Ethanol in petrol blends to be free from excise duty

Ethanol used in petrol blends is to be free from excise duty for at least two years, in recognition of its environmental benefits.

The Transport Minister Paul Swain and the Convenor of the Ministerial Group on Climate Change Pete Hodgson say the use of ethanol in petrol blends will reduce greenhouse gas emissions from the transport sector.

The Environmental Risk Management Authority last month approved the use of up to 10 percent ethanol in petrol blends, following an application from the Energy Efficiency and Conservation Authority (EECA).

"The use of renewable ethanol in petrol blends will help reduce transport's dependency on fossil fuels and ensure the sector contributes to reductions in climate change emissions," says Mr Swain.

"Motorists will have a more environmentally friendly choice of fuel that can be used in most petrol vehicles, and it will be the first time they can choose a transport fuel with a renewable component."

"The decision reflects the objectives of the New Zealand Transport Strategy, which include protecting and promoting public health, ensuring environmental sustainability, and assisting economic development." says Mr Swain.

Mr Hodgson says reducing greenhouse gas emissions from the domestic transport sector is one of the toughest challenges for climate change policy.

"Our best hope for progress in reducing transport emissions is to aim for a more energy-efficient transport system and to encourage lower-emission technologies where possible. The availability of ethanol-blended petrol will be another step in the right direction."

Mr Swain says "it is difficult to determine exactly how much ethanol will be used in petrol blends, but estimates of the potential loss of revenue to the Crown range from $1.722 million to $3.158 million (excl GST) per annum."

This is based on a scenario where between 6 million and 11 million litres of ethanol produced by the New Zealand dairy industry could be utilised.

BACKGROUND NOTE

Any ethanol used in a petrol blend must be rendered unsuitable for use in the production of alcoholic drinks in order to free from excise, ensuring it could not be used to evade the excise of $39 per litre of alcohol.

An excise of 10.5 cents a litre is imposed on LPG and CNG.

Petrol attracts excise of 18.475 cents per litre which is allocated to the Crown Account while 17.725 cents per litre goes towards transport infrastructure.

An Accident Compensation Corporation Levy of 5.08 cents is also payable.

Decisions on ethanol at the end of the two year period will recognise its environmental benefits and will be made in consultation with the industry.

At the end of the two year period the MOT will review the level of uptake of ethanol blended fuel, and it will also monitor whether synthetic ethanol is being imported.

Synthetic ethanol is produced in South Africa and Saudi Arabia but has no climate change benefits as it is produced from non-renewable fossil stocks such as coal or natural gas.

Transport produces 16 percent of all New Zealand's climate change emissions and is the fastest growing consumer of energy and producer of greenhouse gas emissions.

USEFUL WEBSITES www.med.govt.nz for information on fuel specifications www.energywise.org.nz for information for consumer and motor vehicle groups www.ermanz.govt.nz for information on the ERMA consent

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