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Proposed biofuel law change will slow progress

11 December 2008


Proposed biofuel law change will slow progress

Proposed biofuel law change will slow New Zealand’s achievement of self sufficiency in transport fuel and increase Kyoto costs.

New Zealand’s ability to seize the opportunity to become self-sufficient in liquid biofuels for transport will be slowed if the biofuels obligation in the current legislation is removed under legislation introduced in Parliament by the Government today.

The biofuels obligation had given investors the confidence to invest in biofuels manufacturing plant, responding to the challenge of providing locally produced biofuels at the lowest cost.

The current legislation sets out a minimum obligation for biofuel sales, as part of the overall fuel mix, and it has provided the liquid biofuels industry the certainty it needs to invest.

The removal of the obligation will also result in an increase the country’s carbon emissions and therefore Kyoto costs as a significant opportunity to produce green fuels is slowed.

“Investor confidence is key,” Bioenergy Association Executive Officer Brian Cox says. “New Zealand is rich in liquid biofuel opportunities but all options require significant investment in processing plant and distribution infrastructure. For this investment to be committed potential investors need confidence that there is a long-term market for their product.”

“The biofuel obligation encourages biofuel producers to manufacture locally produced biofuel (ethanol and biodiesel) in high volume and at the lowest cost because of economies of scale. It has also provided an incentive for a number of parties to enter the market with the result that competition will keep prices low”.

“Gull have already proven that biofuel blends can be supplied to the public at competitive prices. New Zealand has the opportunity to extend the volume of current sales of biofuel blended transport fuel “ Brian Cox said “This opportunity for an early increase in biofuel sales will be lost without the obligation”.

“The industry has supported the requirements that qualifying biofuels must be both sustainable and make a real contribution to greenhouse gas reduction. That achievement will now be delayed if the propose legislation is passed by Parliament.”

Fonterra produces ethanol from whey and there are a range of producers of biodiesel using tallow or used cooking oils. Biodiesel will also be available next year from locally grown crops. A number of other organisations are researching production of second-generation liquid biofuels, from sources as diverse as sewage pond algae and wood, both from existing forests and purpose-grown crops.

“Our opportunity to use more of these local resources is currently constrained by economics and economies of scale. Confidence that new biofuels will have a market will encourage greater investment from biofuel producers. Over time, we can expect that to lead to reductions in the price of production and to New Zealand becoming more insulated from international energy price hikes.”

Mr Cox said that “the industry does however support the proposal that tax considerations should be equitable across all forms of biofuel whether bioethanol or biodiesel.”

Investor confidence is crucial in developing these promising technologies for New Zealand. “The biofuels sales obligation presents a significant opportunity to provide that confidence,” Mr Cox says.


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