In the lead up to the federal election, Queensland mining magnate Clive Palmer called for an increase in the number of vehicles using ethanol-based fuels, as a way of reducing Australia’s greenhouse emissions.
Now that the Palmer United Party looks set to wield influence in the senate from 2014, policies such as these need to be scrutinised.
So, could ethanol fuel actually improve Australia’s environmental credentials?
Well, in theory, Australia could lower its total greenhouse gas emissions from transport by increasing its use of ethanol (or E10) fuel as a proportion of total fuel consumption.
The appeal of ethanol expansion can quickly be illustrated by the numbers.
Firstly, most petrol cars manufactured since 1986 - and more than 99% made today - can use E10 fuel (a blend of 90% standard unleaded petrol and 10% ethanol).
In 2010, the transport sector in Australia was responsible for emitting over 83 megatons of carbon dioxide into the atmosphere. We consumed a total of 51 gigalitres (GL) of liquid fuels, including 19GL of petrol.
It would therefore require a relatively small increase in production, from the current 0.45GL to 1.9GL per year, to turn every litre of petrol currently sold in Australia into E10 fuel.
To create this amount of ethanol, we could build 10 new ethanol plants, each delivering 0.15GL. That might seem like an ambitious project, but we know that between 2007 and 2009, the United States industry alone constructed 60 new plants.
But to actually assess the environmental benefit of ethanol expansion we’d need to know the reductions in greenhouse gas emissions that ethanol could offer, compared to the equivalent volume in petrol.
In that case, let us assume that the pure ethanol we produced offered greater than 80% reduction in emissions compared to the equivalent amount in unleaded petrol. This type of analysis takes into account the “full life cycle” of ethanol, from the production of the fuel to its emission through the tailpipe.
If we replaced 1.9GL of Australia’s petrol with ethanol fuel and dispersed it through bowsers in the form of E10, this would reduce total vehicle emissions by about 8% per year compared to keeping the equivalent portion as petrol.
This is a large reduction, but is it achievable?
Experience elsewhere in the world shows that ethanol’s environmental credentials depend on local feedstocks, conditions, and technology.
In Australia, the greenhouse gas emission reductions currently afforded by locally produced ethanol compared to the equivalent volume of petrol are estimated to be between 20% to 60%. The range arises partly because Australia’s three ethanol plants use different feedstocks: waste starch originating from wheat, processed sorghum, and molasses originating from sugar cane. The whole life cycle of ethanol matters when adding up emissions reductions.
Comparisons with the USA and Brazil
In the USA, ethanol is produced mainly from cornstarch and in Brazil from sugarcane-derived sucrose. The 2012 ethanol production figures are orders of magnitude higher than in Australia. The USA produces about 50GL of ethanol and Brazil about 23GL each year.
Studies place the greenhouse gas emission reduction of ethanol compared to equivalent volume of petrol at 19% in the case of corn (US average) and at up to 87% for sugarcane ethanol on a full life cycle basis, when best practices are employed in Brazil. The Brazilian case study shows that sugarcane ethanol is not only more environmentally friendly, but is economically more competitive.
The Brazilian industry has achieved such success because it has the land and technology to produce ethanol cheaply and efficiently and has been supported by the government over decades despite economic and political fluctuations. Mandating ethanol use began in 1975, after the oil crisis. The government guaranteed ethanol purchases, fixed petrol and at times ethanol prices, and afforded low-interest loans for agro-industrial ethanol refineries. These measures can be considered to be market distortions, but they have led to the development of a significant new agricultural and manufacturing industry base.
Is increasing ethanol production good policy for Australia?
The answer is: “it depends”.
Based on the experience from abroad and in Australia, ethanol is a proven and relatively inexpensive platform for curbing greenhouse gas emissions in transportation. But it is not free and not without its challenges.
A larger and more environmentally friendly ethanol industry in Australia will not be realised without producers, retailers, consumers and government aligning to expand the market and to ensure this is done in a sustainable manner.
Whether it is good or bad policy to boost the ethanol industry in Australia hinges on the factors that motivate this expansion. Reducing greenhouse gas emissions will not be the only factor at play. Others include regional development, diversifying fuel supply, creating new industries, and reducing dependence on foreign oil.
But improving the greenhouse gas credentials of the fuel industry will not be guaranteed without policies that foster emissions reductions.