The Prime Minister has just announced:
Today I am pleased to release the report of the Biofuels Taskforce. I commissioned the Taskforce in May of this year to examine the latest evidence on the impacts and benefits of ethanol and other biofuels.
The Taskforce found that:
1. there are potentially significantly greater health benefits from ethanol use than previously thought; and
2. greenhouse and regional benefits are similar to previous research undertaken; but that
3. the biofuels industry faces considerable market barriers including low consumer confidence and high commercial risk; and
4. on current settings the Government’s biofuel production target of 350 megalitres (ML) by 2010 will not be met.
I reaffirm the Government’s commitment to achieving our target of at least 350 ML biofuel production by 2010.
In a world of high oil and petrol prices, it is important that unnecessary barriers preventing the development of an alternative fuels market in Australia are removed to allow consumers to make decisions based on sound economic, environmental and social signals. In a climate where petrol prices are likely to remain high it is important to encourage greater use of biofuels.
Today I announce a package of measures to help address market barriers and restore consumer confidence in the biofuels industry.
The Australian Government will work with oil companies, petrol retailers, consumer groups, the biofuels industry and car manufacturers to ensure achievement of the target by 2010. In particular, the Government will work with the major oil companies to develop Industry Action Plans to underpin the achievement of the 350 ML biofuel target.
The Deputy Prime Minister and I will meet oil companies next week to commence the development of Industry Action Plans. This meeting will also provide an opportunity to discuss the outlook for petrol prices.
The Government will closely monitor progress against the Industry Action Plans to ensure all actions are delivered on time.
Consumer confidence in the biofuels industry was damaged in 2002. The Taskforce report finds that the low level of consumer confidence is not justified by the facts. The Government considers that every effort should be made to restore consumer confidence in the biofuels market. The Government will:
1. demonstrate its confidence in ethanol blended fuel by encouraging users of Commonwealth vehicles to purchase E10 where possible;
2. undertake vehicle testing of vehicles in the Australian market to validate their operation with E5 and E10 ethanol blends and work with the Federal Chamber of Automotive Industries to ensure that consumers receive accurate and up-to-date information;
3. increase fuel quality compliance inspections to ensure ethanol blends meet fuel quality standards;
4. simplify the E10 label, which inadvertently acts as a warning to consumers against using ethanol;
5. subject to the results of vehicle testing, allow E5 blends to be sold without a label, as in Europe, giving fuel companies greater commercial flexibility to increase supply; and
6. work with Australian fuels and transport industries to establish standard forms of biodiesel to provide certainty to the market.
7. work with the States and Territories to adopt fuel volatility standards (an existing market barrier) that are transparent, nationally consistent and take full account of the latest information on the impacts of ethanol blends on air quality.
The Biofuels Taskforce found that there are potentially significant air quality and health benefits from ethanol use. To further assess and promote the benefits of biofuels the government will:
1. commission a study on the health impact of ethanol to validate overseas research under Australian conditions; and
2. promote biodiesel’s beneficial environmental properties such as its biodegradability through a B5 biodiesel trial in Kakadu National Park.
The package I announce today is in addition to the Australian Government
Jennifer Marohasy BSc PhD is a critical thinker with expertise in the scientific method.
Actually all mineral commodities have risen in price, a fairly reliable indicator that the central banks have increased the money supply by credit expansion by the use if low interest rates.
Oil is not scarce, only certain categories of it, and of course the environmental movement, with their opposition to the construction of new refineries, have essentially added to the problem.
Louis – which sites have had refineries stopped by the greens in recent time. I must have missed that.
Phil,
Yes you would have, they don’t exist. Even I can work that one out.
Louis,
Could you please provide some examples of any “proposed” refineries that were not established principally because of the environmental movement.
In fairness this should be differentiated from refineries that may not have proceeded due to adverse environmental impact as determined by government evaluation of environmental impact assessments.
Some questions to be answered,
how much energy does it take to make 1 litre of ethanol ?
how much greenhouse gases are produced in the whole cycle of ethanol production ?
Ric
Try this for a start – ethanol life cycle analysis from corn stubble in the US.
http://www.nrel.gov/docs/gen/fy02/31792.pdf
This considers all the carbon cycle issues and from a quick look, it seems that the use of a waste such as stubble, the carbon emission reduction is significant. Not sure how this stacks up economically though, and it would be different for Oz sugar or wheat.
Yes in theory, most of the CO2 emmisions come from the atmosphere in the first place, so in theory it is CO2 neutral. But the point is though, that hydrolysed corn stover is not currently significant part of routine ethanol production, but mainly a potential future route process depending on technology and cost barriers being overcome by ongoing research and innovation. Howard’s initiative underlines the fact that globally most ethanol fuel still relies on significant government subsidies, and gets left high and dry when oil prices fall.
True enough d, not all the technical issues about ethanol from wastes are resolved. I don’t know what the government subsidy situation is now, or is likely to be, in Australia when it comes to using wheat, sorghum or cane. There is a subsidy in that ethanol as a fuel is not subject to fuel excise.
The relatively dry economists resist the use of any Keynesian methods for stimulation of new forms of enterprise. I take the view that if we rely totally on market forces, we could be exposed to severe shocks when a resource is depleted below a threshold, because market forces are dominated by this year’s balance sheet. Live for today, let tomorrow take care of itself.
One function of government is to stimulate economic activities that are sustainable. Short term subsidies, properly managed, can be used to do that. Is this desirable?. The current support for ethanol derived from foodstuffs is, I expect, a short term bridge, to establish markets for ethanol to then encourage R&D for the use of low value non-food materials, such as stubble and woody wastes. The economic advantages of ethanol from low value feedstocks would hopefully then push sorghum and wheat back to higher value uses.
More on biodiesel
http://www.biodiesel.org.au/
Yes Rick, its pretty clear that part of the outcome of these multiple global ethanol initiatives (including South
Africa just recently I noted) is higher global commodity prices for cereals/cane than they otherwise would be, and thus the main beneficiary is farmers. It worthwhile though to be clear who is going to be hurt by high basic food prices. I’d say its the poor in urban areas of the third world, Cairo, Mexico city, Mumbai, Bagdad etc. As far as Australia is concered its probably not too bad on negative welfare impacts. I supect this policy is driven by the prospects of better farmer/rural incomes rather than environmental improvement, and its better to get that clear upfront in evaluating whether you are happy with the way our taxes are spent.
Mises Institute tackle the hidden costs of ethanol and question the sustainability of the product without taxpayer subsidy (welfare)
http://www.mises.org/story/1886