MOTORISTS are paying more for petrol because the State Government has forced the sale of ethanol at the bowser, the Federal Government’s key economic adviser has warned.

The Productivity Commission has strongly urged Queensland, NSW and the Commonwealth governments to dump support for the biofuel industry by the end of next year.

It also dismissed the Queensland Government’s claims that its biofuel mandate would create more jobs.

Its Regulation of Australian Agriculture report released yesterday was damning in its assessment of biofuels, saying they delivered negligible environmental benefits and imposed unnecessary costs on farmers and the community.

Queenslanders regularly pay more for petrol than ­motorists in southern states, and the financial squeeze could become even tighter next year.

Queensland’s ­Liquid Fuel Supply Act mandates that service stations that sell 500,000 litres of petrol each calendar quarter, or those ­owning 10 or more sites, must sell at least ­­3 per cent biobased petrol. It will increase to 4 per cent in July next year.

The report heavily cautioned against the mandates.

“Biofuel support can increase fuel costs and may not help the environment,’’ the report said.

“The commission considers that farmers and the community would benefit from the ­removal of ethanol mandates and excise arrangements, as these policies deliver negligible environmental benefits and come at a high cost.

“The Queensland Government believes that a biofuel mandate would stimulate the biofuel market in Queensland which has remained relatively static for the last several years.

“However, in spite of various government support programs since 1980, they have been ineffective in developing a viable domestic biofuel market.

“Biofuel support programs, including the EPG program and biofuel mandates and targets, have had limited effects on stimulating domestic production capacity, which limits the market for producers to sell feedstock.”

It said its assessment in NSW had found the mandate reduced consumer choice and increased the price consumers paid for petrol, because they substituted to premium fuels and the mandate “affected the competitive dynamic between retailers by reducing the availability of regular unleaded petrol at many retail sites”.

In January, Queensland Energy and Biofuels Minister Mark Bailey said the use of biofuels would help drive jobs growth in regional Queensland.

“By attracting investment to the state’s biofuels and bio-manufacturing industry, we’re creating jobs for regional Queenslanders,” he said at the time.

Extracted from The Courier Mail.