News

Ethanol Labelling and Limits

11.4.2003

The Australian Automobile Association has indicated it would support moves by the Government on ethanol as reported in the media today but with some reservations – including that of cost.

AAA Executive Director, Lauchlan McIntosh, said reports that the Government was planning to impose a 10 percent limit on ethanol content, introduce compulsory labelling and not mandate ethanol content in petrol would be supported.

He warned, however, that the AAA wanted a guarantee that ethanol content in petrol would not increase fuel prices to motorists.

 "We know that Treasury estimates that without the current 0.38 cents per litre subsidy being paid to local ethanol producers, retail petrol prices will rise by ¾ of a cent for every 1 percent of ethanol in the fuel. In other words 2 percent ethanol content would increase retail petrol prices by 1.5 cents per litre and 3 percent by 2.25 cents per litre. Just as a 1.5 cent per litre increase was not acceptable when the GST was introduced, it would not be acceptable now," Mr. McIntosh said.

"Our own work shows that without the 0.38 cents per litre subsidy for ethanol, world oil prices would have to reach $US 92 per barrel before ethanol production costs match that of petrol.

"We can see little or no benefit from ethanol for sugar producers. The problem for the sugar industry is its lack of viability at current world prices. It's difficult to imagine ethanol producers being willing to pay more than the world price – in fact under the current subsidy arrangements they could import sugar product to produce ethanol and still receive the 0.38 cent per litre subsidy.

"AAA also has concerns about suggestions that the Government may spend taxpayer's money to try to convince motorists to use fuel containing ethanol. Motorists are taxpayers and just as they should not be asked to subsidise the ethanol industry directly through higher fuel prices or subsidies, they should not be expected to fund an advertising campaign that benefits that industry," Mr. McIntosh said.

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