Biofuels the 'missing puzzle piece' to hit climate targets

Published Mon 22 May 2023

Australian Financial Review

by Mark Ludlow 

Australia needs to substitute ethanol in fuel and offer significant tax breaks on renewable fuels if it wants to reach its international climate targets, including net zero carbon emissions by 2050, a new report says. 

After the Albanese government flagged it would introduce fuel efficiency standards next year to cut transport emissions, a report by Biofuels Australia has recommended 11 new measures, including setting a target of 10 per cent renewable fuels by 2030. 

Other recommendations include extending the fuel excise mechanism to renewable fuels, and low-interest for renewable fuel start-ups. 

Bioenergy Australia chief executive Shahana McKenzie said renewable fuels were the missing piece of the puzzle when it came to reducing emissions in Australia. 

"While electrification is essential for significant pillars of the energy system, it is only part of the answer to reducing emissions," she said. 

"Australia's economy is reliant on liquid fuels; our heavy industries, aviation, marine, agricul¬ture and mining need affordable and immediate decarbonisation options. 

"Touting electrification as the only solution is naive and is delaying a robust discussion about how we achieve decarbonisation of these hard-to-abate sectors." 

The report by consultancy firm Deloitte says the development of a mature biofuels industry over the next decade could add up to $10 billion in gross domestic product a year and deliver 26,000 jobs. 

Qantas and Airbus have invested in sustainable aviation fuel (SAF), and plan a $400 million ethanol-based fuel factory in North Queenslru1d as a way to reduce their carbon footprint.
The International Air Transport Association has estimated SAF could contribute about 65 per cent of the reduction in emissions needed by avi¬ation to reacl1 net zero by 2050. 

The Bioenergy Australia report said greater effort was needed to increase the uptake of renewable fuels, which account for just 16 per cent of global demand for liquid fuels. 

Australia lagged in investment in liquid renew¬able fuels, with global investment more than doubling 2021. 

The report also recommended replacing 6 per cent of petrol with bioethanol - equivalent to taking 730,000 cars off the road in terms of carbon emissions - and replacing 2 per cent of diesel with biodiesel in the heavy-vehicle sector. This would be achieved through tighter fuel standards rather than a mandate. 

There has been a push in the past few decades for an ethanol mandate, especially in Queensland, which has a significant sugar cane industry, but some drivers have steered clear of E10 fuel despite its being cheaper than traditional unleaded fuel. 

The Deloitte report recommended a 10 per cent renewables fuel target by 2030, which would be achieved through a low-carbon fuel emissions crediting system, and developing a flexible mininum for volume production and the carbon intensity of fuels. 

Producers or refiners that exceed the minimum volume or carbon intensity could sell their credits to producers or refiners who need them to meet the minimum volume or carbon intensity. 

"This policy can act as a national framework for the decarbonisation of liquid fuels," the report said. 

Another idea was a government-funded "contract for difference", where taxpayers would pay the difference between market price and contract price for renewable fuels, so project developers were guaranteed a minimum price per unit of fuel produced.