Australian Government Policies for the Australian Biofuels Industry Jan McCallum-Johnston APEC Energy Department of Industry, Tourism and Resources October 2006

Australian Government's Biofuels Policy Framework 350 mega litres by 2010 Biofuels Target – Ethanol & Biodiesel Up from 28 ML in 2005 Commitment to encourage target achievement a key policy driver Key supporting policies: Prime Minister's Biofuels Taskforce Biofuels Action Plan $37.6 million Biofuels Capital Grants Program Biofuels Production Grants Ethanol Distribution Program

Prime Minister's Biofuels Taskforce Formed May 2005 to investigate environmental and health benefits of biofuels and assess progress towards 350 ML target. Found: –There are potentially significant health benefits from the use of biofuels in addition to already documented environmental and regional benefits –The biofuels industry faces considerable market barriers including low consumer confidence and high commercial risk; and –On current policy settings the 350 ML target would not be met

Response to Biofuels Taskforce The Government reaffirmed its commitment to the 350 ML target Key supporting measures: Actively encouraging users of Government vehicles to purchase E10 Undertaking vehicle testing of E5 and E10 blends to validate vehicle performance and a study on health impact of ethanol Working with Federal Chamber of Automotive Industries to ensure accurate information about compatibility of vehicles with ethanol Increasing fuel quality compliance inspections to ensure ethanol blends meet fuel quality standards Allowing E5 blends to be sold unlabelled, subject to the results of vehicle testing

Biofuels Action Plan – December 2005 Key outcome of Biofuels Taskforce Individual plans from major oil companies, members of the Independent Petroleum Group, and major retailers Sets out volumetric targets and marketing strategies for ethanol and biodiesel Will increase biofuel use from 28 ML to exceed 350 ML target by 2010 Australian Government will review progress on a six-monthly basis Following first review in June 2006, in aggregate companies will meet their commitments

Research & Development Biofuels Taskforce found that there is great potential for future advances in biofuels production from use of lignocellulosic feedstocks It was concluded that future policy interventions in this area should be limited until further developments in production technologies were realised Despite this, Government is lending its support to R&D of new biofuel technologies through its Renewable Energy Development Initiative (REDI)

REDI Projects CSR & University of Queensland's 'SugarBooster' Program Awarded $5 million to develop high-yield sugarcane for ethanol production Australian Renewable Fuels micro-algal biodiesel Awarded $348,100 to develop biodiesel from micro-algal feedstock

Biofuels Capital Grants Program Program established in 2003 to support new or expanded biofuels production capacity Competitive process judged on merit of business proposals 7 projects awarded funding –4 biodiesel projects totalling $25 million –3 ethanol projects totalling $12.6 million The completed projects will increase Australia's biofuels production capacity by 291 ML

Biofuels Production Grants Ethanol Production Grants cents per litre paid to domestic ethanol producers per litre of fuel ethanol produced Grant fully offsets excise applicable to ethanol making it effectively excise free As of July 2006 $61.2 million dollars in grants have been paid and 158 ML of fuel ethanol produced since 2002 Grant will be phased down in steps from 2011 to 2015 to halve ethanol's excise rate and give ethanol a long term 50% excise discount

Biofuels Production Grants Biodiesel Cleaner Fuels Grants cents per litre paid to domestic biodiesel producers and importers Grant fully offsets excise applicable to biodiesel making it effectively excise free As of June 2006 approximately $4.5 million dollars in grants had been paid and 12 ML of biodiesel produced since 2003 Grant will be phased down in steps from 2011 to 2015 to halve biodiesel's excise rate and give biodiesel a long term 50% excise discount

Recent Policy Developments Prime Minister's Alternative Energy Statement – August 2006 Ethanol Distribution Program –$17.2 million over three years –Support for fuel retailers to install new ethanol compatible pumps or convert existing pumps for ethanol use –New and existing ethanol retailers will receive additional funding if they can meet ethanol sales targets