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Labor's problem with alcohol
Rob Burgess
Published 7:58 AM, 13 Oct 2010 Last update 10:25 AM, 13 Oct 2010
Hidden in one of the side deals Prime Minister Gillard did with Tony Windsor and Rob Oakeshott to form government is a potentially explosive problem. Labor, in a flash, picked ethyl alcohol as a long-term winner in clean transport fuels.
This kind of policy would normally take at least a committee to consider the implications, but when you're down to the wire, with two boisterous independents on your hands, it would seem an easy decision.
What Windsor in particular pushed for just before joining Gillard to form government, was a doubling of the period over which ethanol would receive excise relief as a 'clean fuel'. But it may not be as politically clean as Labor would hope.
While still relatively immature, the ethanol industry is receiving massive support in the form of mandates for its addition to transport fuels.
New South Wales already requires unleaded petrol to contain, averaged across fuel types, 4 per cent ethanol, and this will rise to 6 per cent from January 1 next year. The Queensland parliament is also expected to pass legislation this year, to mandate 5 per cent ethanol by the same date.
Unsurprisingly, Stock & Land this week reports that "surging demand for biofuels in Australia outstripped the rate of global biofuels growth in the past year".
APAC Biofuel Consultants has just released a report showing that Australian biofuel demand grew 34 per cent last year, more than double global growth of 16 per cent. Mandated consumption will do that for an industry.
Ethanol takes the lion's share of this growth.
So what's the problem? The ethanol's carbon cycle appears elegant – for every litre a motorist burns, a corresponding quantity of CO2 is sucked out of the atmosphere by the plants which form the feedstocks for its production.
Currently there are three major producers in Australia – Dalby using sorghum feedstocks in Queensland Darling Downs; Sucrogen using leftover molasses from the North Queensland sugar industry; and Manildra on NSW's south coast using starch associated with its flour processing operations.
Together these three operations distil about 300 million litres of ethanol a year, pretty much all of which will be required to meet the NSW and Queensland fuel mandate volumes.
In addition to the mandate-spiked ULP, E10 fuel is now widely available in Australia – it has 10 per cent alcohol, which suits most newer vehicles. And further along the 'carbon neutral' scale is the E85 fuel Caltex is now promoting with the help of Holden. While there are some cars on Australian roads ready for this 70 to 85 per cent ethanol blend (some Saabs and Chryslers, for example), Holden in August released its VE Series II Commodore flex-fuel vehicles, which are specifically designed to run on Caltex's E-flex version of the fuel.
However, where this beautiful green revolution may run off the road is in moving the industry from its currently 300 million litre production, to more substantial levels. A second generation of ethanol plants will need to be built as demand grows – and demand is expected to now get 10 years of help via the Windsor-inspired ethanol excise relief.
That actual formula for the relief is complicated – producer subsidies will be phased out and excise slowly phased in, but the final effective excise will be 12.5 cents per litre, compared to 38 cents for petrol.
As production increases, the Greens will be watching very closely. Greens spokesman Tim Hollo says some of the big issues include increasing the size of Queensland's "sugar mono-culture", including problems with fertiliser run-off. The Greens, as policy, oppose mandated use of ethanol and want to see a lot more R&D money going into developing more sustainable feedstocks for the fuel – lignose/cellulose and algal feedstocks, for instance.
So the real road-block for the Gillard and Windsor deal could take the form of Adam Bandt in the lower house. His spokesman confirmed yesterday that he was not a party to the Windsor-Gillard deal and reserves the right to vote either way on the issue.
There is a lot to be said for ethanol. It promises better energy security for Australia, a reduced carbon footprint for the nation's transport fleet, and huge opportunities for employment and value-adding industry in regional areas. But without Greens support, the 10-year excise relief will not pass federal parliament.
All of which suggests another hasty decision should be put together by team Gillard – a large R&D package to map out a sustainable future for this industry looks like the obvious starting point.
4 Comments
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Silvano Porcaro wrote:
It is interesting that while the biofuels industry is just starting to emerge, the established LPG industry, which is also emissions friendly, is about to be progressively taxed from July 2011. The vast majority of taxis in Australia, and many other commercial and private motorists, currently use this clean fuel. Paradoxically, the federal government has been providing rebates of up to $2,000 to motorists who undertake the conversion to LPG.
Consumers can expect higher transport cost to permeate into many goods and services as a result.
13 Oct 2010 9:25 AM
Daniel Brough wrote:
"So what's the problem? The ethanol's carbon cycle appears elegant – for every litre a motorist burns, a corresponding quantity of CO2 is sucked out of the atmosphere by the plants which form the feedstocks for its production" (See Labor's problem with alcohol, October 13).
In theory that is true, in practice the methods to produce ethanol mean that it takes more than one litre of conventional fuel to produce one litre of ethanol, and ethanol yields less energy per litre, not efficient or carbon neutral at all, in fact worse than conventional fuels.
If ethanol is truly a low-carbon alternative it would not need to be mandated, a carbon price would be enough to ensure its widespread production and use.
13 Oct 2010 11:51 AM
Ted Ledner wrote:
If you take the gross inefficiency of ethanol versus octane in terms of energy available on combustion, and the considerable amount of energy required to grow, fertilise, harvest, ferment and transport the ingredients and then the ethanol (it doesn't come through a pipeline), it is a carbon intensive fuel. (See Australian property takes a hit, October 13).
The whole thing is a joke. If the purpose in using it is to reduce reliance on overseas petrol then fine, just say so. But remember using it increases the carbon production, not the reverse.
13 Oct 2010 12:56 PM
David Sing wrote:
I can't see a problem with the parliamentary numbers here. The Greens shouldn't even need to be in the equation (See Labor's problem with alcohol, October 13).
Any increase in mandated use of ethanol fuel will be enthusiastically supported by Bob Katter. The National Party should be able to provide the numbers in the Senate. Refusing to support it would be suicide in Queensland.
The mentioned arguments against ethanol as a biofuel sound like they are based on the use of wheat and core as feedstocks in the US. The equation for sugarcane-derived ethanol is vastly different. As bagasse waste streams are used as feedstock for electricity generation the additional benefit to be gained from cellulosic ethanol will be limited. What's more, much of Queensland's sugar producing land doesn't have a lot of alternative uses because it's too wet.
Ethanol fuel being uneconomic is not the problem. My take on it is that it's the limited availability of capital and greater attractiveness of returns in the resources industry that is preventing investment in sugarcane-based ethanol generation.
13 Oct 2010 1:57 PM
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