BIOFUELS – AT WHAT COST?

This report by the International Institute for Sustainable Development (IISD) examines the extent and cost-effectiveness of government support for the ethanol and biodiesel industries in Australia. It analyzes various subsidies, including excise tax rebates, capital grants, and research funding, concluding that the level of assistance is high relative to other industries and often fails to deliver cost-effective greenhouse gas reductions or energy security compared to alternative policy options.

• In the 2006–07 financial year, Australian federal and state governments provided approximately A$ 95 million in total transfers to support biofuels, with A$ 55 million allocated to ethanol and A$ 40 million to biodiesel.
• The biofuel industry in Australia is heavily subsidized compared to other sectors; effective rates of assistance (ERAs) for biofuels were over 60 per cent for biodiesel and over 100 per cent for ethanol, while the average ERA for agriculture and manufacturing was around five per cent.
• The primary form of support is an excise tax rebate that exactly offsets the A$ 0.38143 per litre fuel excise duty for domestic producers. This rebate is not available for imported ethanol, effectively creating a barrier to imports.
• The federal government provided A$ 37.6 million in one-off capital grants through the Biofuels Capital Grants Program in 2004, supporting three ethanol and four biodiesel projects.
• Subsidizing biofuels is an inefficient method for reducing greenhouse gas emissions. The cost of avoiding one tonne of CO2-equivalent through wheat-based ethanol is at least A$ 680, whereas the same reduction could be achieved much more cheaply by purchasing offsets on the Chicago or European Climate Exchanges.
• The use of first-generation biofuels may have negative economic impacts on the agricultural sector, as mandatory blending could increase domestic grain prices by over 25 per cent, reducing the international competitiveness of the livestock industry.
• The long-term viability of the industry is uncertain, as evidenced by the 2007 downturn where several biodiesel plants suspended production due to high feedstock prices and some ethanol projects were cancelled.
• While the federal government has resisted national blending mandates, the states of New South Wales and Queensland established requirements for petrol to contain at least 10 per cent and 5 per cent ethanol, respectively, by 2011.

APA

Quirke, D., Steenblik, R., & Warner, B. (2008). BIOFUELS – AT WHAT COST? International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/biofuels_subsidies_aus.pdf

Chicago

Quirke, Derek, Ronald Steenblik, and Bob Warner. BIOFUELS – AT WHAT COST? International Institute for Sustainable Development, 2008. https://www.iisd.org/system/files/publications/biofuels_subsidies_aus.pdf.

Wikipedia

{{cite report |last1=Quirke |first1=Derek |last2=Steenblik |first2=Ronald |last3=Warner |first3=Bob |title=BIOFUELS – AT WHAT COST? |publisher=International Institute for Sustainable Development |date=April 2008 |url=https://www.iisd.org/system/files/publications/biofuels_subsidies_aus.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{quirke2008biofuels, author = {Quirke, Derek and Steenblik, Ronald and Warner, Bob}, title = {{BIOFUELS – AT WHAT COST?}}, institution = {International Institute for Sustainable Development}, year = {2008}, month = apr, url = {https://www.iisd.org/system/files/publications/biofuels_subsidies_aus.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }