Australia: the mandate debate

Following major reviews, reversals and amendments of government policies over the past 18 months, biofuels in Australia should now be able to look to the future with more certainty and support

As with most other countries promoting renewable fuels, targeted policies and support from federal and state governments are critical components for determining the transport fuel mix in the Australian economy. The real question is whether government intervention will have the intended effect on changing consumer’s behaviour towards biofuels?

Mandates are a key tool used by governments to promote biofuels. However, economists continue to argue about their effectiveness and how they interfere with free market mechanisms, creating price distortions. 

In Australia, the introduction of biofuel mandates has rested with the state governments which are keen to promote regional development and investment. 

The most populous state in Australia, New South Wales, was the first state to introduce an ethanol mandate in October 2007. The original mandate started at 2% of all grades of petrol, increasing to 4% in 2010, then to 6% from January 2011. Furthermore, from July 2011, primary fuel wholesalers in New South Wales were to replace regular unleaded petrol (RULP) with E10.

However, in late 2010 the NSW Government was forced to suspend the introduction of the 6% tranche and the 10% E10 mandate because Australia did not have sufficient ethanol production and production capacity to meet the mandated volume. 

APAC Biofuel Consultants (APAC) estimates that about 400 megalitres (ML) of ethanol is required to meet the 10% mandated demand in NSW. Ethanol imports are taxed and thus economically prohibitive.

The Queensland Government was placed in a similar position. It had planned to introduce a 5% ethanol effective January 2011. However, in October 2010, primarily due to ethanol shortages, the Government decided to suspend its introduction for 12 months. Queensland has not yet decided if or when to implement a mandate.

None of the other states in Australia are seriously considering biofuel mandates at this stage.

Read this article in full in the upcoming issue of Biofuels International.