On 1 April, the NSW Government’s legislation to extend its biofuels mandate to 6% next year and, eventually, to 10%, was quietly passed. That won’t help the Commonwealth budget too much. E10 will eventually cost $230m a year in lost fuel excise.

The mandate has spurred the creation of at least four new ethanol production facilities in NSW, and the expansion of Manildra’s Bomaderry starch plant. Among the keenest advocates of ethanol is Kiama MP and noted dancer Matt Brown, who spoke in the debate on the passage of the bill. Brown is said to have benefited from Manildra’s generous political donations, as has NSW Labor, which received just under $100,000 from Manildra in 2007-08 alone. The Federal ALP, which used to return Dick Honan’s cheques, took nearly $200,000.

Meanwhile, the Commonwealth Department of Resources, Energy and Tourism continues to “review” the excise subsidy for ethanol, which is in place until 2011.

The passage of the legislation is timely given the debate currently underway in the United States on standards for biofuels. When the US Congress established a mandate for biofuels in the 2007 Energy Independence and Security Act, it specified certain standards for those fuels, to be regulated by the Environmental Protection Agency. Critical to the standards was the lifecycle greenhouse gas emissions of each type of alternative fuel, which was set at various levels compared to the emissions from diesel or petrol.

The overall legislative requirement is that corn-derived ethanol must lead to at least a 20% reduction in greenhouse gas emissions compared to diesel or petrol, over its lifecycle. Other biofuels must be at least 50% lower in emissions. If they aren’t, they can’t be used as part of the US alternative fuels mandate.

The EPA is finalising a biofuels standard at the moment and there has been strong speculation it will assess lifecycle emissions by including alternative land use for land cleared to produce the crops used in the production of the fuel, which would significantly increase the emissions assessment for ethanol produced from corn. Senators from agricultural stakes like Iowa and Kansas are lobbying to prevent the EPA from implementing such an approach.

Such a standard, however assessed, would be immensely problematic in NSW. None of the ethanol produced by Manildra, or any of the new biofuel plants, would comply with the US standard for greenhouse gas emissions.

As the NSW Greens revealed in January, the existing Manildra plant and new ethanol plants being developed to meet the NSW mandate all generate significant net greenhouse emissions, due to their heavy reliance on coal-fired power generation and transport costs to and from the plant. Even without including indirect emissions such as those involved in constructing the new plants, the biofuel produced to meet the NSW mandate will actually increase the State’s greenhouse gas emissions. On Manildra’s own figures, its Bomaderry plant is currently responsible for more than half a million tonnes of CO2-equivalent emissions each year, even when the use of its ethanol rather than petrol in motor vehicles is factored in.

This means that the sustainability standard for the NSW mandate, which is part of the regulations required by the new Act, will not be able to require any sort of US-style net reduction in greenhouse gas emissions from locally-produced fuel.

There has been speculation that Manildra will have a role in developing the NSW sustainability standard but a spokesperson for NSW Lands Minister Tony Kelly rejected this. “The Bill’s second reading speech confirmed that the Regulations will include the Principles and Criteria of the Roundtable on Sustainable Biofuels. The Sustainability Roundtable Group is a research university-based NGO based in Switzerland, and an international standards setting body which includes representation from the UN & WWF.”

The NSW standard is due to be finalized and published in June.

According to Kelly’s spokesperson, “rigorous environmental assessment processes apply to domestic biofuel plants and these ensure that the domestic production of biofuel is considered sustainable for the purposes of the mandate.”

The NSW Government remains convinced that a mandate is necessary to drive research and uptake of alternative fuels, and that the next generation of biofuels will be drawn from non-food waste products that will end the “food versus fuel” debate that has plagued ethanol here and overseas. However, that next generation won’t be reached with research funding alone, but needs assistance and large-scale production.

On that, they have a point, but proper sustainability is likely to run second to industry development. And, as always, Manildra and its political links overshadow the debate.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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