Government has commenced a review of the operation of the NSW Biofuels mandate.
fuel retail businesses were formally advised of the commencement of the review in
an email sent earlier this week. The email included a link to a Discussion
Paper (https://www.fairtrading.nsw.gov.au/__data/assets/pdf_file/0011/559442/Biofuels-Review-Discussion-Paper.pdf) and
a request for comment on this paper by COB on 29 October 2019.
information about the Review, including guidelines on how to make a submission,
can be found at https://www.fairtrading.nsw.gov.au/consultation-tool/biofuels-act-review
mounted a substantial campaign against the continuation of the biofuels laws during
2015 review and our opposition to these laws is stronger than ever, said ACAPMA
CEO Mark McKenzie.
is simply no case for extending these regulations – regulations that have produced
a decline in the level of biofuel substation in the period since the 2015
review”, added Mark
Government’s only argument for continuing these laws appears to be that they
are delivering a GHG benefit. Even if you were to accept the highly contestable
argument that the substitution of ethanol for petrol in the NSW context delivers
a 30% reduction in GHG emissions, the net environmental benefit – relative to a
100% petrol baseline – of these laws is a net emissions reduction of just 0.8%
benefit – derived after more than 12 years of mandate operation – pales in
comparison with the 10% GHG emissions benefit that has been ‘naturally’ derived
by general improvements in fleet fuel efficiency over the same period”, said
larger benefit was derived by the natural operation of the Australian new
vehicle market (i.e. replacement of older vehicles with substantial numbers of
new fuel efficient vehicles) and did not come at the cost of the adverse consumer
and market impacts – impacts that that have been identified by authoritative
assessments conducted by government bodies such as the Australian Productivity
Commission (APC), the Australian Competition and Consumer Commission (ACCC) and
the NSW Independent Pricing and Regulatory Tribunal (IPART)
Australian Productivity Commission, for instance, released a report in 2017 that
included an assessment of the operation of the NSW Biofuels mandate. The report
concluded that these laws had effectively:
- Reduced consumer choice and increased the price consumers
paid for petrol because most elected to purchase premium fuels in lieu of
reduced availability of regular unleaded
- Adversely impacting on the competitive dynamic in the highly
competitive fuel retail market by reducing the availability of regular unleaded
petrol at many retail sites.
2016, the ACCC observed in one of its’ regular petrol monitoring reports that
the NSW biofuels mandate was costing NSW motorists up to $85 million per year
in fuel costs (https://www.news.com.au/finance/money/costs/nsw-nanny-state-costing-motorists-85m/news-story/2eea09530953f7494d01fa6e23530e70.
assessments followed a report prepared by NSW IPART under the auspices of the 2015
Review. IPART concluded that the only beneficiary of the laws was the State’s
monopoly biofuels producer – which coincidentally happened to be located in a
marginal NSW electorate and had a history of making sizable donations to the
NSW Coalition Government.
lobbying by ACAPMA in the years immediately following the 2015 Review, coupled
with a change in the relevant NSW Government Minister that was responsible for
these laws, saw a change in the NSW Government stance. This chance resulted in
the operation of a more effective exemption mechanism that has protected small
to medium businesses by exempting them from the mandate (and spending large
capital sums on making fuel infrastructure compatible with biofuels – in order
to sell a fuel that consumers simply don’t want).
this mechanism is welcome, it means that fuel retailers are required to
regularly apply for exemptions in what appears to be a pointless exercise.
here we are, five years later with the NSW Government commencing a further review
of its’ biofuels laws.
reasonable assessment of these laws is that they have failed to get within a
bulls roar of the 6% substitution target, have failed to generate increased industry
investment and jobs in regional areas promised by the biofuels lobby and
delivered negligible environmental benefit – all coming at significant cost to both
NSW motorists and fuel retail businesses”, said Mark.
the early signs of the NSW Government conducting a genuine and objective review
of these laws are not good, given several false statements contained in the
Discussion Paper designed to set the context for the 2019 Review.
The first example
concerns commentary about the widespread use of E10 around the world with the Discussion
Paper stating that: “Around the world, biofuels are becoming increasingly
used as a mechanism to improve fuel security, lower greenhouse gas emissions,
and therefore improve health outcomes in cities and regional areas. The United
States and Brazil are the two biggest producers of biofuels, creating 70 per
cent of the world’s biofuels. In the United States, federal and state
government programs have promoted biofuels to address issues of energy
security, sustainability and regional jobs creation”.
most favourable assessment of this commentary is that it is merely outdated and
NSW policymakers have limited up to date knowledge of the global biofuels
market”, said Mark.
the fuel industry is aware that the use of biofuels has been declining substantially
in the USA over the last decade, with the Federal Government and large US State
Governments (e.g. California) redirecting their efforts to encourage electric
and hybrid vehicles. This change in policy has seen falling demand for biofuels
in the USA which has, in turn, prompted some North American biofuels producers
to explore alternative markets for supply of biofuels, including Australia.
of the NSW Government’s Discussion Paper also appear to have missed the fact
that many of Brazil’s biofuels producers have actually closed their doors in
recent years in the face of substantial decline due to higher production costs
making them uncompetitive with traditional fuels (see https://www.bbc.com/news/business-33114119)
A second example
of the falsehoods contained in the Government’s Discussion Paper concerns
commentary in respect of the current European policy with the report stating
that: “In 2005, the European Union mandated that renewable fuels (including
biofuels) must make up 10 per cent of total transportation fuels by 2020.
Sweden is the European leader in renewable energy in the transport sector, with
biofuels making up to 20 per cent of the total transportation fuel market”.
statement implies that biofuels are a major part of the 10% renewable energy
target for transportation in Europe. Yet the reality is that most countries
that comprise the European Union are directing their efforts at EV’s and
hydrogen fuel cells – Sweden is the exception rather than the rule, when it
comes to the EU’s Renewable Energy Directive (RED).
is that the EU has forecast that consumption of conventional biofuels –that is the
‘first generation’ biofuels in Australia – will fall from 2022 to 2030 and will
be replaced by advanced biofuels (see https://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?filename=Biofuels%20Annual_The%20Hague_EU-28_8-9-2019.pdf). Unfortunately
for NSW, there are not produces of advanced biofuels in Australia and the
likelihood of this production in the near term is remote.
there is the issue that around 80% of European consumption of biofuels is
biodiesel – not ethanol. You therefore must question the validity of any
comparison of the NSW Biofuels market (100% ethanol) with the European Biofuels
market (80% ethanol).
the commentary provided in the Discussion Paper is hardly objective.
have to question whether the NSW Government is looking at this policy
objectively or is merely gobbling up the garbage that is being trotted out by
the biofuels lobby, begging the question of why would the NSW Government do such
a thing?”, said Mark
fact is that the NSW Biofuels mandate has been a manifest failure after 12
years of operation and therefore the only reasonable action is to retire the
mandate”, said Mark
That does not
necessarily mean that fuel retailers will not continue to sell E10 of the
mandate was retired. Likely, the retailers who have invested heavily in the fuel
infrastructure needed to sell biofuels will continue to sell E10 to their customers.
suggestion that these laws should continue to operate – imposing unnecessary ‘red
tape’ obligations on fuel retailers in the pursuit of a target that is simply not
credible – is plainly absurd”, added Mark.
“It is time
for common sense to prevail and, for its part, ACAPMA intends to push hard,
loudly and very publicly for same”, concluded Mark.