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BIOFUEL MANDATES ARE A COSTLY JOKE As all Australian businesses seek to steel themselves for another year of financial and trading uncertainty, the business risk posed by unjustified or unnecessary government regulation is greatly heightened. The continued operation of the biofuels mandates in NSW and Queensland is a case in point. By ACAPMA CEO Mark McKenzie. T he NSW biofuels mandate was introduced in October 2007 and requires fuel retailers to achieve an ethanol substitution level of six per cent of all motor spirit sold, which equates to six out of every 10 petrol customers being required to buy E10. The Queensland biofuels mandate was introduced in January 2017 and requires fuel retailers to achieve an ethanol substitution level of four per cent of all RULP sold, which roughly equates to three out of every 10 customers being required to buy E10. Despite having been in operation for more than 13 years, the current state-wide ethanol in petrol substitution level in NSW is just 2.4 per cent. In Queensland, where the biofuels mandate is now in its fourth year of operation, the state-wide substitution level is 2.5 per cent. In other words, both mandates have failed to deliver the desired level of substitution. There are two simple reasons for this failure. First, both mandates were introduced solely for political reasons and were advanced despite the absence of any substantial public good or economic benefit. In NSW, the laws were introduced after extensive lobbying by the state’s sole ethanol producer, which operated in a marginal NSW seat and was a major donor to the state government. In Queensland, the laws were introduced at the request of Katter’s Australian Party at a time when the state government needed the support of this party to maintain a workable majority in the parliament. Secondly, the laws put the liability on the wrong party in the fuel transaction. The liability for the biofuels mandate is placed on the fuel retailers that sell fuel, not the customers who buy it. In other words, the laws forced fuel retailers to spend substantial sums of money investing in the infrastructure required to store and sell E10, in the hope that consumers might choose to buy it. Having now experienced the long-term operation of the mandates in both states, it’s clear most motorists simply don’t want to put E10 in their cars. Yet, both governments continue to impose compliance costs on fuel retailers in the pursuit of an obviously unrealistic substitution target. In one recent case, a small family business operating two branded sites in the greater Brisbane area spent $2 million upgrading one of its retail sites to provide the underground storage needed to retail E10. While it’s fair to say the specific E10 infrastructure was a proportion of the total expenditure, the catalyst for the project was a requirement to comply with the E10 mandate, with the business having previously secured exemptions until such time as the works could be afforded. The site was reopened to the public and began selling E10 in mid-June 2020. Following the completion of its first full TO PAGE 58 ACAPMA PETROLEUM INDUSTRY REPORT JAN/FEB, 2021 CONVENIENCE WORLD 57