The production and distribution of ethanol as an alternative motor vehicle fuel source will increase greenhouse gas emissions over those generated by conventional fuels, research by the NSW Greens has revealed.

The NSW Government has consistently cited the greenhouse benefits of ethanol as one of the reasons for its decision to require that fuel be 10% ethanol (E10) by 2011, and that 4% and then 6% of fuel sold in 2009 and 2010 be E10.

The primary (and until recently dominant) producer of ethanol in Australia is Manildra, a major donor to the NSW Labor Party. In 2006-07 alone, Manildra donated over $200,000 to the NSW ALP. Imports of ethanol were slapped with a punitive excise by the Howard Government in 2002 at the behest of Manildra, which has also donated generously to the Liberal Party. Ethanol excise arrangements are currently under review by the Federal Government, and Resources Minister Martin Ferguson has criticised the NSW mandate.

The greenhouse benefits of biofuels have long been debated. The then-Australian Greenhouse Office commissioned a study by the CSIRO that indicated there was little difference in emissions between E10 derived from molasses and premium unleaded. Data from the International Energy Agency collated in a Masters thesis by grain merchant Dennis Ward suggests a 5% biofuel mandate across the OECD — that is, if 5% of all transport fuel in the OECD were replaced with ethanol — the reduction in world greenhouse emissions would be a quarter of 1%.

However, applications by Manildra to expand its facility at Bomaderry on the NSW South Coast, and by other companies such as Agri Energy and the Four Arrows Group to build new ethanol facilities at Condobolin, Oaklands and Coleambally have provided a rare glimpse into the energy intensity of the ethanol production process, as companies have been required to estimate greenhouse emissions as part of their project Environmental Impact Assessments. Scott Hickie, adviser to NSW Greens MLC Ian Cohen, has estimated that, on the companies’ own assessments, the proposed new ethanol facilities alone would add up to 1.5% to net NSW greenhouse emissions — an extraordinary figure for a fledgling industry. At least four further plants have also been proposed across rural NSW.

The figures include greenhouse credits assumed from the replacement of petrol with ethanol. As Manildra itself states in its EIS for an upgrade of its Bomaderry plant, which it is estimated will generate an additional net 230,000 tonnes of CO2-equivalent a year, “the project will result in a net increase of greenhouse gas emissions, even when the downstream reduction as a result of replacing petroleum fuels with bioethanol is taken into account.”

This is at odds with the statements by NSW Lands Minister Tony Kelly (christened “Minister for Ethanol” by Morris Iemma), who told NSW Parliament last year “new transport fuels must also be capable of making a significant contribution to reducing greenhouse gas emissions, and they must not lead to unintended consequences, such as increasing the price of food. The New South Wales ethanol mandate gets this balance right.” Announcing the new mandate in December with Kelly, Environment and Climate Change Minister Carmel Tebbutt said “we need to embrace bio fuels in a sustainable way, but acknowledge their contribution to reducing greenhouse gas emissions.”

Manildra itself is less reticent about the link. Its subsidiary Shoalhaven Starches, which runs the Bomaderry facility, said in July 2008 that “the use of ethanol as a fuel or fuel additive has many benefits: it is a renewable fuel and lessens reliance on fossil fuels; it reduces greenhouse gas emissions and other air pollutants…”

Kelly’s office today said that, while its advice was that biofuels contributed to reducing greenhouse gas emissions, they were not a silver bullet solution to climate change. The purpose of the mandate was to establish a foundation and a framework that provided the market with a platform and the incentive to produce a range of biofuels.

Greenhouse emissions aren’t the only area where ethanol has been oversold. When Morris Iemma committed at the 2007 NSW election to a 10% ethanol mandate by 2011, he declared it “a win for the environment”. In fact, Manildra has been a repeat offender when it comes to breaching environmental requirements. Only in July, Shoalhaven Shire Council served a Prevention Notice on Shoalhaven Starches for the discharge of industrial waste into the sewage system.

NSW Environment Department records (searchable here) show the company has failed to comply with environmental requirements (including minor ones relating to monitoring) on hundreds of occasions in recent years. By way of comparison, the Caltex petroleum refinery at Kurnell in Sydney has had only a handful of non-compliance reports. Manildra’s representatives did not return Crikey’s calls by deadline.

The E10 mandate will also have a major impact on water usage. The 2.5m tonnes of grain required each year to produce the ethanol necessitated by a NSW E10 mandate will see up to 10 ethanol plants across NSW, all trying to source grain from reliable suppliers. Barring a massive increase in rainfall across the Murray-Darling Basin, this means irrigation, further skewing the MDB water market already heavily over-allocated and still subject to State Government distortions.

None of this is news to the NSW Government. It is understood that the E10 mandate is strongly opposed by many inside the NSW bureaucracy. The NSW Labor Party, however, continues its strong support for the industry.