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Federal Minister for the Environment and Heritage
The Hon Dr David Kemp, MP

Press Conference - Stamford Plaza, Brisbane
Friday, 11 April 2003

Subject: 10 pc cap on ethanol announcement

Dr Kemp:
I'll make an introductory comment and then we'll take questions.

Today I'm releasing the first report of the commonwealth's scientific testing on the effects of high ethanol blends in petrol on automobiles. The effects of this scientific work show, for the first time, that 20 per cent ethanol blends in petrol can have adverse effects, particularly on the older cars in the motor vehicle fleet.

We've noticed operability problems, hesitations in starting, but more particularly we've seen that the 20 per cent ethanol blends can have an effect in corroding important components of the engine, particularly hoses and elastromeric* parts in the engine.

These effects of the 20 per cent blends are potentially very damaging to these engines, and this report for the first time now provides a sound scientific basis for the setting of a cap on the level of ethanol that will be permitted in petrol blends.

Today I'm announcing that the commonwealth is moving to set a 10 per cent cap on ethanol blends in petrol. This is based on the results of the scientific work that we've been doing that shows that ethanol, at high levels, can have an adverse effect on older cars in the motor vehicle fleet.

We'll be continuing with the scientific testing because we need to know the full effects of these blends on the newer vehicles in the fleet. So far the testing has not identified significant impacts on the newer vehicles in the fleet, but there may be impacts that are adverse on these newer vehicles over time. And so the scientific testing program is going to continue to see whether or not these adverse effects on newer vehicles do emerge over time.

The result of the setting of this cap will be that consumers can have confidence that the ethanol blends that they buy at the pump will be compatible with their cars. All automobile manufacturers, all major manufacturers, have indicated that they are quite prepared to warrant the performance of their engines with the 10 per cent blends.

So I'm very pleased that we're able to put in place this additional assurance to consumers that ethanol blends in petrol will be safe for their vehicles. This follows on an announcement that I made earlier on that compulsory labelling would be legislated by the commonwealth so that consumers can know what level of ethanol will be in their petrol.

Now this still remains important despite the setting of the cap. And the reason that it remains important is because there are clearly some uses for ethanol blends which are quite inappropriate.

Obviously ethanol blends should never be used in aircraft. It's also clear that even at 10 per cent ethanol blends can have some effects on the operation of small two stroke motors. So even with the 10 per cent cap, we believe it's important that there should be labelling as well at the pump.

Last December I called on all the states and territories to use their powers which they have to impose this compulsory labelling at the pump. I regret to say that most of the states and territories have not done so.

I previously announced therefore that the commonwealth will undertake this labelling, and today I'm announcing that we will do so through amendments to the fuel standards quality... Fuel Quality Standards Act.

Is 10 per cent enough to kick-start a large ethanol industry for the sugar growers?

Dr Kemp:
Well this is not a decision which is taken with a particular industry in mind. We obviously want to reassure people that ethanol blends that they are buying at the pump are safe. It is part of a series of announcements that the Commonwealth Government will be making in relation to ethanol. Some of those announcements are budgetary announcements and they can only be made in the budget context.

It would be silly, would it not, to import ethanol? So obviously your hope is that we can kick-start a proper ethanol industry here?

Dr Kemp:
Well what I'm hoping is that these decisions will be a very significant step forward in reassuring the motoring public that the petrol blends they're buying that contain ethanol are safe for their motor vehicles. There's been an erosion over recent months of consumer confidence in ethanol blends, that's quite clear.

We believe that as a result of the announcements today, and when they're implemented, consumers will have the opportunity to buy ethanol blends in petrol, knowing that they're making a contribution to both cleaner air and also using a fuel which is warranted by vehicle manufacturers to be safe in their engines.

But the oil industry has been blaming the Federal Government for not taking action earlier. BP had to cancel its BP ethanol trial. Why is it taking the Federal Government so long to make this announcement?

Dr Kemp:
Well many people have said that there is no harm from certain blends. But the fact is there's been no scientific evidence on this until the commonwealth has produced it.

We're not about to introduce a fuel standard which is not soundly based on scientific evidence. And we've now got that evidence. And that evidence is in the report which I'm releasing today. And what that evidence shows is that ethanol blends above 10 per cent can have adverse effects, particularly on the older vehicles in the motor vehicle fleet.

So for the first time now we've got a scientific basis on which a national fuel standard for ethanol can be implemented.

Do you expect the oil companies to actually lift their... the ethanol in all petrol to 10 per cent, or has this got nothing to do with the petrol companies, it's just a maximum level that the government is wanting to regulate on petrol?

Dr Kemp:
Well this is a maximum level for ethanol in petrol. But I would hope on the basis of these decisions that the oil companies will continue to make it clear that ethanol is a desirable and suitable additive to petrol. As a component in petrol it can have significant benefits, and it is more importantly safe in the engines of the automobiles manufactured by all the major manufacturers. They've said they'll warrant their engines at a blend of this level. And so consumers have got a basis of confidence.

And I would hope that the criticism that has been made of ethanol and the ethanol industry by certain voices in the public debate over the last few months, that has eroded confidence in ethanol, will now cease. And we will have those people coming out and saying that they support these decisions and that they believe that these decisions are a significant contribution to restoring public confidence in ethanol.

In view of the fact that ethanol now attracts a same level of excise as petrol, what do you think will happen, or how are you going to fund the introduction of a greater level of ethanol in petrol? Are you expecting the consumer to pay for it or the petrol companies to absorb it or...?

Dr Kemp:
Well at present there are arrangements in place for the support of the ethanol industry. For the longer term any decisions must await on the budget.

One of those arrangements is a 38 cent a litre subsidy for ethanol producers. That ends in September. Do you really think that this announcement is consistent with getting rid of that subsidy by the end of the year?

Dr Kemp:
No, all that I'm saying today is that there are two announcements being made which are significant contributions to rebuilding public confidence in ethanol. There will be further decisions that will be announced in the budget, and I won't be pre-empting those budgetary announcements.

Thanks very much.


Commonwealth of Australia