Biofuels are any fuel produced from biomass of plant or animal origin, such as, agricultural and forestry crops and residues, agricultural by-products, and waste (excluding plastics waste made from crude oil).
The most common biofuels are bioethanol, which can be blended with petrol for use in cars, and biodiesel, which can be blended with diesel.
Biofuels can be grouped into conventional and advanced biofuels. Conventional biofuels have been used for many years and are made from agricultural crops.
Advanced biofuels are produced from agricultural and forestry residues, non-food crops such as grasses and algae, and industrial waste and residue streams. They have low CO2 emissions and cause zero or low indirect land use change.
Some of the advanced biofuels do not need to be blended with fossil fuels to be used in conventional vehicles and fuel infrastructure as they are chemically almost identical to fossil fuels. These biofuels are “drop-in” biofuels.
To encourage the production and use of biofuels the Government has agreed in principle to implement a biofuels mandate. It has directed officials to review the 2008 Biofuel Sales Obligation for reinstatement.
The Biofuel Sales Obligation was repealed in 2008 before it came into effect by the 5th National Government. This mandate would have obliged suppliers of petrol or diesel, in New Zealand, to also supply a minimum proportion of biofuels.
The biofuel proportion was initially 0.5% of a liable supplier’s petrol and diesel sales, rising to 2.5% over four years.
The officials review will:
- confirm that the 2008 Biofuel Sales Obligation will be of net benefit to New Zealand
- update the 2008 Biofuel Sales Obligation’s settings in light of the latest international biofuels developments and overseas policies.
Officials will complete their review to allow Cabinet to decide on the design of the mandate by April 2021.
Public consultation will follow over May–June 2021, allowing final decisions on the mandate in July 2021.
Should Cabinet agree to progress the mandate, the legislative process will follow.
Environmental benefits of a biofuels mandate
When fossil fuels are combusted in internal combustion engines they release all their ancient underground stored carbon into the atmosphere in the form of CO2. But when biofuels replace, some or all of the fossil fuels, the net amount of CO2 emitted reduces.
When the biomass the fuels are made from grow, they absorb CO2. Roughly the same amount of CO2 is released when the fuels are burnt. This means the lifecycle emissions of sustainable biofuels are typically much lower than fossil fuels.
Biofuels are carbon neutral apart from the emissions that are caused from producing and transporting them.
Current use of biofuels
New Zealand’s use of biofuels is low by international standards and we have developed little production capacity.
Liquid biofuels make up less than 0.1% of our total liquid fuel sales. This compares with about 4% globally.
Some countries, typically those with mandatory biofuels obligations or renewable transport fuels targets, have achieved higher shares, for instance, the share of biofuel in Sweden’s transport sector was 20%in 2017.
Finland plans to lift the share of biofuels blended in transport fuel from 13.5% now to 30% by 2030.
 Scion, ‘New Zealand Biofuels Roadmap Summary Report.
 IRENA (2019), Advanced biofuels. What holds them back?, International Renewable Energy Agency(external link), Abu Dhabi
 Ministry of Transport and Communications Finaland (2017), Renewable Energy in Transport until 2020 and Beyond(external link).
Reuters (2016) Finnish government lifts biofuel targets(external link)
Countries with biofuel targets
Bioethanol mandates requiring 2–27%of petrol sales to be bioethanol are common in the United States, Europe, Japan, South Korea, China, Canada, Queensland and New South Wales.
In New South Wales, the bioethanol mandate is 6% and in Queensland it is 4%.
Biodiesel mandates requiring 0.5-20% of diesel sales to be biodiesel are in place in the same countries.
In New South Wales, the biodiesel mandate is 5% and in Queensland it is 0.5%.
Where biofuels will come from if the mandate is introduced
As part of Te Uru Rākau’s work on developing the Forestry and Wood Processing Industry Information Plan, it is looking into the commercial opportunities associated with producing biofuels from woody biomass.
Current domestic biofuel production capacity is very small. If a biofuels mandate is introduced, in the first few years of implementation we expect that most of the biofuels, particularly biodiesel and more advanced drop-in biofuels will need to come from overseas.
North America, South America, Europe and Southeast Asia all have significant biofuels refineries.
Any mandate we put in place would have robust sustainability criteria to make sure only biofuels that are positive environmentally, economically and socially are permitted in New Zealand.
Internationally there have been examples where biofuel production has led to deforestation, loss of biodiversity, increased greenhouse gas emissions, and competition with water resources and food production and that’s not something we want here in New Zealand.
Will the mandate provide incentives for developing domestic biofuels domestic production capacity
It will depend on the production cost here and how it compares with those of overseas biofuels producers. Some countries provide financial incentives for biofuels production, such as credits or grants to biofuels producers, in addition to a biofuels mandate.
How biofuels will be sold
The fuel supply and retail markets will determine where biofuel is available and in what mixtures. The mandate is likely to simply oblige suppliers of petrol or diesel, to also supply a minimum proportion of biofuels in the overall mix of fuel they sell.
Cost of biofuels vs fossil fuels
Conventional bioethanol can be cost-competitive with petrol on a per-litre basis, but its energy content is about 50% lower than mineral petrol.
In the United States, the retail price of biodiesel in neat form is about 20 cents higher per litre than that of mineral diesel. The energy content of biodiesel is about 90% that of mineral diesel.
Risk of engine damage
Under the Engine Fuel Specifications Regulations 2011, bioethanol blend is limited to 10% biodiesel blend to 7%.
Conventional biofuels need to be blended, as there is a risk of engine damage when they are used in pure form, or at high blend level.
The advantage of drop-in biofuels is that they are chemically similar to fossil fuels and do not need to be blended with fossil fuels before use in conventional vehicles.
The Engine Fuel Specifications Regulations do not currently provide for these drop-in biofuels and will need to be reviewed before they are introduced to the New Zealand market.
Existing biofuels policies
The main policy incentives for biofuels in New Zealand are the New Zealand Emissions Trading Scheme (ETS), the excise tax exemption for bioethanol and some R&D support to research institutions, such as Scion.
The ETS zero-rates the biofuel component of transport fuels. The current carbon price translates to around 9 cents per litre for diesel, and 7.8 cents for petrol.
The petrol excise duty is 70.024 cents per litre, which translates to a tax advantage of 7 cents per litre for 10 per cent bioethanol blend (E10) over petrol.
Regulations on biofuels
The Engine Fuel Specifications Regulations 2011 provide for the technical specification requirements for bioethanol and biodiesel.
Engine fuel quality (Ministry of Business, Innovation and Employment)(external link)
The Energy (Fuels, Levies, and References) Act 1989 was the primary legislation for the 2008 Biofuels Sales Obligation, until that obligation was repealed.