LABOUR'S BIOFUELS 'DOG' HAS HAD ITS DAY
20 November 2008JENNI MCMANUS
With the change of government, the biofuels battle is back on our political agenda. Incoming environment minister Nick Smith is likely to make the scrapping of Labour's controversial Biofuels Act, passed in the dying days of the Clark government, one of his top priorities.
The legislation will be either repealed - or, preferably, changed by regulation as this doesn't require a re- run of the past year's parliamentary wrangling - as soon as National gets the chance to "work through the issues", Smith says.
The incoming government believes there are "significant uncertainties about the cost and effectiveness of biofuels". Smith says the legislation is "a dog".
All this is good news for motorists.
National says it can save them $260m a year by repealing or neutering the act. Rather than lumping an extra 4c a litre on fuel to fund a mandatory biofuel levy, the new government is offering a sweetener to new energy technology.
Electric cars and ethanol producers are being offered a 42c a litre exemption from excise tax until 2012.
"The real issue, and the one that illustrates the difference between [Labour and National] is that they prescribed by compulsion while we prefer to kickstart by financial incentives," Smith says. "National is keener on price signals than micro- regulation. If the biofuels industry can't make a go of it with a 42c advantage over fossil fuels, they never will."
Labour's legislation required a fixed amount of biofuels be blended with petrol and diesel from October 1. Nobody seems clear about how, or whether, this has been enforced in the past six weeks.
The mandatory requirement - another way of describing a captive market - is Smith's major gripe, particularly as the act was passed without defining any sustainability standards. As Smith and his supporters see it, this is a critical omission.
But it's not surprising. Europe has been struggling for nearly four years to write sustainability standards into biofuels legislation and in this country officials have told Smith it will be at least two years before anything can be drawn up here.
Worse, not only is there no universal agreement about how "sustainable" should be defined but industry players worldwide are unsure whether a practical definition is even possible.
Until this is resolved, it's hard to see how any biofuels legislation can be enforced.
Another opponent is the Parliamentary Commissioner for the Environment, Jan Wright, who has argued Labour's legislation won't necessarily achieve its goals - lower CO2 emissions and energy security.
"The Biofuels Bill has no inbuilt mechanism for ensuring that biofuels used in New Zealand would emit significantly less CO2 over their life cycle than fossil fuels," she said earlier this year, citing international concern about biofuels' sustainability and their true economic and environmental impacts.
Lining up against Wright and Nick Smith was the fledgling biofuels manufacturing industry. This claimed that without a mandatory biofuels requirement it wasn't economic for them to invest in it.
The oil companies and industry lobby groups like the AA wavered between neutrality and cautiously supporting the legislation but with heavy caveats attached.
Outgoing Climate Change Minister David Parker, supported by the Greens, thought we should "just get on with it" and get the infrastructure in place for the new industry, despite the lack of sustainability standards.
Labour finally got the bill through in September in what Smith describes as "an act of desperation".
Offshore, the battle continues to rage. In an article earlier this year, Time magazine spelt out the parameters of the debate: are biofuels eco-friendly and capable of cutting our dependence on fossil-fuels and reducing greenhouse gases? Or are they "the clean-energy scam", with ethanol - the most widely produced biofuel to date - increasing greenhouse gases, destroying forests and inflating food prices?
Other critics reject earlier studies which claim substituting biofuels for fossil fuels reduces greenhouse gases. These didn't account for the carbon emissions that occur when farmers worldwide respond to higher food prices and convert forest and grassland into cropland, they say.
Aid group Oxfam is the latest to pitch into the debate, urging the European Union to scrap its target of making 10% of all transport run on renewable resources by 2020.
In a report released in June, Oxfam says biofuels are responsible for 30% of the increase in global food prices, pushing 30 million people worldwide into poverty. Rich countries should dismantle biofuels subsidies and reduce import tariffs, Oxfam said.
All this is music to Nick Smith's ears.
"The rush for biofuels is causing a crisis in global food prices, with the United Nations food agency describing biofuels as a "crime against humanity' and calling for a five-year moratorium," he says.
"The problem is the land producing biofuels is competing with that for food production and that there simply isn't sufficient land to do both.
"It's not a good look for New Zealanders to be filling their cars with biofuels while the world's poorest starve."
(c) 2008 The Independent Business Weekly
The Independent Financial Review
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