Blending plant-based fuel to reduce greenhouse gas emissions from transport accepted as too costly.

DETERMINATION to scrap the biofuels mandate, which would have required carbon-neutral biofuels to be added to petrol and diesel, has been welcomed by industry involvers and appears to take the pressure of an operation looking into having to make it work.

The Motor Industry Association, which speaks for almost all new vehicle distributors, and the Motor Trade Association, which acts for repairers and the like, have expressed relief about Government’s determination to drop a mandatory biofuels sales obligation that, if sustained, would have seen biofuel blends start to be supplied at petrol stations from April 1, 2024.

There is no comment from Channel Infrastructure, the company formerly known as Refining NZ, which almost a year ago highlighted that the Goverrnment’s plan would require Marsden Point's big oil tanks and Auckland pipeline – which meant it would have been more efficient to go straight to high-tech second-generation biofuels anyway.

Biofuels are defined as being any fuel produced from biological matter or 'biomass'. For New Zealand implementation, it was envisaged this could well include agricultural and forestry crops and residues, organic by-products, and waste.

 The concept has been to blend these with petrol and diesel to reduce greenhouse gas emissions from transport.

Currently, the use of biofuels in New Zealand is very low and there is limited domestic production, but the car industry has been evaluating biofuels for years – to point of announcing some engines as being biofuel-compliant – and the Ministry of Business, Innovation and Employment has been an enthusiastic proponent.

One plus, it argued, was that they are less dependent on new vehicles (for example, electric vehicles or hydrogen fuel cell vehicles) because they can be used in existing internal combustion engine vehicles. The use of biofuels would help reduce emissions and contribute towards meeting national climate targets, MBIE has said.

The mandate was estimated to prevent one million tonnes of emissions from entering the atmosphere within the first two years of its effect. 

The Sustainable Biofuels Obligation Bill, the first step of defining the mandate for the country's cars, trucks, trains and ships, was introduced to Parliament in November 2022, and had its first reading then, but nothing has resolved since. 

Although it conceded today that biofuels will always be an option for some vehicle users, especially heavy vehicles, as NZ moves to a lower CO2 intensive transport system, the new vehicle industry has been dubious about biofuels. 

MIA chief executive David Crawford reiterated today his members’ view that a mandatory obligation with the stated purpose of reducing CO2 emissions is not needed, given the transition to an ever increasing electrified fleet is reducing emissions at a fast rate.

The MIA noted that sales of vehicles with some form of electrification to fully electric vehicles grew from 14 percent in 2021 to 25 percent in 2022.

“The increase in sales of electrified vehicles in 2022 led to a big reduction in the average sales weighted CO2 emissions rate from the light vehicle fleet, dropping from 187.1 grams (of) CO2 (per) kilometre in 2021 to 167 grams CO2/kilometre in 2022.”

That’s a 10.7 percent drop in one year, the largest reduction by far since the MIA started tracking CO2 emission reductions in 2006, the MIA’s spokesman said.

‘Biofuels are expensive to produce and the MIA welcomes the Government’s decision to not proceed with a mandatory biofuel sales obligation,” Crawford said.

“This will help to keep motoring costs down at a time when New Zealand is facing strong inflationary pressures across our economy.”

In earlier comment, the MTA described the Government’s decision, announced by freshly-installed Prime Minister Chris Hipkins, as being a win for cash-short Kiwis.

Hipkins also acknowledged the mandate would have increased the price of fuel.

“Given the pressure on households that’s not something I’m prepared to do,” he said.

The effect on households was an issue MTA foreshadowed in its submission on the Sustainable Biofuels Obligation Bill last month.

“The obligation, and its implications for the importation of biofuels, at least in the short to medium term, will increase the fuelling costs motorists face. Budget constrained households will be disproportionately affected,” MTA wrote in the submission.

“Such households are more likely to already experience higher fuelling costs as they predominantly own older, less fuel-efficient vehicles compared with the average age of New Zealand’s fleet.

“The obligation is estimated to increase fuel prices by 5 to 10 cents per litre – adding further strain to budget-constrained households.

“Reduced energy affordability diminishes New Zealand’s public ability – more specifically the ability of low-income and budget-constrained households, to participate in society, for instance, their ability to commute to work and school affordably.”

Notwithstanding the decision, MTA said it recognises the need for pragmatic action to address climate change and that the sector has a key role to play to achieve targets. 

It wants to ensure the industry can innovate and diversify in a way that New Zealand can leverage all available low emission technologies and work towards a ‘net’ zero emissions future. 

Channel Infrastructure’s thoughts on biofuels were expressed in April, 2022, just after its board, shareholders and the major fuel companies that own it agreed to shut down the Marsden Point refinery and lay off most of its staff.

Coming into effect at the same time as the oil and gas crisis caused by Russia's invasion of Ukraine, the closure sparked concern, still ongoing, about NZ's fuel security.

In the wake of Marsden Point, NZ's only refinery, having stopped processing crude oil, Channel Infrastructure had said it would not run first-generation biofuels like ethanol and biodiesel down its pipe either. 

However, the transition to it becoming as it is now, a holding facility for imported oil and fuels, the company said it would be looking to repurpose its infrastructure for biofuels.

While it was still awaiting detail from Government,  Channel said it knew it was facing infrastructure requirements, with biofuels requiring additional tanks and facilities for blending.

An important part of being able to deliver the emissions reduction was having adequate time to plan and prepare for these future requirements, the company’s chief executive, Naomi James, had said.

"First-generation biofuels, such as ethanol, are only a short-term fix because they can only be blended in small volumes, and cannot be distributed via the pipeline to Auckland due to the risk of contamination of jet fuel supply, meaning that these fuels will need to be distributed via truck and road to the Auckland market,” she commented then. 

"… and we don’t want an unintended consequence of the biofuels mandate being more trucks on the road, with the emissions and safety impacts that come with that." 

That meant skipping straight to second-generation or “drop-in” biofuels, which included sustainable aviation fuel, and could be blended in much higher volumes or even wholly substitute for fossil fuels. These drop-in biofuels could be sent down the pipeline from Marsden Point to Auckland, at one tenth of the emissions of equivalent road transport.

The catch? Timing. While second generation fuels were already being produced elsewhere in the world, James said New Zealand was still some way off this. 

Work was under way. The Ministry for Primary Industries' Wood Fibres Futures Study has been looking at biofuel feedstocks such as forestry and timber mill waste, and the Air NZ Sustainable Aviation Fuel process has been assessing interest in domestic manufacture of biofuels.  

Channel was also conducting a study with Fortescue Future Industries exploring whether hydrogen production could be part of the future for Marsden Point.

The biofuels decision comes in the same timeframe as local circulation of an international report from electric carmakers, Polestar and Rivian, which suggests the car industry will overshoot the InterGovernmental Panel on Climate Change (IPCC) climate target by at least 75 per cent by 2050.

IPCC is the scientific group assembled by the United Nations to monitor and assess all global science related to climate change.

Public data was used to compile the report, compiled by the makers with management consultant Kearney, which states if no further action is done to reduce carbon dioxide emissions, the planet will continue to warm past the 1.5 degrees Celcius mark halfway through this century and ultimately lead to a “climate catastrophe”.

Considering cars currently emit approximately 5.5 gigatonnes of CO2 per year, it means the car industry will have spent its 500 gigatonne CO2 budget by around 2035, 15 years short of its goal. If it continues, it would overshoot the budget by 75 per cent.

 Completely switching to electric cars overnight won’t be enough to slow emissions down either as most of the world’s electricity needed to power them is still produced by fossil fuels.

The report suggests the energy grid would need to increase its use of renewable energy like solar, hydro, and wind power, and it would need to significantly reduce greenhouse gas emissions during car manufacturing. 

Both Polestar and Rivian are calling on all carmakers to accelerate the transition to EVs through manufacturing investment and by placing a firm end date on new fossil fuel car sales globally, increase renewable energy supply to electrical grids globally, and to decarbonise the manufacturing supply chains for EVs by switching to low carbon materials.