The Australian Government is currently working on an amendment to the Fuel Quality Standards Act (2000) to make provision for the inclusion of renewable diesel. The formal consultation on these new standards commenced with the release of a Discussion Paper on 24 November 2023, with stakeholder comments sought by 2 February 2024. Details about the consultative process can be found at:  Consultation hub | Enabling supply of renewable diesel in Australia – a consultation paper on an Australian paraffinic diesel fuel quality standard – Climate (dcceew.gov.au)

Renewable diesel presents a major opportunity for the early realization of GHG emission reductions from the operation of diesel vehicles and machinery in Australia. This is particularly so in the heavy industrial sectors (e.g. mining, road freight, rail, and agriculture), where significant economic and technical challenges associated with the adoption of battery electric and hydrogen fuel cell drive trains are making near term emissions reduction particularly challenging.

While significant policy and legislative measures are being advanced to clear the way for renewable and synthetic fuels in Europe and North America, Australian initiatives are lagging. The development of a national fuel quality standards framework that defines the minimum properties of these low carbon liquid fuels for use in Australia is urgently needed – and ACAPMA is very supportive of the Australian Government’s work in this area.

But before we go too deep into ACAPMA’s position on this consultation, it is worth reflecting on the case for renewable diesel and the potential to use these fuels to support Australia’s low carbon mobility ambitions.

Nature of the Renewable Diesel Opportunity

The Australia Government’s Consultation Paper provides a great summary of the nature of Australia’s opportunity to utilise renewable diesel to lower Australia’s GHG emissions from the consumption of mineral diesel. A useful extract from this paper is provided below:

 

The Australian economy is currently reliant on fossil fuels. We consumed more than 50,000 megalitres of fuel in the 2022 calendar year, nearly 60% of which was petroleum-derived (mineral) diesel (DCCEEW 2023a). Australia uses more energy from diesel than electricity and as shown in Figure 1, diesel is a crucial energy source for sectors such as transport (particularly freight), mining, agriculture, construction and defence (DCCEEW 2023b). The combustion of diesel produces considerable greenhouse gas emissions. The transport sector alone (primarily through petrol and diesel-powered road transport) accounted for 20.9% of Australia’s greenhouse gas emissions in the year to March 2023 (DCCEEW 2023c).

Figure 1: Diesel use by activity in Australia, 2021–22[1]

Source: DCCEEW 2023, Australian Energy Statistics, Tables F & R; DCCEEW estimates for road transport passenger, light commercial and trucks.

Urgent action on emissions reduction is critical for mitigating the effects of climate change. In the shift to a net-zero emissions economy, Australia needs to reduce greenhouse gas emissions produced from diesel combustion. Electric and hydrogen-powered vehicles are expected to provide alternatives to diesel-fuelled light passenger vehicles, light commercial vehicles, and a range of trucks and buses during this transition. However, alternative options for large long-haul trucks and trains, and industrial equipment (such as that used in construction, mining and agriculture) are in many cases not yet commercially viable.

Diesel will remain a key fuel over the coming decades to service existing vehicles and equipment. The Australian on-road vehicle fleet turns over slowly, with the average age of a heavy vehicle ranging from 9.9–‍16.3 years depending on vehicle type and an average age of 11.2 years for a light vehicle (BITRE 2023). Around 40% of the diesel used in Australia is for non-transport purposes, such as in heavy construction and mining machinery (DCCEEW 2023b). This machinery often has a long lifespan and replacement of the diesel fleet prior to expiration of the equipment would not be viable for industry.

A low-carbon substitute for mineral diesel is vital to assist hard-to-abate sectors in efforts to decarbonise until other options are viable. Renewable diesel can offer a sustainably sourced alternative to mineral diesel. Unlike biodiesel, renewable diesel has the potential to be used in many existing heavy duty diesel engines in its pure form (neat) without the need for engine modifications. However, renewable diesel has some different components to mineral diesel that require consideration as part of its inclusion within a fuel quality standard.

 

What is renewable diesel?

Renewable diesel is a low-carbon biofuel which can be used as a direct substitute for mineral diesel. The fuel constitutes a significant opportunity to reduce emissions from conventional diesel fuels as Australia transitions to net-zero emissions by 2050.

Although significantly more expensive than conventional diesel (typically 2.5 to 3 times more expensive than mineral diesel) and advanced biodiesel (typically 1.5 times more expensive than mineral diesel), the fuel has potential to deliver larger reductions in greenhouse gas emissions without requiring transport users to adopt expensive alternative drive train technology (i.e. battery electric and hydrogen fuel cell drive-trains).

In the near term, renewable diesel is unlikely to be sold in pure form given the significant cost differential to mineral diesel and the absence of significant market supply. It is therefore more likely that renewable diesel will be made available as a blend with mineral diesel (which effectively lowers the use cost relative to mineral diesel and maximises market access to limited production volumes).

 

ACAPMA position on the Renewable Diesel Standard

“ACAPMA is strongly supportive of a performance-based approach to the reduction of GHG emissions from diesel vehicles, as opposed to one that seeks to pick technology winners”, said ACAPMA CEO, Mark McKenzie.

“We believe that low carbon renewable fuels and synthetic fuels should be an essential element of Australia’s response to the low carbon mobility challenge, particularly given that these fuels have the potential to utilise existing national infrastructure for the storage, transport and retail of liquid transport fuels”, added Mark.

“Given that the principal advantage of the greater market utilisation of these fuels lays in their ability to utilise Australia’s extensive liquid fuel storage and distribution infrastructure, it is important that any new standard ensures that these fuels are compatible with same”, said Mark.

Notwithstanding the Association’s strong support for the market adoption of renewable diesel – and the development of national fuel quality standards to support same – ACAPMA is keen to ensure that the minimum requirements of any new renewable diesel standard align closely with the properties of mineral diesel.

“This is critical when it comes to the proposed ‘flash point’ threshold for the new mineral diesel standard”, said Mark.

“Given the current structure of the dangerous goods act which treats diesel as a combustible fuel, the flashpoint threshold for renewable diesel and renewable/mineral diesel blends must not result in these new fuels being classified as flammable”, said Mark.

“The likely implications of a failure to observe this requirement are obvious. It would result in a need for an expensive, whole-of-industry adaptation of national diesel storage and transport infrastructure – not just within the supply chains of the fuel industry but also in relation to fuel infrastructure for mining agriculture, road freight, and defence facilities”, said Mark.

Such adaptation would completely undermine the inherent advantage of a move to renewable fuels given that the adjustment cost across multiple industries would likely be cost-prohibitive.

 

Next Steps

The Government released a consultation paper on 24 November 2023 and ACAPMA has been working to finalise a submission by the closing date on 2 February 2024, on behalf of members.

Any members wishing to provide input to the finalisation of the Association’s submission are invited to send comments to Mark McKenzie via email (markm@acapma.com.au) or by calling Mark on 0447 444 011.

Further information about the progress on the development of these national standards will be provided to members as it comes to hand.

 ACAPMA

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