The NSW government’s controversial ethanol mandate is costing Sydney motorists up to $85 million a year, a report by the federal competition regulator has found.

A report by the Australian Competition and Consumer Commission on Monday found that Sydney motorists were paying “significantly higher prices” for petrol as a result of motorists choosing premium petrol or being unable to access regular unleaded petrol due to the mandate.

“The ethanol mandate in NSW led to less choice and higher spending,” the report found.

Averaged out across Sydney, that changed behaviour amounts to an extra cost of up to 3.5¢ a litre every time motorists fill up at the bowser, or as much as $85 million in 2014, compared with spending on fuel by motorists in other major cities.

That figure is only likely to rise with moves by the Baird government to mandate the sale of E10 by smaller retailers in order to increase the proportion of ethanol-blended petrol laws require be sold from 2.5 per cent of all petrol, to 6 per cent.

Manildra, the nation’s largest ethanol producer, is a major beneficiary of the policy mandating the sale of fuel mixed with ethanol, brought in by the previous state government and expanded by the Baird government.

The company is a major donor to the major parties, including more than $4 million into their coffers over the past two decades.

Research previously commissioned by the biofuels industry has found several hundred thousand cars on NSW roads are unable to use ethanol because it could damage their components.

Greens MLC Jeremy Buckingham said the environmental benefits of ethanol were “virtually nil”. Manildra has often said the product is made from food waste, a claim which is contested.

“Instead of ripping off motorists for a political donor, the government should be putting in place policies to encourage the adoption of electric vehicles and associated infrastructure,” he said.

Fairfax Media previously revealed Manildra had secured 20 meetings with NSW cabinet ministers in the more than a year before a change requiring small retailers to sell ethanol-blended E10 petrol was passed by cabinet, and donated more than $150,000 to Coalition parties across state and federal divisions.

The expansion led to an internal revolt over plans to expand the mandate to small petrol retailers.

The Baird government later said only fuel sellers who process more than 3.5 million litres of petrol a year will be required to stock E10 petrol, not the 1 million litres Manildra had lobbied for, in changes that will apply from next year.

Successive state governments have emphasised Manildra’s status as a major employer and the development of a home-grown biofuels industry as among the benefits of the policy.

The fuel industry says some independent retailers will still be hit by the changes and face costs of between $30,000 and $900,000 to comply with the law that had previously exempted sellers with fewer than 20 sites.

“Consumers are encouraged to use the government’s FuelCheck website, which empowers them to find the cheapest fuel by publishing petrol prices in real time for every service station across NSW,” said a spokesman for Better Regulation Minister Victor Dominello.

Extracted from Sydney Morning Herald.