The following contains excerpts from a paper outlining the case for a national development strategy in Australia to build a biofuels industry that would make the country a biofuels superpower within 10 years. The paper was written by Professor John A. Mathews from Macquarie University’s Graduate School of Management in Sydney.

The project would call for investment of $7.5 billion over 10 years to build 60 advanced biorefineries that would produce 6 billion litres of ethanol and 4.5 billion litres of biodiesel by 2017. The income generated from these investments would be of the order of $10 billion per year.

These biofuels could reach one fifth of petrofuel consumption (resulting in E20 and B20 blends) and create an export industry worth $4.5 billion each year. As such, a biofuels industry based initially on wheat and sugar would double the size of these industries.

Such a biofuels project would finally wean Australia off its obsession with fossil fuels by:

› creating more than 100,000 jobs in the rural sector, thus underpinning Australia’s social structure
› revitalizing the sugarcane and wheat industries without imposing price pressures on existing feed-using industries such as pork and beef
› solving the looming catastrophe of balance of payments crisis imposed by fossil fuel imports
› drastically reducing Australia’s greenhouse gas emissions footprint
› moving towards cleaning the air in our cities creating a ‘nation building’ project comparable to the Snowy Mountains scheme of the immediate post-war years, by extending Australia’s fuel-crop growing and processing towards the arid interior (for biodiesel) as well as into the tropical far north (for cane-fed ethanol and oil palm biodiesel) and building the infrastructure needed.

The project would mesh with worldwide trends towards biofuels and would tap into fast-growing markets for biofuels in the Asia-Pacific region, particularly from Japan, China and Korea.

It would mesh with the shift worldwide towards a bioeconomy as successor to the fossil fuel economy that has created a planetary crisis in the form of global warming. The project would turn Australia from the world’s worst emitter of per capita greenhouse gas emissions to one of the pioneers of the new bioeconomy.

The missing ingredient that’s needed is the imagination to make the project a reality.

Lucky country goes missing in revolution
Australia – the land of infinite sunshine, vast agricultural resources, reliable monsoonal rains across the entire northern tropical belt, in other words, a land made for biofuels – is nowhere to be found in the exciting biofuelled revolution.

Its sugar industry, which should be converting vast cane fields to ethanol use, is in fact shrinking, with the Federal Government actually paying sugar farmers to leave the industry. Its oil seeds industry has barely awoken to the possibilities for biodiesel.

Wholly unique features such as mallee root farms, which can supply oil for biodiesel as well as anti-salinity and carbon sequestration ground cover, potentially rolling back the desert, languish for lack of any official support.

The Federal Government makes ludicrous gestures such as a ‘biofuels target’ of 350 million litres by 2010 (just one percent of current fuels consumption). This is followed up with a confusing mix of fuel excise allowances and burdens regarding biofuels that generate no clear advantages for home-grown green fuels over imported fossil fuels from the Middle East.

The efforts of independent petrol retail chains in Queensland and elsewhere to market ethanol blends are frustrated by arbitrary imposition of import tariffs.

Meanwhile, a vicious anti-ethanol PR campaign financed by the largely foreign-owned oil industry in Australia is allowed to run rampant.

With the government’s relentless focus on fossil fuels at the expense of everything else, and the constant refrain over the past 10 years that ‘global warming is just a theory’ while building the economy around fossil fuel intensive exports like coal and aluminium, the opportunities to use our sugarcane fields to produce bioethanol and to end our catastrophic dependence on oil imports, have been squandered.

Poisoning the politics of ethanol
The politics of ethanol have been poisoned by irresponsible interventions in the market to favour a single producer. The foreign-owned automotive companies have been allowed to claim that ethanol damages their cars – while shipping more or less the same cars to Brazil where they run on blends of anything from 5 percent to 85 percent ethanol.

The sugarcane industry is allowed to run down, with the government paying farmers with public funds to leave the industry, at the very time when it should be expanding to cope with future biofuel demand. And so the sorry story goes on, and on.

It is time to put all that behind us – time for a fresh start with biofuels.

The switch from coal to biofuels as one of the country’s largest export industries could be accomplished in a decade. The targets proposed could be achieved without any deforestation of virgin lands being bought under cultivation, or new irrigation schemes drawing on scarce water supplies.

The interim goals could be achieved simply by diverting crops to new market needs and expanding existing cultivating areas, in accordance with standard microeconomics principles – driven by the necessary market-creating steps of mandating of blending targets by government.

This is such an attractive option that there is every likelihood that the Labor Party Opposition will commit to such an interim target of 10 percent biofuel blends by 2012 before this year’s federal election. If it does so, then it is also likely that the Howard coalition government will follow suit. And that would be good news for biofuels and for rural communities in Australia.

Farmers can become key players
An ambitious biofuels program for Australia achieves three goals simultaneously. It is a national economic development strategy, with a focus on reviving rural communities – not through handouts, but by giving farmers a chance to join in and become key players in technologically-advanced bioenergy activities.

Secondly, it is a prime means of dealing with Australia’s spiralling cost of oil imports, where the deficit of imports over exports now exceeds $10 billion per year and accounts for no less than 60 percent of our overall balance of payments deficit – with no end in sight (as pointed out by Bob Gordon of Renewable Fuels Australia).

The key that unlocks the potential of renewable energy sources for development is – as discovered by Brazil – flex-fuel vehicles. It works like this: Flex-fuel vehicles give motorists a choice – fill up with ethanol or with petrol, depending on the price and personal preference.

This choice engenders confidence, and overcomes any lingering doubts about ethanol. This builds consumer demand for ethanol, so bringing competition to the petrol forecourt. The oil companies can swim with the tide, and supply ethanol themselves, or they can go against it, and allow independents to supply the ethanol the motorists demand.

Either way, an ethanol market is created. This then leads to realistic policies for supplying ethanol – either through imports (probably from Brazil) or through local production that gets a kick start mandated by popular demand. In the tropical parts of the world, such as in northern Australia, there will be sugarcane and starch-rich crops such as cassava providing the feedstocks.

In more temperate climates, it will be grains such as wheat, sorghum, corn and new varieties not yet seriously tested, such as sweet sorghum. The bioreactors built will be at the leading edge of technology, to capture latecomer advantages.

The key to latecomer industrialising success is to be able to utilise the inventions of the developed world in innovative ways that capture the low-cost advantages of the developer as it seeks to catch up.

Job creation to boost rural areas
One of the attractive features of biofuels is that they create substantial jobs, not just in the construction of biorefineries and their operation, but in the whole value chain from farm to refinery to transport and distribution. And the majority of these jobs are created in rural areas.

Biofuels represent a real shot in the arm for otherwise distressed rural areas. They are offered nothing by fossil fuel dependence, which has contributed substantially over the course of the 20th century to running down rural and regional centres. Biofuels promise to reverse this trend.

Stepping towards a new bioeconomy
Biofuels represent the first step on a clean technology development trajectory. As such, biofuels are not an end in themselves, but a step towards a new bioeconomy. A serious program to promote biofuels will necessarily lead a country along a trajectory that will involve many more biofuel innovations and clean technologies.

Brazil for example started with ethanol, and now since 2005 it has launched a biodiesel program that promises to rapidly take the country to leadership in biodiesel. All countries that come late to the process – like Australia – can expect to pass through the same two phases, probably in more concentrated form.

Within the next decade, a third phase can be expected to become significant, namely the use of biomass (such as through forest plantations, or municipal waste) as feedstock for general bioreactors.

Tax fossil fuels – not biofuels
A fresh look at the biofuels industry would have to be accompanied by a fresh look at the taxation of all fuels, in light of the looming carbon pricing that is widely perceived to be needed to combat greenhouse gas emissions. From such a perspective, taxes should be imposed on fossil fuels and not on biofuels, provided the biofuels can demonstrate their green credentials. But none of these issues are currently taken into account in Australia.

As a laggard in biofuels, Australia now has the chance to enter the new industry as a latecomer, utilising latecomer advantages such as leapfrogging to the most advanced technological level.

Australia has every opportunity to make its mark in this new industry. All that is needed is vision and imagination.

© 2010 BBI International