The Case for a Biofuels Mandate

1
The Case for a Biofuels Mandate

• By the
• Western Research Institute
• Wednesday 7th September 2005

2
Outline

• Background
• Relevant Issues
• Contribution of Biofuels
• Cents per Litre
• Oil Companies
• Policy

3
Background

• CSIRO/ ABARE/ BTRE Desktop Study 2003
• Securing Australias Energy Future (white paper)
  2004
• Prime Ministers Taskforce on Biofuels 2005
• Renewable Fuels Australia

4
Relevant Issues

• International/ Australia Oil Situation
• Greenhouse Gas Emissions
• Air Quality and Health
• Regional/ Rural Development
• Balance of Payments

5
Oil Situation (World)

• Demand 84.89mbd supply 83.43mbd
• Proven reserves 1,278bn barrels (overstated)
• Run out 40 years
• Only one elephant in 35 years Caspian Sea
• OPEC expects 80 a barrel next 2 years

6
Oil Situation (World)
7
Oil Situation Australia

• 2005 crude oil condensate 490,000 - 670,000bpd
• 2025 157,000 341,000bpd
• Consumption 2004 sustained only 9.3 years
• Consumption by 2010, Australia will be importing
  40 of its refined products needs

8
Australian Petroleum Industry Trade Deficit
9
Greenhouse Gas

• Australia 27.6 tonnes per capita largest in the
  world
• Greenhouse intensive exports
• 2003 transport sector 80 million tonnes (12)
• Australia not ratified Kyoto protocol so adverse
  affects on industries carbon sequestration

10
Air Quality and Health

• Gaseous, aerosol or particulate toxins make up
  air pollution
• Transport sector 3rd largest and fastest growing
  sector
• Particle emissions account for one fifth lung
  cancer
• Hydrocarbons aromatic compounds benzene
  carcinogenic
• Kearney particulate matter cost to Sydney 5.2bn
  pa

11
Regional Development

• On a range of social and economic indicators,
  rural Australians are more disadvantaged than
  their metropolitan counterparts.
• Institute for Regional Rural Research

12
Balance of Payment

• 2004 over 7 of GDP
• Trade deficit rising over 3 GDP since 2001
• Income deficit constant 3 of GDP

13
Biofuels in other Countries

• Ethanol helps our farmers find a new market and
  helps us replace foreign crude oil. I mean, I
  like the idea of spending money on research to
  make ethanol more feasible, so that someday an
  American Presidents says show me the crop report.
  As apposed to, how many barrels of crude oil are
  we importing?
• President Bush 15th June 2005

14
Biofuel Policies

• Brazil, UK, Europe, China, Japan, India,
  Thailand, Philippines, Indonesia, Canada
• Brazil flex fuel cars, 25 blend
• Most have or are considering mandate or clean air
  policy

15
Oil Situation

• Current ethanol production 50-60 million litres
  pa
• Current sales of fuel 33bn litres pa
• Production of 4bn litres of ethanol from sugar
  without touching grains
• Grains happy but grain users not

16
Greenhouse Gas Contribution

• CSIRO blended E10 has 8 to 11 reduction in full
  cycle GHG emissions
• One ethanol plant equivalent to removing 70,000
  cars from Australia

17
Air Quality and Health Contribution

• E10 decreases tailpipe particulates by 50
• B20 deceases tailpipe particulates by 22
• Health care savings for Sydney 900m pa

18
Regional Development

• 120ml litres pa plant impacts
• Construction - 45m GRP
• - 516 Employment
• Ongoing - 95m GRP
• - 725 Employment

19
Balance of Payments

• Assume 50 US per barrel and exchange rate of
  AUD/USD 0.7
• Excludes any negative impacts on exports
• E10 and B20 mandatory
• Reduce gasoline/ diesel deficit by 2/3rds to 2bn

20
Cents Per Litre
21
Total Benefit

• Ethanol 2.61 2.63 per litre
• Boidiesel 0.78 per litre
• Excludes regional benefit

22
Government Incentives Excise

• 16 December 2003 alternative fuels 50 discount
• Excise to be phased in 5 years beginning 2008
• Final rates 19.1 cents per litre for biodiesel
  and 12.5 cents per litre ethanol
• Compares with 38.143 for petrol diesel
• Only domestic producers eligible for rebate

23
Government Incentives Capital Subsidy

• Invest Australia Biofuels Capital Grants
• Seven projects offered grants totalling 37.6
  million
• 12.4 million offered for ethanol projects, the
  balance for biodiesel

24
Oil Companies

• Renewable Fuels Australia advised major oil
  companies declined contracts with ethanol
  producers
• Other countries oil companies anti-biofuel stance
  until legislative changes with respect to air
  quality and health issues required minimal fuel
  oxygen content
• Oil industry self interest remains a risk to the
  immediate, mid and long-term growth of robust
  biofuel industries in Australia

25
Conclusion

• Third party access has been essential ingredient
  of government microeconomic reform in other major
  infrastructure sectors namely electricity, gas,
  water, rail, roads telecommunications, air.
• Parallel for biofuels to reach marketplace
• Need to address demand side as well as supply