The federal government’s u-turn on tax incentives for the burgeoning biofuels sector threatens to derail the viability of an industry potentially worth up to $2 billion in the next five years.
Key biofuels industry players and the Western Australian government have criticised the legislative changes, via the Fuel Tax Bill 2006, which passed through the Senate last week.
Biofuels are produced from renewable organic sources and there is a growing market for ethanol and biodiesel.
Leading biodiesel company Australian Renewable Fuels Ltd’s managing director Darryl Butcher said more than $150 million had been invested in the biodiesel industry based on federal government assurances that the status quo would prevail.
“With the stroke of a pen, approximately 75 per cent of the target market for biodiesel producers has been wiped out,’ he said.
WA Business News highlighted the concerns over the Fuel Tax Bill earlier this month.
Currently, under the Cleaner Fuels Grant Scheme, biofuels producers and importers are entitled to a rebate of 38.1 cents per litre, which offsets an excise of the same amount payable on diesel and petrol fuels.
The grant was established to encourage the biofuels sector.
Under the new Fuel Tax Bill, due to take effect from July 1, the grant will be reduced to 19.1c/L for biodiesel and 12.5c/L for ethanol, by 2015.
WA Agriculture and Food Minister Kim Chance called on the federal government to rethink the Fuel Tax Bill.
“The WA government recommends the scheme in its current form be extended indefinitely to ensure a viable biofuels industry is allowed to develop in Australia,” Mr Chance said.
Recent reports by the Australian Bureau of Agriculture and Resource Economics indicate that the proposed changes will remove the viability of biodiesel production, and make ethanol production marginal, by 2015.
