Ethanol is well and truly the flavour
of the month among politicians with a
taste for electoral advantage and businesses
keen to drink from the taxpayers' trough.
Large production subsidies and suggested
compulsory blending of ethanol,otherwise
known as ethyl alcohol, in automotive
fuel are the key ingredients of this intoxicating
But before the rest of the community
- motorists and farmers included - become
just as intoxicated with ethanol-blended
fuels, we need to take a closer look at
the cocktail being offered as a saviour
of the natural environment and sugar industry.
In the wake of the 1970s oil crisis,
many governments tried to encourage greater
use of alternative fuels by various means.
The Australian Government exempted ethanol
used as fuel from excise and customs duty.
Only in Brazil did ethanol become a major
transport fuel. In the United States,
only 1.2 percent of fuel used in cars
is ethanol, mainly in a petrol-ethanol
blend containing 10 percent ethanol (E10).
In Australia, ethanol provides just 0.2
percent of all fuel for cars, but in specific
areas ethanol content ranges up to 22
During the 1990s, popularisation of the
concept of sustainable development and
the theory of global warming revitalised
interest in ethanol. This induced the
Commonwealth Government to continue exempting
fuel-ethanol from excise and customs duty.
In October 2001, the Commonwealth Government
announced a capital subsidy of 16 cents
per litre for new or expanded production
facilities for biofuels, such as ethanol,
until 30 June 2007 or production capacity
reached 310 million litres. It also maintained
excise and customs duty exemptions.
From 17 September 2002, the Commonwealth
applied excise and customs duty to fuel-ethanol
at 38.143 cents per litre, the same rate
as petrol. Simultaneously, a subsidy of
38.143 cents per litre was given to domestic
producers of fuel-ethanol for one year,
pending consideration of long-term arrangements
for "renewable energy".
Subsequently, politicians with one eye
on crucial rural electorates and the urban
green vote have argued that the ethanol
subsidy should continue, and inclusion
of ethanol in petrol should be compulsory,
with the proportion rising over time as
the Australian ethanol industry expands.
Manildra and CSR currently dominate ethanol
production in Australia. Manildra uses
waste starch from its wheat gluten and
starch plant at Nowra. CSR's ethanol plant
at Sarina uses C molasses, a low value
by-product of sugar production.
In response to Commonwealth subsidies,
all existing producers in Australia plan
to expand capacity substantially. Also,
Multiplex is investigating entering the
industry with several ethanol plants around
But the costs and income transfers associated
with subsidising and mandating use of
ethanol in petrol are enormous.
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