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Wednesday, 4 May 1994
Page: 169

Senator COULTER (11.41 a.m.) —Senator Ian Macdonald was quite right in identifying the genesis of this bill as being an Australian Democrats initiative. He was also quite right in identifying the negotiations which went on during the 1993-94 budget debates with the government as the mechanism which the Democrats were successfully able to use to convince the government that this was a very good scheme to enter into. So I would agree with Senator Macdonald there. However, to impugn the motives of the Democrats is quite wrong. For many decades I have been firmly committed to the proposal that Australia needs to move towards a much greater, and eventually exclusive, use of renewable fuels.

  I think Senator Macdonald and other senators would know that last year Australia imported $4 billion worth of petroleum product and that by the year 2000 that is likely to rise to something like $10 billion; that these petroleum based fuels are non-renewable, both within Australia and globally—they will run out; and that they are one of the principal causes of greenhouse gas emissions—one of the principal causes of smog emissions in our major cities and urban centres. For a whole variety of reasons similar to this we do need to move to renewable fuels of which ethanol, in the transport area, is pre-eminently sensible.

  Regarding costs, I think one could mount a very credible argument that the only reason that ethanol is not already competitive is that the hidden costs in relation to the use of petroleum—the costs of depletion, the costs of urban air pollution, the deaths which occur from lung cancer and other diseases in cities—are not borne as they should be against the use of petroleum. If those costs were factored in it may well be that ethanol and other renewable fuels already would be competitive.

  The bounty scheme which this bill introduces was also initiated by the Democrats. The government chose, in the budget, to increase—initially, very substantially—the price of petrol and to increase differentially the price of leaded fuel. The argument which the government used was that this was to discourage the use of leaded fuel, particularly in view of the fact that perhaps half the people who were continuing to use leaded fuel had vehicles that could, in fact, use unleaded fuel. However, there was nothing whatsoever in the government's original proposal which would have allowed those people who had older cars that necessarily used leaded fuel to eventually avoid that increased impost. Given that those people who had the older cars were often less able to cope with this increased price, the Democrats felt that this impost was unfair if the money from that differential simply went into general revenue.

  Therefore, we argued very vigorously with the government that at least some of the money from this increased cost of leaded fuel should go into providing an alternative. In the case of Manildra, we were aware of the fact that already 23 service stations in New South Wales were providing ethanol mixes—10 per cent ethanol in petrol, which was a perfectly satisfactory substitute for leaded petrol for the vast majority of the vehicles that would otherwise require the higher octane fuel and would normally be using leaded fuel—and that this number could be rapidly expanded.

  I understand that by the end of this year there will be 400 service stations in New South Wales providing gasohol, the 10 per cent mix of alcohol in petrol. It gives the lie to the claim often made by the opposition that the Democrats are opposed to industry. We are strongly in favour of appropriate industry. I would point out that Manildra has already made a $36 million investment as a consequence of the offer of this bounty.

  As I have already said, alcohol is not only a renewable fuel but also a very satisfactory substitute for lead in petrol. The government was initially anticipating a phase-out of leaded petrol perhaps by early in the next century. Under this bounty scheme if this three-year window of opportunity is used, as I hope it will be, to make the breakthroughs in the technology which are still required to bring the price of ethanol down—and I will refer to those in a moment—then I believe that we will see the phase-out of leaded petrol occur much more quickly. The transition in Australia to a much higher proportion of ethanol in fuel—eventually 100 per cent ethanol—as a transportation fuel could occur quite quickly.

  That brings me to the research going on in Australia, which is one of the other benefits of going down this road. As I think many senators would know, there has been excellent research in the University of New South Wales over many years into ethanol as a fuel. Dr Russell Reeves, who has been leading that research, has not only developed the gasohol mix for use in ordinary vehicles but also very successfully developed and patented a mix with diesel fuel—a 15 per cent diesohol mix. I understand that that diesohol mix is not only being trialled in Australia but is already being trialled in Sweden, another country with a great interest in ensuring that the use of petroleum based fuels does not lead to the environmental damage which it would otherwise do.

  From the little I have seen of that research, it seems extremely likely that the use of that diesohol could well become widespread. I understand that Manildra has been for some time using diesohol in its farm machinery and trucks. As I mentioned, the Action buses in the ACT and the buses in Sydney are trialling the use of diesohol. I am quite sure that that will become a viable and cleaner fuel. Emissions from engines using gasohol and diesohol with respect to not only carbon dioxide but also nitrogen oxides and carbon monoxide tend to be lower than the emissions of unmodified fuels.

  Senator Macdonald also mentioned the derivation of ethanol from crops in north Queensland. I guess he is referring specifically to the use of either sugar or molasses as a feed stock for fermentation into ethanol. There are two concerns that I think one must put up front in relation to those feed stocks. Firstly, those feed stocks tend to be expensive, and that is one of the reasons why alcohol from that source is expensive. Secondly, in a world with growing populations, where one needs to look very closely at food supplies for people, there are serious ethical questions about diverting material that could otherwise be used for food into feed stock for fuel.

  One of the exciting developments that is going on in the University of New South Wales is work on the derivation of ethanol from cellulose. Cellulose is part of the woody material in all plants, the stalks of grain, a large part of the stems of trees, and so on, and is a much cheaper source of starting material for ethanol. It is also abundantly available. The work that is going on there involves a certain amount of genetic engineering: ideally, putting the appropriate enzymes for the breaking of the cellulose into a bacterium and then the various enzymes for breaking down the sugars which result from that initial digestion of the cellulose, so that in one step one would be able to derive ethanol from cellulose. This can already be done in several steps, but there seems every likelihood that the work in the University of New South Wales will be able to produce very cheap ethanol from that feed stock within the three-year time frame.

  It is terribly important that this bounty be put in place to encourage that development, because Manildra has stood very firmly behind the University of New South Wales in the research work it has been doing. As I have already mentioned, the Manildra company near Nowra has already committed some $36 million to expanding its ethanol production. I certainly do not share Senator Macdonald's concern that that ethanol will be used to compete with other producers of ethanol for the chemical industry and for other purposes at the end of this bounty period. I think Manildra has demonstrated a very firm commitment to fuel ethanol, even before this bounty was put in place.

  Manildra is in some respects a good example of the way in which companies should be going in terms of closed cycle processing. Manildra began essentially as a flour milling business. It moved on to taking the gluten, the protein fraction, out of the flour and selling that for protein enriched bread, value adding to the flour it produced. It then realised that it had the starch fraction of the flour which it could sell for various purposes, and it did that. It moved on and found that, using particular enzymes, it could ferment that starch to a whole range of sugars which had much higher value. It did that, and it produces things such as glucose and fructose from the starch.

  To do that it needed a particularly pure form of starch, so it had to purify the starch. It had waste starch left over, which initially, I understand, it was using for spray irrigation on nearby farm land. More recently, it has used what was otherwise waste starch for fermentation to ethanol. So it has used every fraction of the flour to produce a very much value added product. The final material—the waste water and so on—still goes out to irrigate pasture on which it fattens cattle. So there is very much a closed loop in this manufacturing.

  I understand that Manildra also will be installing its own power station and that that will further improve the environmental viability, the environmental sustainability, of the plant. It certainly suggests to honourable senators and others who may be listening that, if they want a very good example of a business that uses a natural raw material and squeezes all the value adding possible out of that material, they should go no further than Manildra.

  I hope that under this bounty scheme there will be other people in Australia who will see the advantages of going down this road. In my own state, on the Eyre Peninsula we have a group of farmers who are very keen to use rain damaged grain as a feed stock for the production of ethanol. It is a much smaller operation than Manildra but nonetheless one that in this case could take a feed stock that has a limited value and turn out ethanol for fuel. This could be turned back onto the farm, making the farmers in that district far more independent of imported fuel—expensive fuel, as most honourable senators would know—and turning out a fermentation mash that would have almost the same value as the initial feed stock of rain damaged wheat and barley.

  Again, one sees the possibility of very considerable value adding, of a local industry with local employment and local self-sufficiency being developed in which the fuel that is produced remains in the district. If that scheme gets up in the next few years, one may well see similar examples spread around Australia. I hope that will occur.

  The Democrats strongly welcome this legislation. It gives effect to that negotiated agreement between the government and the Democrats. We have been strongly committed to renewable fuels over a long period. That commitment remains firm. Our commitment now is not only to see this legislation passed but also to continue pressing the government in relation to that other portion of the research funding that came under the rubric of lead abatement strategy, to ensure that that also goes back into the fuel ethanol program so that Australia will develop a technology of ethanol from cellulose, producing cheap ethanol which it will then be able to export to other nations in the world. Australia is in no sense unique in needing to go down this road. Every nation will need to go down the road of moving from non-renewable to renewable fuels. The nation that first manages to make this transition will be in an excellent position to take advantage of that invention, that technology, and to export that technology to other nations.

  In the production of ethanol from cellulose, in the application of that ethanol as fuel—both with petrol and with diesel—and eventually in the use of pure ethanol fuels in internal combustion engines, Australia stands in a very good position to lead the world to a non-greenhouse, renewable source of transportation energy. This bounty will create that window of opportunity. Far from in any sense criticising this, we should be grasping this three-year opportunity and using this window of opportunity to ensure that we successfully negotiate down this path and come up with those further technical and economic developments during this interim period.