Australia’s top economic advisor slams E10 push in Qld, NSW

The Queensland and New South Wales governments’ push on ethanol sales forces higher fuel costs onto consumers, while delivering almost nothing in environmental benefits, the federal government’s top economic advisory body has warned.

The Productivity Commission recommends instead that arrangements to support the biofuel industry – which includes the production of ethanol, or E10, fuel – be scrapped at the end of  of 2018.

This comes in the face of Queensland government’s mandate, that came into effect on January 1, that a third of all non-premium petrol sales at service stations stocking must be an E10 product. Meanwhile, the New South Wales government targets 6 percent of total fuel sales to be ethanol.

Queenslanders had been nervous because fuel prices rocketed in NSW after an ethanol mandate was introduced, according to reports.

Ethanol is a biofuel, which means that it’s made from organic material such as plants. The Biofuels Association of Australia explains that “ethanol is made from waste products as sugar cane, the waste from starch production, and red sorghum.”

The Queensland government has argued that mandating the sale of ethanol as a fuel would help create a new, high-value bio-manufacturing industry in the state that will provide jobs for Queenslanders. Some farming groups have supported the move because they also believe it will help create jobs in a new biofuel industry, while other farmers’ groups have argued that it should be up to the market whether a biofuel industry is viable in Australia.

But the Productivity Commission released a report yesterday on the Regulation of Agriculture that slammed the claims made about “biofuel support programs” such as those exercised in Queensland and New South Wales.

The commission said that an assessment of NSW’s mandate found that service station operators cut the supply of regular unleaded petrol so they could meet the biofuel sales target, that this reduced consumers’ choice and effectively increased the price of refueling because drivers who didn’t want to use ethanol were forced to buy premium fuel instead of regular, and that the “competitive dynamic” between petrol stations was impacted.

The commission also pointed out that the argument that biofuels were environmentally friendly was not necessarily accurate.

“If native vegetation is cleared in order for the land to be used in biofuel production (or to replace agricultural land diverted to biofuel production), this can lead to several times more carbon emissions being released than the fossil fuels they displace,” it said, citing an academic study.

The commission pointed out that various Australian government support programs since 1980 had failed to develop a viable local biofuel market. There is currently only one producer in NSW and two producers in Queensland making biofuels.

Instead, the demand for biofuel should be market-driven, the commission said.

“The commission considers that farmers and the community would benefit from the removal of ethanol mandates and excise arrangements, as these policies deliver negligible environmental benefits and come at a high cost,” it concluded. “The Australian, New South Wales and Queensland governments should remove these arrangements by the end of 2018.”

What do you think about the E10 mandates? Do you buy it or pay more for premium petrol? How do you feel about fuel prices more generally?