Biofuel bill passes first reading

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Legislation forcing oil companies to sell a set proportion of biofuels has passed its first parliamentary hurdle without opposition.

The Biofuel Bill implements the biofuels sales obligation (BSO) – requiring that 0.53 per cent of a suppliers' petrol and diesel sales are made up by biofuels in 2008, rising to 3.4 per cent by 2012.

The bill also stipulates the biofuel must come from sustainable sources.

Energy Minister David Parker said there should be plenty of local sustainable sources, including animal tallow and forestry and dairy byproducts.

Biofuels would reduce harmful vehicle emissions as well as reduce reliance on imported fossil fuels, softening any shocks in supply.

"A range of likely developments will enable biofuels over time to make up an increasing proportion of transport fuels.

"The biofuels sales obligation should be viewed as being an initial step in the transition towards greater uptake in future years.

"It will trigger important changes in infrastructure needed to cater for these new fuels."

The National Party supported the bill through its first reading, but energy spokesman Gerry Brownlee questioned whether oil companies would be able to meet their obligations – particularly from sustainable sources.

Mr Brownlee said most of the biofuels made around the world were from crops, which were "barely carbon neutral" at best.

Green Party co-leader Jeanette Fitzsimons said the risk with biofuels was they would displace food production and speed deforestation as farmers in developing countries cleared trees to grow crops for biofuel production.

That could lead to starvation in poorer countries as potential food was exported as fuel to developed countries.

"The engines of the rich will always outcompete the stomachs of the poor," she told Parliament.

However the Greens had negotiated the clause in the bill that any biofuels must meet a sustainability requirement.

She believed up to 5 per cent of New Zealand's fuel requirements could be met by the conversion of agricultural byproducts.

Under the bill, suppliers would be able apply for deferral in the first two years, would have choices over how to use surpluses and shortfalls of biofuels, and could enter into entitlement agreements to allow suppliers to count the biofuels of others towards their BSO.

The Government is expected to lose about $83.5 million in revenue from petrol excise over the first five years of the obligation as a result of replacing a proportion of petrol with ethanol.

But the bill says the cost to the Government of the revenue loss "may be offset by increasing the excise on petrol".

That would increase the cost of petrol "albeit by a small amount – about one cent per litre from 2010 to 2012".

Ensuring a biofuel level of 3.4 per cent by 2011 would achieve savings estimated at between 1.08 and 1.12 million tonnes of carbon dioxide emissions between 2008 and 2012.

- NZPA