The report ‘Setting a Quality Standard for Fuel Ethanol’ dashed hopes of a high-ethanol blended fuel in the Australian fleet for the near future and reinforced the current 10% ethanol cap introduced in July 2003, claiming only specially-designed flexible fuel vehicles could use ethanol in higher percentages.
The government research also showed that only about 60% of cars currently on Australian roads, some 7.6 million, are compatible with the 10% ethanol blend.
Despite the low ethanol blend and the potential unpopularity of the fuel the Queensland Government still plans to introduce an ethanol mandate by 2010.
The lack of ethanol compatibility may prove a boon for the biodiesel industry whose product can supplement petroleum diesel 100% – but the industry has been struggling against government policy in order to effectively reach the market.
Australian Biofuels Group sales director Ray Adams said there is considerable market scepticism over biodiesel and the government seems to be making it even more difficult by reducing incentives.
“While the [Australian] market is quite sceptical because of poor quality products in the past, the quality now is much higher. It’s just a matter of that support,” Adams said.
Incentives for the use of biodiesel are dropping annually, with tax rebates for biodiesel already substantially lower than for petroleum and continuing to fall.
The federal Fuel Tax Credit provides an on-road tax rebate for diesel of 18.5 cents per litre for vehicles over 4.15 tonnes, while for biodiesel it is 14.8 cents per litre. The government has stated this will drop even further to 11.1 cents this July.
Incentives in the mining sector are even less, with a zero off-road tax rebate for biodiesel and an attractive 38.1 cents per litre for petroleum diesel.
Adams continued that a fuel, which is more than 25% biodiesel, would receive no tax rebate by July 2010.
“Over the last two to three years the industry has been booming, then we got hit with this and a lot of [biofuels] companies have put construction and production on hold until they know what the government is going to do,” Adams said.
“It’s going to make the market very competitive with petroleum. It’s not a very positive picture for the biodiesel industry.”
Despite this, he sees the introduction of biodiesel into Australia as inevitable.
“The industry is growing every year and natural progression in Australia will adopt biodiesel. Engines only need minor modifications for biodiesel [but] ethanol can only be handled at a certain percentage. I can’t see why there is no support for biodiesel,” he said.
