While it was good to see Cabinet end more than six months of confusion by announcing a lower-than-proposed excise regime for LPG and ethanol, public opinion continues to decry the excise as an idiotic paradox.

The government continues to urge the greater use of green fuels in order to cut the production of greenhouse gases, but then turns around and raises the costs of those fuels, jeopardising the very future of the industry.

At its last meeting of the year, Cabinet announced excises for LPG and ethanol would receive a discount to be set at 12.5c per litre from July 1, 2012. Excise on alternative LPG and ethanol will start at 2.5c per litre from July 1, 2008 and will be phased in to the full 12.5c per litre from July 1, 2012. Under the changes, diesel and petrol excise will remain set at 38.143c per litre.

But Labor's energy spokesman Joel Fitzgibbon said the Government needed to explain why it had dumped plans to tax fuel on its energy content basis.

That plan would have set the LPG and ethanol excise at about 26¢ per litre.

In an attempted sweetener Prime Minister John Howard said the government would also provide a $1000 subsidy from July 2008 to people who buy new LPG or dual fuel powered cars.

Bob Gordon, director of the Australian Biofuels Association, led the condemnation of the excise, saying the move put the industry at a disadvantage compared to other countries.

"The decision to tax the growth of the emerging green renewable fuels industry puts Australia at odds with the rest of the world," he said in a statement.

"It will cause new industry entrants to review projects for the establishment of new ethanol and biodiesel production in rural Australian communities."

The Australian Taxi Industry Association has also warned that a new tax on liquefied petroleum gas (LPG) could result in a rise in taxi fares. Taxi drivers and operators have threatened to campaign against the decision also to impose a tax on LPG fuel, which is used by about 90% of cabbies in Australia.

Conversely cane farmers have hailed the Government's new 12.5 cent a litre excise on ethanol, saying it is likely to help guarantee the future of the Australian sugar industry.

Sugar Industry Revival Campaign chairman Geoff Cox hailed the commitment to a level of excise only one-third of that on petrol, and to phase in the regimen over five years.

Mr Cox said the decision was an important step forward for the struggling sugar industry because it gave much-needed certainty that would lead to investment in ethanol production and new jobs in cane-producing communities.