Biofuel (Ethanol Content) Amendment Bill 2009
I will make a brief contribution on the debate on the Biofuel (Ethanol Content) Amendment Bill 2009. I will not go over most of the ground that previous speakers have covered, but I will provide a general introduction. I will then raise two important ethical issues about this bill.
The objectives of the bill are to amend the Biofuel (Ethanol Content) Act 2007, to make further provision in respect of the required ethanol content in petrol sold in New South Wales and to make provision in respect of a required biodiesel content in diesel fuel, and for other purposes.
Proposed section 6 of the bill maintains the current provision stating that a primary wholesaler of petrol must ensure that the volume of ethanol sold in the form of petrol-ethanol blend during a certain period is not less than 2 per cent of the volume of all petrol sold within that period. However, the bill also requires that that percentage be increased to 4 per cent from the beginning of 2010 and 6 per cent from the beginning of 2011. The minimum ethanol percentage will also apply to a major retailer.
The bill will expand membership of the expert panel to include a representative from Treasury. The expert panel will continue to advise the Minister on whether there is any need to suspend the provisions in whole or in part and whether exemptions should be granted to individual companies. Under the current wholesale scheme, the major retailers in the State have not been bound to comply. This bill will broaden the application of the Act to include major retailers controlling more than 20 service stations.
The current Act imposes a minimum ethanol percentage mandate on sales of petrol by a primary wholesaler to persons in New South Wales. At present a primary wholesaler of petrol must ensure that the volume of ethanol sold by them in the form of petrol-ethanol blend during a certain period is not less than 2 per cent of the volume of all petrol sold by them in that period. To retain the option of ethanol-free petrol for older vehicles, ultralight aircraft, boats and small engines that may not be able to use the ethanol-blended fuel, the 10 per cent will only apply to regular grade unleaded petrol, commonly known as ULP.
The biodiesel requirement will initially be set at 2 per cent, but will be increased to 5 per cent in 2012. The 5 per cent is the maximum biodiesel content currently covered by most vehicle warranties, and the Federal Government has recently amended the diesel fuel standard to permit up to 5 per cent biodiesel in all diesel fuel. In the agreement in principle speech, which places all the values of this bill into a couple of paragraphs, the Parliamentary Secretary said:
Biofuel production facilities in regional New South Wales will support hundreds of jobs … Second-generation biofuels will add enormous value to regional agriculture and forestry industries, and algae have the potential to capture the carbon dioxide emitted by coal-fired power stations, while producing high quality biodiesel and stock food.
Replacing 5 per cent of our diesel with biodiesel could reduce the total greenhouse emissions from diesel-fuelled vehicles by about 1.3 per cent. The proposed mandates will reduce carbon dioxide emissions by about 450,000 tonnes per year, equivalent to taking 1,900 buses and trucks, and 77,000 light vehicles off the road.
Biofuels burn cleaner than petroleum fuels, reducing toxic emissions, especially carbon monoxide and particulates. Fine particles are a major cause of illness and death and are responsible for 97 per cent of the health impacts of emissions from vehicles.
Federal Government trials have recently demonstrated that E10 petrol will reduce fine particle emissions from petrol-engine vehicles by 33 per cent. B5 biodiesel will reduce particle emissions from diesel-engine vehicles by 4 per cent. These reductions will produce health benefits of approximately $22 million per annum in the Sydney basin.
With all of these good things outlined in the other place, why should we raise concerns? The concerns are real, and they are ethical and long-term. The 10-year biofuel strategy will be developed to pursue second and subsequent generation technologies and the strategy will be reviewed every three years. I will talk in a few moments about the subsequent generation technologies and, in particular, the advisability of putting more money into research of second-generation technology.
With the problem of global warming, the limited supply of oil, and the deepening financial crisis, the food for fuel dilemma has been at the forefront of both national and international debates. Proponents argue that ethanol is a cleaner, greener and renewable form of energy, yet critics say converting crops into fuel will simply create more food shortages and sky rocketing commodity prices, particularly among those who can afford it least. The international scene presents compelling contrasts.
In the United States, rising corn prices, driven by subsidised ethanol demand, have placed pricing pressure on a range of cereal food staples, particularly corn, contributing both to a degree of inflation and some social unrest. In Australia, the escalating cost of tallow and imported palm oil, along with the removal of government subsidies have rendered investment in biodiesel capacity uneconomic.
Brazil and the United States of America are leaders in global ethanol production, accounting together for 70 per cent of the world’s production and nearly 90 per cent of ethanol used for fuel. In the United States, more than half of the country’s fuel is blended with ethanol and Washington has passed a new law mandating a staggering 36 billion gallons of renewable fuel annually by 2022.
According to the supporters of ethanol, there are benefits, and I will mention half a dozen of them. The first is reduced oil imports. Some 70 per cent of petrol in Australia is derived from imported oil. A thriving ethanol industry in Australia will replace much imported oil and improve our balance of payments. Experience in the United States demonstrates that new ethanol plants provide substantial economic stimulation to the nation’s economy particularly, as the Hon. Don Harwin said, to an important area on the South Coast.
Kyoto Protocol commitments will see an increased use of ethanol and help Australia to achieve a reduction in greenhouse gases required by international agreements. Regional stimulation means that ethanol plants are usually sited in regional areas adjacent to farm areas. Therefore the ethanol industry would assist in employment, creating added income and value to farm products and reduce the boom/bust cycle. The increase of an Australian-made fuel would also reduce our dependence on oil from the Middle East and Indonesia.
Australia imports oil for some 70 per cent of our petrol needs and this figure has been increasing rapidly. There are other benefits to regional Australia; each ethanol plant will provide some 300 jobs in regions that lack skilled, stable employment. In the United States of America the production of over seven billion litres of ethanol per year has created an expected 190,000 jobs in rural communities. There are a range of spin-off industries from co-products such as cattle feed, fertilizers and transport.
The New South Wales Government re-affirmed its decision to mandate 10 per cent ethanol in all regular unleaded petrol sold in the State by 2011. Back in 2007, New South Wales was the first State to mandate the use of ethanol in petrol. The ethanol mandate will cost taxpayers nationally $200 million per year. The New South Wales ethanol mandate will increase food prices nationally as more quantities of grain will be diverted to ethanol production. Wheat and canola are the main ingredients of grain-produced ethanol. I will mention the concern I have about this in just a moment.
The proposed 10 per cent New South Wales mandate will exacerbate the inflationary impact of foreign government ethanol-related policies. With Australia’s ethanol producers already receiving more government assistance per litre than the Government provides in the United States of America, such as fuel excise relief and ethanol import tariffs, the proposed 10 per cent ethanol mandate in New South Wales will provide further grain and food price inflationary pressures. This might be good for putting a floor price into grain prices, which would make many of our farmers happy, but it has other implications.
The 10 per cent ethanol mandate will significantly reduce the ability of the State’s grain crop to meet demand needs. For instance, if the 2002-03 drought were replicated after 2011, the New South Wales mandate would divert over 22 per cent of the State’s total grain crop away from food production to production of fuel.
The 10 per cent mandate also places implications on the environment. For example, Manildra—the State’s monopoly ethanol supplier—indicated in its environmental impact statement for its Bomaderry plant, that the upgrade will generate an additional net 230,000 tonnes of C02-equivalent a year. It stated, “the project will result in a net increase of greenhouse gas emissions, even when the downstream reduction as a result of replacing petroleum fuels with bioethanol is taken into account”.
However, with the State currently in drought and experiencing a hotter and dryer climate, the E10 mandate will have a major impact on water usage. The 2.5 million tonnes of grain required each year to produce ethanol necessitated by the E10 mandate will see up to 10 ethanol plants across New South Wales, all trying to source grain from reliable suppliers, and this will have huge implications on water usage in the Murray Darling Basin.
According to the CSIRO, the future of the biofuels industry in Australia is not viable because production costs are outstripping the profits being returned for alternative fuels. Large-scale production of fuels from food stocks is no longer economically sound.
Natural Fuels Australia, Darwin’s biodiesel plant, has gone into voluntary administration, which threatens the employment of its 15 staff members. Dr Beer, a senior scientist with the CSIRO, believes the plant ran into financial difficulty mostly because of the higher cost of the palm oil used to produce fuel. Dr Beer believes all the biodiesel plants in Australia have had problems because the cost of feedstocks has risen markedly in the past few years.
The Service Station Association and the Australasian Convenience and Petroleum Marketers Association have criticised the mandate because there is only one ethanol producer in New South Wales and the mandate system gives that producer a blank cheque in setting prices. The service station sector is also concerned about the lack of supply competition and the inability to meet the stipulated mandate supply targets. Many smaller service stations also have very large capital costs for putting in place new tanks and pumping facilities.
Currently Manildra supplies 100 per cent of the State’s ethanol requirements, with no other competitor likely to be operational in the immediate future. The fuel retail and wholesale industry is also concerned that the mandate will impose a $276 million implementation cost on industry. In a time of global financial crisis, small operators will be greatly affected. I have spoken with their lobby group and there is no question that small operators are very concerned about the bill.
I will address the House also on the ramifications of the escalation of biofuel expansion and usage in advanced, industrialised countries to the detriment of the poorer nations on this planet. The expansion of the biofuel industry has led to a reduction in food supplies as developing countries convert food crops to fuel. Lester Brown from the Worldwatch Institute stated in the Guardian:
The competition for grain between the world’s 800 million motorists, who want to maintain their mobility, and its two billion poorest people, who are simply trying to survive, is an emerging epic issue.
According to Jean Ziegler, the United Nations Special Rapporteur on the Right to Food, the growing practice of turning crops into biofuel is a crime against humanity because it has created food shortages and sent food prices soaring, leaving millions of poor people hungry. The right to food is a human right and is a binding obligation well established under international law, in the Universal Declaration on Human Rights and the International Covenant on Economic, Social and Cultural Rights, as well as a plethora of other instruments.
The right to food has been well defined in General Comment No. 12 of the Committee on Economic, Social and Cultural Rights. This defines the right to food as:
The right of every man, woman and child alone and in community with others to have physical and economic access at all times to adequate food or means for its procurement in ways consistent with human dignity.
The United Nations Food and Agriculture Organization’s “The State of Food Insecurity in the World” reports that hunger has increased to 852 million gravely undernourished children, women and men. Some 100,000 people are dying from hunger or its immediate consequences every day, 854 million people are chronically undernourished, and every four seconds somebody loses his or her eyesight because of a lack of vitamins.
It takes 232 kilograms of corn or grain to produce 50 litres of ethanol. Those 232 kilograms of corn or maize would feed a child in Zambia or Mexico every day for an entire year. The right to food is gravely violated in many parts of the world and the situation is made worse because wealthy people want to have cheaper fuel at the petrol browser.
The 2008 World Bank research report found that from 2002 to 2008 large increases in biofuels production in the United States and Europe were the main reason for the steep rise in global food prices. Cheaper prices at the petrol pump come at the cost of increased prices at the food table for the world’s poorest and most hungry. At the Thirtieth Regional Conference of the Food and Agriculture Organization, the President of the World Bank said:
While many worry about filling their gas tanks, many others around the world are struggling to fill their stomachs. And it’s getting more and more difficult every day.
The United Nations has said that the price paid for maize has risen by up to 120 per cent in the past six months because of the demand for maize for fuel. For instance, this year 34 per cent of the world’s largest grain crop—United States corn—will be produced for fuel, not food. Such biofuel policies have also increased Australian grain prices because 80 per cent of our grain is exported, and United States corn exports represent more than 60 per cent of world trade. While grain prices have declined more recently from their record high levels in 2008, they are still significantly above long-term averages.
Matt Marks from www.crikey.com.au puts it best:
Every time you hear the word biofuel, you should think about the real winners and losers. The winners are all those on the biofuels gravy train. The big losers are the most impoverished and disadvantaged people on the planet.
There are new pathways to biofuels using previously unattractive, low-value resources emerging from laboratory and research projects world wide. These are called generation-two biofuels and this is where the New South Wales Government should be investing its money. The process involves the development of ethanol from otherwise low-value lignocellulose, algae, and other plentiful resources of hydrogen and carbon.
Every year I teach at the State University of Tennessee in Johnson City, Tennessee, and I have visited the research laboratories for cellulose where they turn sawgrass into ethanol. We do not have to use food for fuel. I close by making two points: We must not promote food for fuel and we are not wise to put our resources into the least productive of all the alternatives for making ethanol.