Opening speech to Biofuels Conference 2008

For people with a passion for energy systems and technologies, this is an incredible time to be alive.

Our generation is being forced to re-invent the way we do business and the way we live because of the twin forces of climate change and peak oil.

The biofuel industry and the electric vehicle industry are both on the pointy end of this business and technology transformation.

It is you folks here today that will play a growing part in creating a new society.

Some may say there is nothing new under the sun, and to some extent that's true, as in fact Robert Anderson built his first electric car in the 1830s and Rudolph Diesel built his first engine to run on peanut oil a half century later.

But we all know that today it's an entirely new game.

New fuels and modern electric storage devices mean we can do things that Anderson and Diesel never dreamed of.

However biofuels have had a somewhat rocky road in the press lately.

Just a couple of years ago they were touted as the answer to climate change and oil depletion, another substance we can just drop into the tank of our cars and keep driving more km every year.

Today we see articles describing them as a route to world starvation and the final destruction of tropical rainforests and people calling for biofuel programmes to be slowed or stopped.

The message I've been trying to get across in the media for some time now is that not all biofuels are equal.

We need to be discriminating and set some standards but not throw the baby out with the bathwater.

As you know, we have legislation before select committee at the moment mandating a biofuel obligation from July this year.

It is very important that we maintain momentum and pass that legislation if we are to create the market certainty that will encourage investment in NZ production of biofuel.

At the same time we must ensure NZ production is not undercut by heavily subsidised ethanol from corn, with a net energy loss, a high carbon footprint and which is already raising food prices disastrously for those who are most vulnerable.

We need to achieve some flexibility in allowing imports, but not at the expense of the rainforests of South East Asia and all their unique biodiversity which are being cleared to plant palm oil for biodiesel.

That's why there is a sustainability clause in the Bill, and we have agreement that it will be refined to require, not just allow, a sustainability standard to be set.

Some have argued that the coming into force of the Act should be delayed because some officials have advised it could take three years to draft the standard.

I believe we can and must do it much faster than that.

Work has already begun within Government to develop ways to assess and label biofuels at the pump.

EECA has commissioned a study from SKM on labelling for sustainability and Chris Purchas will give you all the details of that work this afternoon.

The UK is facing similar problems with US B99 and has also done work on sustainability labelling which we can benefit from.

It is not hard to use the work done on a voluntary information system and turn it into a mandatory standard.

The aim of course is to incentivise the production of biofuels in NZ from our own sustainable sources — tallow, whey, other wastes including used cooking oil, and eventually if we can commercialise them successfully, second generation fuels like algal biodiesel and cellulosic ethanol.

I believe that NZ is uniquely well placed to grow trees and to utilise waste wood for energy and I look forward to hearing the latest news from Peter Hall and Trevor Stuthridge from Scion later today.

We should remember it's not just cars that can benefit from the coming biofuel revolution, but one of our biggest emitters, aviation.

We'll hear from both John Plaza and Darrin Morgan after lunch, both of whom are pioneering the commercialisation of biofuels for aircraft.

Electric cars also have their euphoric supporters and their sustainability issues.

We have set a target of 90% renewable electricity generation by 2025, in the knowledge that we are trying to provide extra for transport as well.

The introduction of electric vehicles and plug-ins needs to be co-ordinated with the growth of renewable electricity supply.

There are several programmes in the new Energy Efficiency Strategy that will help with this transition, including smart metering and demand side reforms to the electricity industry.

The electric car industry suffered a premature failure in California almost ten years ago and precious time was lost.

However, the tide has turned again and both plug in hybrids and fully electric vehicles are back on the drawing boards and entering production around the world.

The Meridian Energy Electric Vehicle session follows morning tea, with keynote speakers from around the world and New Zealand who will help us meet the goal of the NZ Energy Strategy to be an early adopter of this technology.

That brings me to the other very important strand of the Energy Strategy.

Meeting the challenges of climate change and peak oil is not just about supply — we have to tackle the demand side too.

The Strategy states that we should invest in energy efficiency wherever it is cheaper than new supply, including the environmental costs.

There is lots of potential to use transport fuel more efficiently and we have started down that road.

One tool is to put a price on carbon, and the Emissions Trading Scheme will do that from 1 January next year for transport fuels.

That will increase the incentive for renewable fuels compared with petrol and diesel.

But it is not enough on its own.

We have started with consumer information, and built a website which gives the fuel efficiency of all vehicles, new and used, for which information is available.

That has been followed with a mandatory fuel efficiency labelling scheme.

From next Monday check out the new labels on all new and recent used vehicles which will show you a fuel economy rating of up to six stars.

New cars will also carry litres per 100 km and typical fuel cost per year.

We expect people to start making wiser choices when they have the information and can compare different models.

But that's not enough either.

Submissions have just closed on a discussion paper on the best way to set fleet weighted average fuel consumption standard that will improve the average efficiency of new entrant vehicles by 25% by 2015.

We want to see average fuel economy improved to around 7 litres/100 km by then.

And of course one contribution to meeting that average standard will be the introduction of biofuels and electric vehicles.

So instead of sterile discussion about "either or" — either a price or a standard — we have gone for both — pricing and a complementary regulatory instrument.

Interestingly this approach was called for recently both by Joseph Stiglitz of the World Bank when he spoke in Wellington and by our own David Skilling of the NZ Institute in a recent paper.

Under the Energy Efficiency Strategy we have a goal of halving our per capita transport emissions by 2040.

Achieving that will require some big changes and a wide range of tools.

On the demand side we will need pricing and efficiency standards; improved technology and improved driving skills; improved public transport and better planned cities.

On the supply side we will need biofuels and electric vehicles and bikes and trains and carpools and feet.

It's an exciting work programme and I congratulate and thank you for being part of it.

If we work together to make this transition truly sustainable, we will leave something of real value for our children.