Mrs DE-ANNE KELLY (10:49 PM) —The Renewable Energy (Electricity) Bill 2000 and the Renewable Energy (Electricity) (Charge) Bill 2000 are a significant step towards a cleaner, greener Australia and demonstrate this government's strong and practical commitment to meeting our obligations to reduce greenhouse gas emissions. In fact, these bills formed an important part of the original package of measures promoted by the government in the lead-up to the Kyoto negotiations. The bills encourage businesses to pursue actions they would otherwise be unlikely to pursue without the provided incentives. At the same time, responsible limits have been placed on the financial impact of those actions on businesses in the national economy. It is a market driven and flexible approach to encourage innovation for a better environment and it illustrates in a clear and unambiguous way how this government can work cooperatively with private enterprise to obtain a wider community and international benefit.

Under these bills, the achievement of the mandatory renewable energy target will be facilitated by a certificate trading mechanism. It is an approach that is a first for a renewable energy scheme. The approach adopted will also support the most cost-effective response, with low-cost generators being able to sell their product to parties who may have only limited renewable energy potential in their area. Allowing certificate trade will also provide substantial flexibility in the achievement of the measure, with certificates generated in years of high yield being banked to guard against the possibility that lower than average generation levels may occur in a following year.

It is envisaged there will be a substantial reduction in gases in the short term and the potential for a much greater reduction, obviously, in the longer term. Various estimates place the CO2 to be achieved through this measure between 5.5 million tonnes and seven million tonnes. It is certainly one of the largest single measures in the National Greenhouse Strategy and a major contribution towards meeting our Kyoto obligations. It is recognised that the electricity generation sector, as the largest contributor to Australia's greenhouse emission profile, must make efforts to reduce their greenhouse gas growth. The measures in these bills contribute significantly to that sector's greenhouse gas response strategies.

The longer-term nature of the measure could see even more than the 9,500 gigawatt hours of electricity generated from renewable energy sources after 2010. The significance of 9,500 gigawatt hours is shown by the fact that this is more than twice the renewable energy output of the Snowy Mountains Hydro-Electric Scheme, or slightly more than the entire generation of Hydro Tasmania—with all due respect to the member for Braddon—which supplies most of the electricity for the state of Tasmania. This equates to a domestic electricity consumption for a city of some four million people, or about a 60 per cent increase above current renewable energy generation levels.

The investment required is between $2 billion and $3 billion in the renewable industry up to 2010, so its significance and impact cannot be understated. The Minister for the Environment and Heritage, Senator Robert Hill, and the government have negotiated and achieved a remarkable outcome, and I am certainly pleased with the informed estimates that in excess of 10,000 jobs could be created, predominantly in regional areas, as a result of the implementation of the two per cent target. Up to 3,000 of these potentially could be directly related to energy generation. Certainly the economic benefits for regional Australia are exciting and, importantly, could well be ongoing.

It is appropriate in this debate about the important issue of renewable energy that I raise a related subject. The government's Sugar Industry Task Force hosted a seminar here in Parliament House on 1 June on the ethanol industry in Australia. Ethanol is produced from renewable resources in Australia, predominantly wheat and sugar cane. The task force hosted this seminar, which attracted an impressive number of expert contributors, to inform itself—and, by extension, the government—of the current status and the likely future of the domestic ethanol industry. Currently some 110 million litres of ethanol are produced each year in Australia, with roughly 60 million litres from sugar cane and 50 million from starch. Of that, we consume approximately 42 million litres domestically.

Ethanol has a wide application. It is used in the production of pharmaceuticals, food and beverages, chemicals, household methylated spirits, printing, paint and paint thinners, aerosols and cosmetics, and it is used in laboratories and hospitals. However, the real opportunity for growth is as an additive to fuel, with the suggested blend being anywhere between two per cent and 10 per cent. The current cost to supply ethanol into fuel markets in major capital cities has a variety of estimates, the highest being about 69c or 70c a litre. The Australian Biofuels Association said:

There has been significant progress to date. In 1995 the government estimated the cost of delivering ethanol fuel into major city markets was 82c. Today, it is anticipated to be 69c to 70c a litre. This is certainly similar to cost trends in the United States, Canada and Brazil. However, there is an interest in the use of molasses. I must make a note that CSR use molasses for their ethanol production at Plain Creek, Sarina, which is in my electorate. This is predominantly used for alcohol production. Japanese sake comes from Queensland sugar cane, which I think is a wonderful irony, and trash from sugar cane is a by-product that is usually used as a covering on the soil. So there is a range of low-cost organic materials associated with the sugar cane industry that could be used to produce ethanol.

I must mention renewable energy in this debate. The forecast, and the best estimate, is that Australia's oil reserves will most likely be depleted within 15 to 20 years. After that, we could well be exposed to a completely volatile international oil market and all that means for the cost and reliability of fuel. As I said earlier, ethanol and other renewable fuels can be produced from both sugar cane and starch. Understandably, the focus of the Sugar Industry Task Force was on sugar.

The sugar industry is certainly going through a very difficult downturn at the moment because of poor seasons and weather conditions in the north and an oversupply of sugar worldwide from heavily subsidised producers. However, the industry sees the development of the domestic ethanol industry as a very positive move that could bring considerable financial benefits to the people and communities that rely on the sugar industry. At the seminar, the Mossman Central Mill, which is in Northern Queensland, said:

Hypothetically, if all sugar mills in Australia not currently involved in ethanol production were to install a distillery to ferment their molasses, about 1,300 megalitres of ethanol could be produced annually.

Mossman mill provided a scenario of a legally mandated requirement for anywhere between two per cent and 10 per cent ethanol blend in all domestic fuel. It pointed out that fuel through the nearby Cairns port totalled 240 megalitres of diesel and 180 megalitres of petrol in 1999, and that, with a 10 per cent blend, the Mossman mill could provide all of those local requirements. It is really quite staggering to think that the sugar cane farms adjacent to the port could provide at a modest 10 per cent blend all of the fuel needs for that busy, active northern port. The Mossman mill went on to say:

Given this hypothetically mandated 10 per cent blend, the Mossman mill believes it could be ready for full ethanol production in 2001 or 2002. The announcement by the government that it will not extend the fuel excise to ethanol has been very positively received by the biofuels industry and has relieved it of a major concern. The prediction is that over the next two to five years major advances are expected in the development and commercialisation of technologies for the production of ethanol both from traditional feedstocks and from cellulose from a wide range of non-traditional biomass feedstocks. This will further accelerate an ongoing process of technical innovation and reductions in the cost of production in the biofuels industry. As I have said, the benefits of a 10 per cent or even, at a minimum, a two per cent ethanol blend in petrol or diesel have been clearly documented.

Evidence presented to the sugar task force seminar stated that the 1999 Australian passenger vehicle fleet comprised approximately 25 per cent pre-1986 vehicles using leaded petrol and 75 per cent post-1986 vehicles using unleaded petrol. When compared with the use of neat petrol, the use of a 10 per cent ethanol blend would have significant effects in regulated exhaust emissions. There would be a decrease in carbon monoxide of 32 per cent, a decrease of about 12 per cent in THC, and other significant decreases in non-regulated exhaust emissions, including butadiene, benzene, toluene and xylene. In the USA in 1999, more than 10 per cent of all gasoline contained ethanol, and fuel with a 10 per cent ethanol blend has been certified by the US Environment Protection Agency to reduce carbon monoxide emissions by up to 30 per cent.

The benefits of an ethanol blend in domestic fuel are obvious: an increased domestic market for the currently depressed grains and sugar industries, an economic boost for regional and rural areas with its resultant boost to jobs improvement, a reduced reliance on imported oil, greenhouse gas emission abatement and improved vehicle efficiency. I commend these bills to the House and ask that the Minister for the Environment and Heritage, Senator Hill, who has demonstrated so clearly his strong commitment to renewable energy, take on board the strong case for nurturing and encouraging the domestic ethanol industry.