Media Release -
Federal Minister for the Environment and Heritage
The Hon Dr David Kemp, MP

New Package to Support Uptake of Biofuels

13 May 2003
KB11

A comprehensive package of Budget measures to support the production and use
of biofuels underlines the Howard Government's ongoing commitment to a
commercially viable renewable fuels industry for Australia.

The Minister for the Environment and Heritage, Dr David Kemp, said the
measures include grants, production assistance, national fuel quality
standards and changes to excise arrangements for biofuels.

"Biofuels are produced from renewable organic sources and waste products,
including sugar cane, wheat, waste vegetable oils and animal fats. These
fuels offer greenhouse, air quality and regional benefits while reducing our
dependence on imported fossil fuels," Dr Kemp said.

"This Budget provides a financial incentive for investment, assurance of
safety for biofuels users and the encouragement to move to genuinely
commercial production," he said. Biofuels with commercial prospects include
ethanol and biodiesel.

"This package will address key barriers to the take-up of biofuels and is
consistent with the broader fuel excise reform framework," Dr Kemp said.

Dr Kemp said the new arrangements for ethanol include:

• continuing the effective zero excise rate for domestically produced
  ethanol under the existing excise and subsidy arrangements until
  30 June 2008;
• adjusting the nett effective excise rate for ethanol in a series of
  five even annual steps, commencing on 1 July 2008 and ending on
  1 July 2012, and 
• extending these arrangements to imported ethanol; and
• setting a new excise rate that will apply to ethanol from 1 July 2012.
  

"These measures complement the Government's decision last month to set a 10%
limit for ethanol blends in petrol, to develop a standard for fuel ethanol,
and legislate to require labelling of the ethanol content of petrol - all of
which are critical in building consumer confidence in ethanol fuels," Dr
Kemp said. 

These measures will aid the development of a commercially viable domestic
biodiesel industry by addressing critical market barriers to its use, while
providing greater certainty with quality.

The new biodiesel arrangements include:

• from 18 September 2003 the Government will apply excise on biodiesel -
  whether pure or blended - at the same rate as diesel;
• providing domestic biodiesel producers and importers with a subsidy of
  38.143 cents/ litre until 30 June 2008, with a nett effective excise
  rate for biodiesel of zero over this period;
• adjusting the nett effective excise rate for biodiesel in a series of
  five even annual steps, commencing on 1 July 2008 and ending on
  1 July 2012; 
• setting a fuel standard for biodiesel, after which biodiesel will be
  listed as an eligible alternative fuel for on-road grants under the
  Energy Grants Credit Scheme; and
• setting a new excise rate that will apply to biodiesel from
  1 July 2012.

"These measures put biodiesel on a broadly similar footing with ethanol and
will ensure each can play a part in a renewable transport fuels industry in
Australia," Dr Kemp said.

The effective nett excise rates for both fuels will be set later his year,
having regard to energy content and the assessment of environmental and
other benefits.

"This package will provide a stable long-term policy climate for investment
in biofuels production," Dr Kemp said. "It will also encourage industry to
pursue production efficiencies that will enable these fuels to compete in
the longer term without the need for government assistance."

Media Contact:
Catherine Job Dr Kemp's office (02) 6277 7640 or 0408 648 400