Hon David Parker
Minister of Energy
Minister responsible for Climate Change issues

24 April 2007

Speech notes

Biofuels' potential in New Zealand
Address to the EECA Biofuels Conference
9am, Soundings Theatre, Te Papa
Wellington

I am delighted to be here today at the third EECA Biofuels Conference.

Biofuels will be covered from a number of perspectives today and I would like to set the scene by outlining the opportunities Government sees for biofuels.

There are three areas I would like to concentrate on this morning:

• Why biofuels
• What the Government is doing about biofuels, and
• The future of biofuels

Late last year Government released the draft New Zealand Energy Strategy and a draft Energy Efficiency and Conservation Strategy, along with several discussion documents related to climate change. These documents provide a basis for a robust discussion about our energy future. In relation to transport they highlight concerns around climate change, energy security and the end of cheap oil.

Reversing the upward trend of transport emissions will be a challenge. Under a business-as-usual scenario, greenhouse gas emissions from transport are projected to increase by 35 percent, by 2030.

In New Zealand we have a relatively high level of car ownership, low use of public transport (although this is increasing), dispersed cities and rugged terrain.

These circumstances provide opportunities and challenges. Transformation is required in every sector producing greenhouse gases.

That applies not just to transport, but across our economy. I would like to take this opportunity to speak for a moment about the broader challenge of reducing our greenhouse gas emissions.

I believe New Zealanders take the issue of climate change seriously, and they are keen to be part of the solution.

Over 3000 submissions were made on the energy, land use and emissions pricing proposals. Not just environmental groups but also leading business groups have said that the cost of greenhouse gas emissions ought to be met by those who emit. Most support emissions trading as the means to achieve this.
The clear message we've received is that all sectors can and should do their fair share, bearing in mind it will be easier for some sectors than for others.

Work is progressing on the design options for an economy-wide emissions trading scheme – a "cap and trade" system - covering all greenhouse gases.

Cabinet will consider recommendations on emissions trading options over the coming months.

We believe an emissions trading scheme must be seriously considered for New Zealand – not only because it is a flexible way for business to find the least cost means of reducing their carbon footprint, but also because it gives greater certainty than a carbon tax, that we will reduce emissions. And that, after all, is the point.

Reducing emissions and curbing our dependence on oil in the transport sector specifically requires a range of tools, not just a price on emissions.

Strategies to achieve this are set out in the draft Energy Strategy and the draft Energy Efficiency and Conservation Strategy discussion documents. There is considerable scope for improvements in vehicle efficiency, which will significantly cut oil usage and emissions. But fuel substitution is also necessary. Alternatives to oil identified include electricity, hydrogen and biofuels.

All these options have significant promise. New Zealand's renewable electricity resources mean we are well placed to use vehicles powered by electricity in the future. But the alternative transport fuels with the most opportunity in the short-term for New Zealand are biofuels.

Biofuels have a number of advantages:
• Using them in place of existing fuels reduces overall CO2 emissions and reduces our reliance on oil imports – thereby improving fuel security
• Biofuels can utilise existing vehicles and infrastructure
• Domestic resources can be used to produce biofuels and they provide opportunities for economic development

To ensure the introduction of biofuels to the New Zealand market the Government is introducing a Biofuels Sales Obligation from April next year. This policy was developed throughout last year and as I am sure you are all aware, the Prime Minister announced the final details in February.

I was pleased to see some of the statements made by industry players following its announcement. I am confident that we will see not only biofuels blended in tradition fossil fuels, but also the development of a competitive domestic biofuels industry here in New Zealand.

The biofuels sales obligation is going to be further discussed in some detail later today, but I thought I would take time now to outline the key change made to the policy following last year's consultation.

Before I do that I would like to thank all those who made submissions last year or who have otherwise helped in the development of the policy. I also applaud the enthusiasm that has been shown for biofuels over the last few years. This has led us to where we are now.

As you all probably know, an obligation level of 2.25 percent for 2012 was initially presented to stakeholders for consultation last year. During that consultation it became apparent that a higher obligation level could stimulate greater domestic biofuel production. Government was also keen to see biofuels distribution infrastructure developed for both the petrol and diesel markets.

Accordingly the biofuels sales obligation level for 2012 was increased to 3.4 percent, with the levels for earlier years adjusted accordingly.

We expect that most, if not all, of the obligation can be reasonably met through domestic production, resulting in new plants and generating associated expertise and jobs.

Notwithstanding the increased obligation levels through 2012, I am keen to see sales of biofuels in New Zealand ultimately exceed those levels.

Attention has recently been drawn internationally to the potential competition between biofuel feedstocks and food sources. This is a significant issue but one where New Zealand has an advantage. Our likely biofuel sources don’t involve such trade-offs.
Further growth in biofuel use will probably require the employment of what are generally known as second-generation biofuel technologies. These technologies promise enhanced greenhouse gas reductions, an improved energy balance and the use of waste or by-product feedstocks.

Because of their potential environmental advantages the government is keen to see the potential of these technologies realised in New Zealand. We are not alone in this. All around the world, governments and the private sector are putting significant resources into developing second-generation biofuel technologies.

Already New Zealand is positioning itself as a leader in advanced biofuels and local companies lead biofuel innovation. Last year I drove a vehicle powered by a blend of biodiesel made locally from algae. Crown Research Institutes Scion and AgResearch teamed up early this year with the US-based Diversa Corporation. Initiatives like these could ultimately see a large proportion of New Zealand's entire vehicle fleet running on New Zealand-grown and manufactured biofuels.

It would also like to note the recent announcement that scientists at Lincoln University are about to begin a study funded by Chevron to look at biodiesel plant crops with the potential to be commercially farmed on marginal land, thereby creating a sustainable agricultural energy source.

To enable the significant uptake of biofuels in future it will be necessary to have a vehicle fleet that can use them. Government is right now considering policies to improve the quality and reduce the age of the New Zealand vehicle fleet. Biofuel compatibility is a factor in these considerations.

Turning back to the present, I would like to finish by saying that government is keen to work with all parts of industry to ensure a smooth introduction of biofuels into the New Zealand market.

Consumer confidence is a key factor. Government is working to ensure that consumers will be able to buy biofuels and biofuel blends with the same confidence that they buy petrol and diesel today.

To achieve this, appropriate regulations will be put in place to ensure the quality of biofuels and biofuel blends. Fuel will be tested to make sure it is adhering to these regulations.

In addition, information will be made available to consumers to inform them of biofuels, their advantages and any implications for fuel users.

As members of industry your role is critical. Now is the time for us to work closely together. I am confident that together we can make the most of these opportunities for the benefit of all New Zealanders.

Thank you

ends

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