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Monday, 29 November 2004
Page: 100


Senator BOSWELL (Leader of The Nationals in the Senate) (7:59 PM) —Today I would like to bring to the attention of the Senate an issue on which I have spoken many times before—that is, the importance of ethanol to Australia. Ethanol is a renewable alternative fuel. It is made from cereal grain or sugar juice, it can be added to existing fuels to make them burn more effectively and efficiently and it can clean up the carcinogenic particles that spew into our atmosphere in fumes from vehicles. Ethanol is a fuel of today and of the future. The federal government has supported the development of ethanol in Australia. It has determined a target of 350 million litres of biofuel—that is, ethanol and biodiesel—by the year 2010. I am glad Senator Campbell is here to listen to this because he will be impressed by it.

In support of the 350 million litre biofuel target, the government has regulated the use of a 10 per cent ethanol blend in fuel, implemented a capital grants program for new ethanol production by new and existing ethanol plants, extended the excise free period from five years to eight years from 2008 to 2011, enabled access for new ethanol projects under the $75 million community fund through the sugar package and enabled access to the low emissions grants funds and the Renewable Energy Development Initiative, as announced in the new energy policy.

Along with the ethanol industry, I applaud the government and the relevant ministers for the initiatives they have taken to assist the development of this vital industry. But I am speaking here tonight to say that we have to do more because, while rural industries want ethanol projects, while rural communities want ethanol projects, while consumers in urban areas want the clean air advantage of ethanol, while environmentalists want the reduction in greenhouse gas emissions that ethanol blended fuel will bring and while the transport industry wants the flexibility of ethanol blended fuel, the fuel companies do not want to lose control of any aspect of their industry.

There are significant changes associated with the current oil crisis that make it very different from those of the 1970s and 1980s. These differences demand that we look again at our future policy settings for both renewable and petroleum alternative fuels, such as LPG and CNG. I am not referring to the record prices being demanded for oil and the serious burden this is placing on consumers around the world; I am referring to the probability that the current oil crisis is a warning signal that the inevitable transition from oil based petroleum fuels to the next generation of transport fuel technologies—hydrogen fuel cells et cetera—over the next 25 to 30 years has commenced. I am also referring to signs of global strain in the capacity of oil to meet future transport fuel demands. According to ABARE, automotive gasoline and diesel fuel imports between 2002-03 and 2003-04 doubled to 17 per cent, and every year hereafter our dependence on imported fuels will grow.

The oil supply stress fractures we are seeing in the current crisis are being driven by the two largest and most densely populated economies in the world: China and India. By 2050 it is estimated that 42 per cent of our planet's population will reside within the borders of these two countries alone. China has already eclipsed Japan as the fourth largest consumer of oil, and will eclipse America as the largest consumer of oil over the next 10 to 15 years. Although considered developing countries, both China and India are already leading Australia and New Zealand in moving forward with the development of a domestic renewable fuels industry.

The existing policy measures I have already mentioned provide an ideal platform for reviewing our policy for ethanol and biodiesel. The key to the matter is that fuel companies do not want to lose control of any aspect of their industry. They do not want to give up 10 per cent of their business to a fuel they do not control. The fuel companies are standing in the way of a vital and essential industry in Australia. They demonstrated this when they exercised their de facto veto power over the growth of ethanol production in round 1 of the biofuels grants scheme by refusing to enter into any purchasing contracts with potential or existing ethanol producers. They stand in a position to do so again in round 2 of the grants scheme that is currently underway.

It is now up to the government to ensure the greater benefit of the nation and its people is put before the dominance of the vested interests of the four major fuel companies. It is now up to the government to take action to ensure a strong, viable ethanol industry is allowed to develop in Australia. Let me point out that Australia is not alone in this position. In no country in the world have the major oil companies voluntarily facilitated access for competitor fuels such as ethanol into transport fuel markets that they dominate. Worldwide, mandates or regulated use of biofuels based on cleaner air, health, and energy security have been necessary to provide free and open access to transport fuel markets. Even in America, where the ethanol industry is surging ahead and environmental concerns alone demanded urgent action be taken, the oil industry fought to keep control of their market domination.

Forty-two billion litres of ethanol is currently blended in fuel in an increasing number of countries around the world. In the USA, the European Union, Brazil, Japan, China, Thailand and India ethanol is in transport fuels in a variety of percentage blends. These countries, which account for the majority of the world's population, are doing this for four very important reasons. One is the health of their people. The use of ethanol blended fuels results in an overall reduction in the carcinogenic and greenhouse gas emissions from both passenger vehicles and larger transport vehicles. In passenger cars, the health benefits of E10 can best be summarised by an astonishing 24 per cent decrease in the carcinogenic risk when E10 is used instead of our current fuel source. The second reason is the benefit to the environment. Renewable fuels greatly reduce the greenhouse gas emissions that are synonymous with fossil fuel use, and even greater reductions will be achieved as technology advances. The third reason is the benefit of increased fuel security. Less dependence on the unstable Middle East for energy supply is a goal for all nations in times of turbulence. The current price of oil is threatening the economic security of industrialised nations and ensuring the increased viability and price competitiveness of renewable fuels like biodiesel and ethanol. The fourth reason is the benefit to regional communities. Regional industries will benefit greatly from the increased economic activity that results from the increased demand for cereal grains and sugar.

An ethanol industry does not just happen overnight, and it will not happen without the determined and persistent support of government and industry. The key to the long-term viability of a strong ethanol industry is the development of a retail market confident in the use of ethanol and the surety of demand and market for the end product. We can make the ethanol and the biodiesel, but without a buyer the industry will die. As I said previously, the federal government fully supports the development of an ethanol industry. It has provided the development support, but it is now its role in government to ensure the surety of the market and future transport energy security. It is in the national interest that oil companies embrace renewable fuels. They are the biggest purchasers of renewable fuels around the world—and why not in Australia? At today's oil prices ethanol is both a competitive and a viable alternative fuel, with the price of oil fluctuating between $46 and $57 per barrel. Brazil is producing fuel ethanol at a cost of between $28 and $30 per barrel.

As I stated at the time of its release, the CSIRO-ABARE study on the viability of the 350 million litre target for biofuels was redundant at the time of its publication. World market realities have clearly shown that the study completely missed the mark. Ethanol is competitive and viable and it has been proven to be reliable. It is desirable, and now we have to make sure that it is buyable. It is in Australia's national interest for the alternative fuels industry to work together to ensure the successful transition from petrol and diesel to technologies such as hydrogen over the next two or three decades.

There is a precedent for government intervention in market access in the mandatory renewable energy target, MRET. As a government we took steps to ensure the continued viability of renewable energy sources for the benefit of the nation by introducing the mandatory take-up of renewable energy by electricity wholesalers. The MRET system is a world first in the development of a legislated national renewable energy market based on an innovative system of tradeable certificates. MRET is the cornerstone of the government's renewable energy strategy. After almost three years of operation, an independent review panel has found that MRET is meeting its objectives, with industry taking up the challenges of delivering new renewable energy projects—and I congratulate Senator Ian Campbell on running a very good department. Under MRET, the interim targets for the first two years were exceeded, and the industry is well on the way to meeting its targets for the third and fourth years. Within the MRET strategy there is a specific action agenda to establish a working group to promote the development of the renewable transport fuels.

I am calling on the government today to use the successful MRET model to promote the Australian renewable fuels industry. The fuel companies need to be encouraged through legislation to take up renewable fuels. The MRET has been highly successful and is a working model of how a market strategy for renewable fuels could be adapted to embrace the Australian fuel industry. The extension of the MRET to include a strategy for renewable fuels would consolidate and support the efforts of the government on biofuels and would indicate in a practical way that, although Australia will be reliant on fossil fuels for some time to come, the government sees an important role for renewable fuels in Australia's future.

A renewable fuel extension of the MRET means that E10 and biodiesel sales would be concentrated in regional and urban areas, where they will have the greatest impact on market efficiency and air quality. Producers and distributors will be able to supply this fuel to consumers in the most cost-effective way, and consumers will be given the choice. The majority of ethanol blended fuel would be sold in highly populated urban areas near the refinery, where cost efficiency, environmental issues and health benefits will be greatest and transport more cost effective. This strategy complements the government's existing support program and provides environmental benefits as well as surety for regional biofuels producers.

The Office of the Renewable Energy Regulator is a statutory authority established to oversee the implementation of the Australian government's mandatory renewable energy target. It is expected that this office would be able to oversee the administration and compliance of the fuel strategy within its charter and the existing transport system, with the assistance of the renewable fuel industry. With a limited number of biofuel suppliers and purchasers, it is not proposed that a certificate scheme similar to the MRET be introduced before key industry stakeholders have been consulted. A different approach may need to be developed.

What I am proposing here today is the introduction of an extension to the MRET for renewable fuels, in line with the 350 million litre target set by the federal government and Senator Ian Campbell's department. The strategy will begin in 2005, with 0.25 per cent of the nation's fuel consumption required to be renewable fuels. Australia's four foreign owned oil companies and independents would be required to purchase this volume of renewable fuel, as a minimum amount from the national petrol and diesel fuel pool. That would represent over a 50 per cent increase over current fuel ethanol and biodiesel sales. This level would ratchet up every year and would incorporate the government's initial 2010 target of 350 million litres of biofuels. Therefore, by or before 2010, one per cent of the fuel consumed in Australia would be required to be renewable. After 2010 there would be incremental annual production increases leading to a five per cent renewable target by 2018, and then to the European Community 5.75 per cent renewable fuels target by 2020. The European Community is scheduled to meet its 5.75 per cent biodiesel use target by 2010.

Implementation of this kind of renewable fuels strategy under the MRET would mean that there would continue to be growth and development in the market and that ethanol and biodiesel would be playing an important role in reducing Australia's dependence on imported oil. By 2020, more than two billion litres of biofuels would be utilised by the Australian market. This target is modest but in line with the government's stated goals for renewable fuels. It is a growing industry and one that has just as much export potential as the domestic market. Target levels should be reviewed periodically and reassessed in 2010.

I have a vision for Australia—a vision of strong rural communities producing crops that have as much value as fuel as they have as food; a vision of rural industries with marketing choices, independent of corrupt world markets; a vision of an Australia that is not dependent on imported oil for its prosperity; a vision of an Australia that has clean air in its urban areas, where fewer children and elderly people are suffering from vehicle exhaust related illnesses; and a vision of an Australia that is a leading exporter of fuel grade ethanol to provide for the massive populations and industries in neighbouring Asian countries. I see that Australia's future is closely linked with the future of an ethanol industry. I support the future development of an ethanol industry. The federal government supports it. I want Australia's fuel companies to support it. Most of all, I believe it is in the national interest for the people of Australia to support it.