Ron Boswell's ethanol-clouded logic on renewables

Ron Boswell, Queensland National Party senator, seems to have made it his life’s mission to have the Renewable Energy Target dismantled. He has been leading the charge within the Coalition not just to water-it-down but have it abolished completely. But what is rather peculiar is that he has been a vocal supporter of another renewable energy support scheme over many years, the Ethanol Production Grants Scheme.  

Indeed, back in 2006 he described the RET as a "successful" policy. Not content with the lacklustre expansion of ethanol through the Production Grants subsidy scheme, he actually advocated expanding the RET to biofuels in a speech to Parliament:

Over the past two years I have been advocating a volumetric biofuel obligation system similar to that which currently exists for renewable energy. The scheme … the mandatory renewable energy target ... compels the major electricity suppliers to purchase a percentage of green electricity to sell to their customers. I believe this existing scheme should be expanded to include renewable transport fuel. It would be an enforceable mechanism to compel the oil majors to purchase an increasing percentage of their fuel supplies from renewable sources ... Next year it could be 0.25 per cent of their total sales … and increase by 0.5 per cent each year until the companies are purchasing 10 per cent of their total sales as biofuels.

Over the years Boswell has repeatedly lauded the greenhouse gas emission reduction benefits of what he calls “clean and green” ethanol.

He has often used them as a justification for ongoing government subsidies which began back in 2002 (which, by the way, imported ethanol is strangely ineligible for) and averaged $105 million per annum over 2008-09 to 2012-13. He was one of the most outspoken critics of the oil majors for their lack of support for the Howard government’s non-legislated 350 megalitre biofuel target. Reaching the target according to Boswell would, “be a significant achievement by the government and reflect the maturity of the transport market and consumers in their acceptance of fuel that significantly reduces greenhouse gas emissions".

In addition, Boswell criticised the Labor Party for not making biofuels a focus of their climate change policies stating:

He’s also urged motorists to use ethanol blended fuel to do their bit to fight climate change,

So how does the Boswell’s ethanol subsidy compare relative to the Renewable Energy Target. It’s an interesting comparison to make because both provide government support equal to about half the production cost.

Now, a few days ago the Bureau of Resource and Energy Economics released a study assessing the costs and benefits of the Ethanol Production Grants program. The table below extracted from its report summarises the findings.

Overall, you’d have to say it doesn’t look like particularly good value. With a cost of $274 per tonne of CO2 abatement, the ethanol subsidy delivers abatement at about 400-600 per cent greater cost than the Renewable Energy Target. Also, in spite of providing a subsidy equal to about half the production cost of ethanol – the tiny number of jobs created and overall abatement are close to a waste of time. 

Source: Bureau of Resource and Energy Economics (2014)

But it gets worse.

The cost of abatement from the ethanol subsidy is actually, in fact, likely to lie around $750 per tonne of CO2 avoided or 1200-1800 per cent the cost of the RET.

You see, BREE assumed that there were no emissions involved in producing the ethanol and it was effectively carbon neutral. But ethanol is very far from carbon neutral because of all the fossil fuels and fertiliser involved in growing the feedstocks and fermenting them into a liquid fuel. Based on estimates from the 2005 Australian Government Biofuels Taskforce for molasses, wheat starch and sorghum feedstocks, the BREE report overestimated the abatement from use of ethanol by about 300 per cent. 

The existing ethanol subsidy scheme over its 10 years of operation has only managed to allow ethanol to gain 1 per cent of the transport fuel market and, in fact, in the last two years production has declined. In addition, the number of ethanol production facilities – three – hasn’t changed over the life of the scheme. Also, there’s been no material improvement in the production costs of ethanol producers (over the same time solar PV’s costs have dropped by 75 per cent). Given this it seems for Boswell to achieve his prized target of 10 per cent of fuel from biofuels it would need a vastly greater subsidy than the already extremely poor value of one tonne of CO2 for every $750 in government subsidies.

Maybe it’s time for Boswell to consider that other forms of renewable energy represent vastly better value than biofuels?