has been an attitude of complacency in the past, and that the voice of this industry has not always been effectively heard. I am determined to listen.

The right hon. Member for Stirling raised the question at the outset of why the RHI impact assessment did not include the impact on the wood panelling industry. I would like to say, up front, that that is a very good point and I do not have a proper answer for her. She is right to raise it and I will pursue that issue as soon as I get back to the Department. I invite her to meet me so that we can go through the data. I can tell her, and the hon. Member for Liverpool, Wavertree (Luciana Berger), who also raised this matter, that in respect of the renewables obligation consultation there was a significant contribution from the wood panel industry, which set out its concerns along the lines that have been highlighted today. We are now working on guidance about what will be considered as waste and excluded from sustainability criteria. I will say more about that in the course of my remarks.

[Mrs McGuire]

I welcome the Minister’s frankness in admitting that there may have been an omission in terms of the impact assessment. I would be delighted, and I am sure that I speak on behalf of my colleagues, to meet him to see whether we can rebalance that impact assessment in a way that recognises the importance of the issue to the industry.

[Gregory Barker]

I look forward to meeting the right hon. Lady and going through those issues in more detail. Before I go into more substantive points about UK policy, may I also just echo the remarks made by the hon. Member for Liverpool, Wavertree and go on record to say that the UK welcomes 2011 as the international year of forests? This is an excellent opportunity to raise public awareness of the importance of forests—although I think that the coalition Government have done quite a good job of doing that already—and in tackling climate change, halting biodiversity loss and preserving the livelihoods of forest-dwelling peoples.

Forests have a dual role in helping us to reduce greenhouse gas emissions and to tackle climate change. First, forests act as carbon sinks, removing carbon dioxide through photosynthesis and storing it in plant and soil matter, but forests also contribute by providing wood for energy and renewable materials for construction and manufacturing, and reducing the use of fossil materials. However, deforestation is a very real risk that must be addressed. If the world’s growing demand for bio-energy and renewable materials were to lead to the clearing of forests, particularly primary forests, that would increase total global emissions dangerously and drive forward, rather than tackle, dangerous man-made climate change.

The coalition Government are committed to tackling the drivers of deforestation, in particular the global trade in illegal timber—an issue raised by the hon. Member for Liverpool, Wavertree. The international year of forests provides a useful platform to highlight our recent achievements in that area, particularly in terms of EU timber regulation. That regulation prohibits the first placing of illegal timber on the EU market, and will send a clear message to producer countries that illegal timber has no place in the UK market. That complements our wider efforts to improve forest governance in developing countries through the EU forest law enforcement, governance and trade action plan.

The international year of forests is also an excellent opportunity to promote the importance of sustainable forest management in building a greener, more equitable and sustainable future. To complement our work on tackling deforestation, the UK is working with the International Union for Conservation of Nature and other international partners to promote the role of forests in restoring degraded landscapes. The Forestry Commission is using its programme of educational, community and recreational events throughout 2011 to highlight the international year of forests. I am sure that those activities are going on in many of the constituencies of hon. Members who are present.

The hon. Member for Liverpool, Wavertree raised the issue of our clear ambition to be the greenest Government ever, which goes right to the heart of the coalition’s programme for Government. My right hon. Friend the Prime Minister has spelled that out on numerous occasions, but our ambitions go much further than our work to stop deforestation, critical though that is to us. We want to be a global leader in the world-wide transition to a low-carbon economy. We are committed to producing 15% of the UK’s energy from renewable sources by 2020, and to reducing our carbon emissions by 80% by 2050. Renewable energy, and bio-energy in particular, must play a very important role as we decarbonise our economy and seize opportunities to create new businesses, employment and long-term green prosperity in the UK.

Heat and electricity from biomass could provide nearly a third of UK needs from renewables by 2020, meeting approximately 4.5% of our overall energy demand. Bio-energy offers the rare benefit, for a renewable technology, of not being intermittent. It can generate electricity or heat on demand at any time of the day or night. The UK needs the flexibility and security that that supply brings. Moreover, bio-energy can provide significant new business and employment opportunities to the UK. For example, the expansion of biomass use in off-gas-grid areas of the UK will mean a growing order book for specialist boiler manufacturers, demand for new local businesses to provide installation and maintenance, and will create opportunities across the wood fuel supply production and distribution chain. Just last week, we set out a portfolio of major policies that will help us achieve that. Bio-energy will make a significant contribution to our decarbonisation plans, but that must not be at the expense of other jobs. I am very aware of unintended or perverse consequences and hon. Members present are perfectly entitled to raise those issues. We will work harder to look at the consequences for the wood panel industry. Many powerful arguments were made today, not least how it is better to lock up carbon rather than to burn it, and I am mindful of that.

[Mrs McGuire]

While welcoming future discussion and recognising that issues have been raised, is the Minister in a position to say to us today that he thinks there may be some flexibility in the way in which the RHI is being implemented to the current detriment to the wood panel industry? While discussions with the Minister are wonderful, I would like to push him that wee bit further to see what commitment he can give to us today.

[Gregory Barker]

I will develop my theme in my speech, but I think that there is a genuine point of disagreement in our approaches. I agree with the right hon. Lady; there is absolutely no excuse for not publishing the account that we take of the impact on the wood panel industry in the impact assessment, and we will address that. I am sure that there are ways that we can improve measures to mitigate the impact on the wood panel industry, and we are keen to see more wood used in houses. However, the difference between us may lie in the fact that, fundamentally, we believe that the market will respond with more supply, both domestically and globally. This is an immature market—this is a theme that I wish to develop—and the biomass industry in the UK has fallen to a very low level. Historically, we powered the country on biomass. I represent a constituency in East Sussex, the most wooded county in England. I know, just from my own experience, that the vast majority of woodland in that county has fallen into a state of disrepair and is not actively managed. There is significant scope to bring in new supply, both globally and in the UK, and I will come to that in more detail if I may.

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[Gregory Barker]

If it were simply a dodge to try to get around the regulations, they would have great difficulty in proving their case. If they were to upgrade their plant or adopt new technologies in a new installation, that would be a different proposition.

We recognise that mainstreaming bio-energy is not without risk—hon. Members have done a good job of outlining the risks. We acknowledge the critical importance of taking action to ensure that rapid growth in bio-energy does not result in loss of important habitat either at home or internationally, or the release of more carbon than we actually save. Hon. Members raised concerns about that. Biomass can be a low-carbon energy source, as the hon. Member for Liverpool, Wavertree said, but that requires it to be grown, harvested, processed and transported sustainably.

We are introducing mandatory sustainability criteria to ensure that the biomass power generation supported by the renewables obligation is genuinely sustainable. From April, generators will be required to report to Ofgem on their performance against a target of 60% greenhouse gas emissions savings compared with fossil fuel use, and on land criteria. Following a transition phase, we intend to make those criteria mandatory from 2013 for all generators of 1 MW capacity and above. We expect that similar standards—again, mandatory sustainability criteria—will be introduced for biomass used for heat under the renewable heat incentive from 2013.

Sustainable forest management is a critical part of biomass sustainability. Therefore, the Government are actively working with stakeholders to develop an approach that will robustly protect not just UK forests but global forests, and enable UK woodlands to come under active management, with the many benefits that that will bring not just to those who use the products but also in terms of biodiversity and recreational benefits for the communities that live around them.

[Mrs McGuire]

I do not believe that any of us who are participating in this debate have any problems with some of the good things that the Minister has identified, but I would like to draw him back to the fundamental questions posed by the debate. The first is the impact when wood that could be utilised for other purposes is burned in biomass-powered generators, and the second—this was my final question—was about jobs, which the Minister mentioned. Is he willing to recognise that there will be collateral damage to an important rural industry which links into all the forestry management that he has spoken about, in order to get the other elements of his policy through? I do not believe that any of us have any problems with some of the good things that he is talking about, but we need to draw him back to the crucial question and the nub of the debate.

[Gregory Barker]

Let us be absolutely clear: the coalition values the jobs in the wood panelling industry, as we value all jobs. It is certainly not our aim—unintended or otherwise—to see those jobs disappear. That neatly brings me on to my next point, which is about the impact of other wood-using industries on wood prices and trends, and competition for a limited resource.

We recognise that the increased use of wood for energy risks negative impacts on other potential users of wood. We understand that the wood panel industry is facing more competition for their raw materials. We also want more wood to be used in the construction of homes. Our analysis shows that the deliveries to wood fuel markets are increasing from a very low base. In 2005, just 100,000 green tonnes of softwood were delivered to fuel markets, accounting for just 1.2% of total softwood deliveries. In 2009, that had increased to only 600,000 green tonnes, less than 7.5% of total softwood deliveries.

In real terms—perhaps this is the most telling point—the price of softwood saw-logs increased by 14% over the five-year period ending in September 2010. I have not done the arithmetic, but I would have thought that the rise was below inflation over that period. I apologise that I do not have more recent statistics. Obviously, this is a dynamic model, and we will continue to inform Members. I do not think anyone could argue that that represents significant inflation in costs. If there were a problem of the magnitude hon. Members have described, it would be reflected in the price, but, clearly, we have not seen that to date. However, I accept that that is clearly something that we will have to watch.

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[Gregory Barker]

I do not agree with my hon. Friend. Yes, there has been a rise in wood prices, but my maths tells me—I am happy to be corrected if I am wrong—that it is below the inflation rate. Wood is a commodity like everything else, but a 14% rise over five years is not alone a cause for concern. Over 20 years, the real-terms price of softwood saw-logs has fallen by almost 46%. The lowest value was reached in March 2009, so the pricing indicators do not support his argument.

Price have recovered slightly since March 2009, but the bottom line is that even if prices increase—I anticipate that they will—we are starting from a very low base. In real terms, they are substantially lower now than 20 years ago.

[Mrs McGuire]

I hope that I highlighted some of the information that DECC has on forward supply of and demand for wood. It is unhelpful to be historic about that when all the analyses show that the demand for wood will outstrip supply.

Another element is that one part of the market—the demand side—is being subsidised when other elements of the market are not. I know that the Minister is a great believer in competition, but surely the Government are putting the wood panel industry in an unfair position when its competitors are being subsidised for the same products.

[Gregory Barker]

It must be remembered that timber prices are set by global markets, not solely by national Government energy incentives. According to some sources, international energy markets are already influencing timber prices. There was a forecasted 10% drop in log prices for 2010, but instead they were higher than in 2008, which was probably due to increased demand for wood fuel. I assure the hon. Lady that we are looking at that carefully. In addition, we are very aware that wood fuel is increasingly traded as a global commodity, so UK wood supplies can and will be exported for energy use in other countries if that will deliver a better price, and we may import timber from abroad. Nevertheless, as I stated in my introduction, the value of the wood panel industry in terms of green jobs and the carbon stored in its product is significant, and we are mindful of that. That is why the Government are taking action to reduce those displacement issues.

Our actions fall into three main areas: increasing the use of biomass feedstocks that the wood panel industry has no use for; bringing more wood supplies forward; and diverting more waste from UK landfill. To increase the use of other biomass—for example, food waste and anaerobic digestion—it is important to look beyond just wood when sourcing biomass. Biomass suitable for energy generation may come from a wide range of plant and animal materials, many of which are unsuitable as raw materials for our wood processing industries. They include perennial energy crops, such as Miscanthus grass and short-rotation coppiced willow, which can be grown on lower grade land. Similarly, dry farming residues, such as straw, can be combusted for energy.

The Government support perennial energy crops, so long as they do not displace food crops. The renewables obligation provides additional support for energy crops over other biomass feedstocks. That uplift of half a renewable obligation certificate aims to stimulate interest in energy crops grown by the power generation sector, and to help to develop the fuel supply chain.

Support is also provided directly to farmers through the energy crops scheme, which is part of DEFRA's rural development programme for England. The ECS seeks to remove one of the most significant barriers for prospective energy crop growers—the high initial cost of establishing new plantations. The ECS provides grants that reimburse 50% of planting costs.

Another important area is the use of wet biomass residues, such as food waste, sewage and animal manure, that can be anaerobically digested to produce biogas, which can then be used to produce heat and electricity. The UK produces about 100 million tonnes of wet organic material that is suitable for treatment by AD. That includes up to 20 million tonnes of food waste from households and industry; 90 million tonnes of agriculture by-products, such as manure and slurry; and 1.7 million tonnes of sewage sludge. By diverting those wet organic wastes into energy, we can stop slurry surface water run-off polluting our rivers, reduce pressure on landfill sites, and avoid methane emissions, which are 23 times worse than those of CO₂ . The Government are working with the industry to draw up a joint programme to tackle the barriers to the deployment of AD. That will be published in May 2011. We are also looking at the feed-in tariff scheme to see whether the tariff rates are enough to make farm-based AD worthwhile.

What about bringing more wood supplies forward? A further key way to reduce the impact on the UK wood processing industries is to bring new supplies of wood to the UK marketplace. There is a large underused bio-energy resource in the UK. Around 40% of the UK's forest and woodlands, measured by land area, are not currently under an active management plan, as the hon. Member for Brecon and Radnorshire (Roger Williams) said. When woodland becomes overly mature, leaf cover prevents sunlight from reaching the forest floor, and the biodiversity is poor. Sustainable management would allow a wider range of shrubs, birds, trees and bees to thrive, and at the same time bring more UK timber and wood supplies to the market, and generate new business, jobs and opportunities.

The Forestry Commission is developing a wood fuel implementation plan, to be launched later this year. It will set out actions to bring forward an additional 2 million green tonnes of wood from unmanaged forests and other sources by 2020. The commission is also developing a wood fuel woodland improvement grant to assist harvesting and marketing activity. Key features of the new grant are that the wood fuel WIG will offer a 60% contribution to costs, and can support forest roads, access tracks and other related harvesting infrastructure. Further details will be published later this year.

Alongside the development of UK woodlands, developing the biomass import market and securing a healthy share of that for the UK will be essential. We have estimated that a global market of up to 50 million oven-dried tonnes annually will be available to the UK by 2020. I recognise that the wood panel industry is rightly proud of the use it makes of the UK's waste wood. It is estimated that around 4.5 million tonnes of wood waste are generated in the UK every year, of which more than 1 million tonnes, mainly from packaging waste and wooden pallets, are recycled by the panel-manufacturing industry. But we estimate that a considerable quantity is still going to UK landfill.

Wood in landfill is particularly dangerous because it decays and generates methane, so the Government are actively considering how best to make further reductions in the amount of waste going to landfill as part of the review of waste policies, which is due to conclude in the spring. It will look at all aspects of waste policy and delivery in England, including the role of energy from waste. The aim is to ensure that we are on the right path towards a zero waste economy.

In particular, we want to address the priority of moving wood up the waste hierarchy so that it best delivers the right environmental outcome. The waste hierarchy will be legally binding in the UK, so we will seek better to address the potential for diverting treated wood waste, which is not suitable for use in the wood processing industries, from landfill to energy recovery.

In conclusion, the wood panel industry has an important and valuable role to play in the UK's low carbon economy. I have set out today the proactive actions that we are taking to bring new biomass to the UK market, and to ensure that we have the supply to meet demand. We are increasing the use of biomass, other than clean wood, for energy; we are bringing forward more wood supplies; and we are diverting more waste from landfill. But we are open to new ideas. I do not pretend that we have the perfect solution yet, and DECC would very much welcome continuing engagement with the wood panel industry.

I thank all hon. Members who have participated in an important and valuable debate. The agenda will certainly continue beyond today.