Sustainable biofuel: victim of the 100-day wrecking ball

ENERGY (FUELS, LEVIES, AND REFERENCES) BIOFUEL OBLIGATION REPEAL BILL First Reading

This tragic little Energy (Fuels, Levies, and References) Biofuel Obligation Repeal Bill, rushed through all its stages under urgency by a Minister of Energy and Resources who is ignorant of most aspects of his portfolio—apart from perhaps sexy coal—will do exactly the opposite of what the Minister says it will do. It will replace the potentially sustainable local industry—stable, secure and well known—with intermittent imports of biofuels from unknown sources, which are likely to include palm oil from South-east Asia grown where the tropical forests, the last refuge of the orang-utan, used to grow, and corn ethanol with a higher carbon footprint than petroleum, subsidised by the US Government. That is what this bill will do.

Let me tell members about who is already investing or is poised to invest in biofuels in New Zealand. Although there are many others doing little bits, there are three major companies involved. The company that people have heard most about is Biodiesel Oils (NZ) Ltd. Its managing director is Tom McNicholl, and it has a plant already operating in East Tamaki making small quantities of biodiesel from tallow, as well as a large plant under construction in Waharoa to make 60 million litres a year.

That plant has now been mothballed because there will be no market for the fuel under this plan—and I will tell members why in a minute—and that has caused the loss of 46 jobs. The point Mr McNicholl makes is that unless the oil companies are required to set up lending facilities, there will be no possibility of selling biofuels for blending, only for 100 percent biofuel vehicles, which is a much more difficult market. In his letter to me, Mr McNicholl states “Exempting excise and road user charges from biofuels act only as a subsidy to fuel consumers. They do not compel the use of biodiesels, unlike the biofuel obligation.”

Secondly, there is Ecodiesel Ltd in South Auckland, which is producing small quantities of biodiesel from tallow. It was planning expansion to 40 million litres, but that has been delayed at least 6 months because of the uncertainty created by this bill. Thirdly, there is Biodiesel New Zealand Ltd, which uses rapeseed oil grown as a rotational crop with other food crops so that the green material is ploughed back in as a green soil-conditioner. The oil is extracted from the seeds, and the seed cake is used as an animal feed. That is a sustainable biofuel, and that company was planning to produce 70 million litres, but that is now under review. That is what this bill has done.

Those are three significant entrepreneurial companies in New Zealand that want to do the right thing by sustainability, that are all undoubtedly sustainable by any definition of the term, and now their investment is seriously under threat.

Hon Gerry Brownlee Why?

JEANETTE FITZSIMONS Perhaps if the member listens, he will find out why. The intention of the bill is to set up a stable local market. It would have actually been better for sustainability to say that we will not allow the import of any biofuels, and that we will only have them made in New Zealand, so that we know where they come from and that they are sustainable.

The Greens could have supported that but unfortunately people got nervous about the World Trade Organisation and so forth, and did not think that was an option. Mr Brownlee says the Parliamentary Commissioner recommended against the passing of the Energy (Fuels, Levies, and References) Bill, and that is true. She came to the select committee when the bill was in its as introduced form and she said “the bill currently before Parliament should not proceed in its current form”, and it has not proceeded in the current form it had then, because that was before the Green Party negotiated with the Government a sustainability clause.

We made it clear that without that sustainability clause we would not support the bill at all. That clause was drafted—and I had a large hand in that—and it went through the select committee, and it was adopted. As far as I can make out, that sustainability clause is the most stringent sustainability clause in the world, yet it is being abolished by the Government today. It says that to be sustainable a fuel has to reduce by at least 35 percent the carbon it produces relative to petroleum, it has to not be grown on land suitable for food production—to not compete with food—and it has to not be grown on land of high conservation or biodiversity value.

Those are the three criteria, and they are in clause 35G(a) in the Biofuel Bill, and those have now gone. Members opposite have been making a big feature of the fact that the regulations to give effect to 35G(a) are not yet drafted. They are partly drafted. The Minister and I met with the officials and said “This idea that you can’t do this until 2011 is rubbish. You can do it by the middle of 2009, can’t you?”, and they said “Yes.”, and they were directed to do that by the middle of 2009.

The amount of biofuel that is required under the legislation to be used in New Zealand by the middle of 2009 is so infinitesimally minute that there was no reason not to proceed without the regulations. But the fact is that because the clause is in the bill, there is still a conceptual standard against which to measure biofuels coming into the country. It was always the intention that there would be a reporting obligation for those biofuels. In her advice to the committee, the Parliamentary Commissioner provided a table of carbon emissions for a wide range of different biofuels around the world, showing that some of them like the US corn to ethanol programme have higher carbon emissions on a life cycle basis than petroleum, and others, particularly those made from wastes like tallow, have very low carbon emissions.

Not all biofuels are equal. That is the thing the National Party has never been able to grasp. The Minister said that the work on drafting the regulations will continue. Well, I ask what he will do with those regulations, because there will now be no primary legislation under which they can exist. We cannot have regulations just hanging in the air. He says biofuels will cost up to 8c a litre more. That figure comes from the oil companies.

I remember back to the days when we had a big campaign to get lead out of petrol because it poisoned children’s brains. The oil companies told us repeatedly that petrol would be massively more expensive—I think they said 10c a litre more expensive at the time—if the lead was taken out. Eventually, we forced them to take the lead out, and nobody even noticed any change to the price. The oil companies are the absolute last people we should trust if we want to know what biofuels will cost. The fact is that whether biofuels cost more or less will depend on the price of petroleum.

The Ministry of Economic Development gave advice that whether biofuels would increase fuel prices will depend first on the amount of infrastructure required by oil companies. Currently, that is estimated to add 0.2 to 0.4c per litre to the price.

Secondly, it will depend on what the price of petroleum is at the time. When oil actually reached $157 a barrel, biofuels were cheaper than petroleum. But it cannot be left just to the market, because if we do not have the infrastructure, if we do not have the industry, all that the market will do is produce a fluctuating import, or not, of fuels, depending on what the price is. So we will get the worst stuff going. We will get no stability in the market, we will get no blending, and we will get no New Zealand industry.

All we will get is ad hoc imports from wherever it might be available to make up the difference. The Minister says that he wants to give a tax subsidy instead of a mandatory obligation. I will pick that up in my second reading speech. There is plenty more to say.