Associate Transport Minister Judith Tizard and Climate Change Minister David Parker today released a discussion document outlining a proposed sales obligation for biofuels, as part of the government's response to climate change.

The proposal would require oil companies to sell a minimum percentage of biofuels in transport fuels, beginning with 0.25% of sales in 2008, and rising to 2.25% by 2012, Judith Tizard said.

“Diversifying into renewable transport fuels will reduce our dependence on imported oil. Using biofuels will also reduce vehicle emissions, greenhouse gas emissions and improve air quality.”

Although imported biofuels could be used, there is enough domestic feedstock from within the agricultural sector to produce the amount of biofuels needed to meet the minimum obligation.

Energy and Climate Change Minister David Parker said biofuels would move New Zealand towards a more sustainable energy future, as well as providing significant climate change benefits.

"If the proposed sales obligation is met, we will not need to account for over a million tonnes of carbon dioxide emissions under the Kyoto Protocol, due to the replacement of fossil fuels by biofuels. This represents more than $16 million that would be saved by the Government in respect of its Kyoto Protocol commitments in the first commitment period (2008-2012) alone."

Mr Parker said the minimum was the starting point.

"Once the legislative framework and infrastructure is in place, we can expect biofuels to make up a greater proportion of our transport fuel than these mandated minimum levels."

The discussion document and reports on the supply, distribution, vehicle compliance, and economics of bringing biofuels to the market in New Zealand are available at www.transport.govt.nz/biofuels-sales-obligation-discussion-document/ or from the Ministry of Transport. Submissions close on 20 October.

Background

Biofuels include biodiesel and bioethanol.

• Biodiesel is made from vegetable oils or tallow (animal fats) and is most commonly blended with diesel.
• Bioethanol is produced by the fermentation and distillation of sugars and starches and is most commonly blended with petrol.

What is biofuel?
Biofuel is a generic term for fuels that can be produced from or are made up of a renewable material of plant or animal origin. Often they are substitutes or partial substitutes for fossil (or mineral) fuels. Biofuels used in transport are typically bioethanol which is used as a petrol substitute and biodiesel which is used as a diesel substitute. These are the biofuels that are most likely to be used in New Zealand in the medium term. Biofuels have the major advantage of not contributing to overall greenhouse gas emissions.

What is biodiesel?
Biodiesel can be produced from any vegetable oil or animal fat and used as a substitute or partial substitute for mineral diesel. To produce biodiesel, these fats or oils are chemically converted to esters that have properties similar to mineral diesel. Biodiesel is often blended with mineral diesel and blends of up to 5% in mineral diesel are suitable for use in diesel engines without modification. Higher blends may be used in dedicated fleets.

What is bioethanol?
Bioethanol is an alcohol made from sugar, starch and products containing sugars and starches, through a process of fermentation and distilling, and used as a substitute or partial substitute for petrol. Bioethanol has properties that are similar to petrol and is often blended with petrol. Bioethanol is likely to be introduced as a low level blend (likely 3 to 5%) in some petrol, although the current maximum allowed is 10%. Higher blends may be used in dedicated fleets.

Can biodiesel and bioethanol be made in New Zealand?
Yes. New Zealand produces sufficient tallow, a by-product of the meat industry, which would, if converted to biodiesel, produce around 5% of our diesel fuel needs. New Zealand currently produces sufficient bioethanol from whey, a by-product of the dairy industry, to meet around 0.3% of our petrol needs. More bioethanol could be produced from whey or other waste and by-product sources.

Will we grow crops for biofuel manufacture?
In the foreseeable future, most likely not. While many other countries grow crops for biofuels, it makes sense to use waste or by-product sources to make biofuels, as these are likely to be significantly cheaper than growing crops. A possible future feedstock for New Zealand bioethanol is wood waste.

What is the government proposing regarding biofuels?
The government is developing and introducing a biofuels sales obligation for the sale and use of biofuel blends in New Zealand. The aim is to ensure that oil companies selling petrol or diesel must also sell a small amount of biofuels. It would be up to the oil companies to determine which combination of biofuels and which blend levels to use, and where to market them.

Why is the government considering a biofuels sales obligation?
The government is committed to the use of renewable transport fuels to reduce environmental impacts of the use of fossil fuels, and to reduce New Zealand's dependence on imported transport fuels.

The National Energy Efficiency and Conservation Strategy's Renewable Energy Target, released in October 2002, included an indicative target for renewable energy for the transport sector of 2 petajoules, equivalent to about 1% of current transport energy use. Despite having had an indicative renewable transport fuel target for three years, and the price of oil currently being high enough for biofuels to be cost competitive, there are still no transport biofuels being used in commercial quantities in New Zealand.
It is clear that market forces alone are not enough to encourage the supply and use of renewable transport fuels.

How will decisions be made about the biofuels sales obligation?
The government has asked the Ministry of Transport to establish a consultative group comprising the fuel industry, the motor industry, consumer and user groups, to help develop the biofuels proposal to the next stage.

Will new legislation be required?
Yes. Existing legislation is not suitable for a biofuels sales obligation, nor for imposing mandatory quality specifications for biofuels or blends. Therefore new legislation, or an amendment to existing legislation, would be needed that could provide for a biofuels sales obligation and to regulate biofuels quality.

How can the public have their say?
On 12 September the Ministry of Transport released a public discussion document on proposals for the biofuels sales obligation. Any resulting new legislation will attract scrutiny through the Parliamentary process.

What are the benefits of biofuels?
Using a biodiesel blend has a number of benefits, which are reduced net carbon dioxide emissions, reduced emissions of concern to air quality and human health, better fuel lubrication and reduced deposits in your diesel engine. Biodiesel is also non-toxic, biodegradable and speeds up the breakdown of any spills of diesel that it is blended with.
Using a bioethanol-petrol blend reduces net emissions of carbon dioxide and provides air quality benefits. Bioethanol is also a relatively high octane fuel.

What countries currently use biofuels?
Biofuel blends are widely used around the world. The USA, Brazil, Canada, most European countries, Australia, China, India and Thailand all use biofuel blends.

Does the use of biofuels affect vehicles?
No modifications are necessary for petrol or diesel vehicles using the blend levels of biofuel that are currently being considered for retail sale at the pump. Petrol engines tuned correctly for use on ordinary petrol would normally not exhibit any problems with using bioethanol-petrol blends. Diesel engines tuned correctly and regularly serviced would not normally exhibit any problems with using bio-diesel blends. Modern computer-controlled fuel systems monitor engine performance and adjust variables such as fuel accordingly to maintain optimum operability.

Some older vehicles may find slight deterioration of certain metals, rubbers and plastics in the fuel system when using bioethanol-petrol blends. However, overseas experience shows this risk to be minor. If a vehicle is more than 10 years old or is not in good condition, a mechanic may need to inspect the vehicle. This includes checking for water in the fuel tank (and, if necessary, cleaning out the tank and fuel lines) and checking the condition of fuel hoses and seals.

For more information on the extent of any risk to older vehicles of using bioethanol-petrol blends, see the Vehicle and Engines risk report: www.transport.govt.nz/assets/NewPDFs/Vehicle-and-Engine-Risks-report-v3.... (PDF, 396kb).

Will biofuel blends cost more?
The relative price of biofuel blends and ordinary petrol and diesel will vary depending on the price of oil, the price of production of biofuels, and the tax regime applied to them. It will be up to fuel producers and retailers to set the price. Biodiesel and bioethanol-petrol blends are unlikely to cost users any more than ordinary diesel and petrol at the pump. It will be up to fuel producers and retailers to set the price.

Would biofuels be exempt from a carbon or other greenhouse gas oriented tax?
Yes. Biofuels are regarded as carbon neutral because they are made from renewable sources. Therefore the biofuel component of any fuel would be exempt from a carbon tax or similar tax.

Will the use of biofuels help New Zealand meets its Kyoto Protocol obligations?
Yes. If biofuels replace mineral fuels then their use will assist New Zealand in meeting its Kyoto Protocol obligations because emissions from the use of biofuels are not counted as greenhouse gas emissions under the Kyoto Protocol, whereas emissions from the use of mineral fuels are.

Will users have a choice between biofuel blend fuel and ordinary fuel?
Bioethanol-petrol blend fuel would likely replace either regular or premium petrol, and biodiesel mineral diesel blend fuel replace mineral diesel at service stations, but this is a decision for producers and retailers to make. Setting a biofuels sales obligation gives producers and retailers the flexibility to meet the obligation within a competitive commercial environment.

Will you be able to change between biofuel blend fuel and ordinary fuel?
Yes. You can have both bioethanol-petrol blend and petrol, or biodiesel-mineral diesel blend and mineral diesel in your tank at the same time and there should be no noticeable effect changing between renewable biofuel blends and conventional fuel, either in petrol or diesel vehicles.

Will there be controls on the quality of biofuel blends?
Yes. Biofuel blends are required to meet regulatory standards, just as ordinary petrol and diesel do, under the Petroleum Product Specifications Regulations 2002. There are also currently voluntary industry standards for the biofuels themselves. Until there is new legislation to further control biofuel quality, the Energy Efficiency and Conservation Authority (EECA) has developed a label for biofuels which meet the biofuel quality standard. Only buy biofuels with this EECA biofuel label.

Is bioethanol unsuitable for marine and aviation applications?
There is increased risk for the use of low level ethanol blends in marine or aviation applications. This is because of the presence of water. The bioethanol can separate out of the fuel into a bioethanol water layer which could cause an engine to stop. In aviation use, cold temperatures at altitude can result in easier bioethanol separation with any water from the air condensed in the fuel tank. Bioethanol blends are specifically excluded by the Federal Aviation Authority which sets the standards for aviation safety in the USA.
The situation with respect to marine applications is less clear. Marine use increases the risk of the presence of water in the fuel tank. However, many of the major outboard motor manufacturers accept the use of ethanol blends up to 10% with their engines and in a number of states in the USA the marine use of ethanol blends is encouraged because fuel spills are less environmentally damaging with these fuels.

Are biofuels suitable for motorcycles, and small engines like lawn mowers and chain saws?
Bioethanol-petrol blend fuel can generally be used in both 4-stroke and 2-stroke engines used in land-based applications, no differently than petrol. It is best to check with the equipment manufacturer first.

What is methanol?
Methanol is an alcohol primarily made from non-renewable feedstocks such as coal, oil and natural gas, and also made from wood waste. It is also used in biodiesel production. It is volatile, corrosive, produces heavier than air vapour, and is poisonous to humans and animals if ingested. Methanol is not considered to be suitable for use as a general transport fuel in New Zealand.