ACTING CHAIR—I want to ask a few questions about biodiesel and the standards for biodiesel. As I understand it at the moment, there are 20 criteria that biodiesel needs to meet. Is that correct?
Ms Harwood—I could not give you a precise technical description of what the parameters are that comprise the standard for biodiesel, but I could give you a technical description of the standard on notice.
ACTING CHAIR—It would be very much appreciated if you could. I have heard some concern expressed in the industry that they do not think that the standards—this is coming from the industry—are quite tough enough. If I understand it correctly, the industry is concerned there may be people making backyard biodiesel that does not actually meet criteria and they may sell it into the market and then lower the quality of biodiesel and give the product a bad name. Have you had those concerns presented to you?
Ms Harwood—Not personally, no. I would be happy to follow up. I am not aware of those concerns.
ACTING CHAIR—If you could.
Senator Ian Campbell—The concerns were expressed to me at the time BP made their announcement about putting tallow into basically an existing diesel plant. It was called biodiesel. Putting a certain amount of tallow into the feedstock in a normal diesel production would not, as I am briefed—and I have advised BP of this; there is no argument—be called biodiesel. It is still environmentally advantageous to use tallow as opposed to pure fossil fuel. That is one of the issues that is out there.
ACTING CHAIR—The concern that has been expressed goes beyond that. It is about where it can be used, the heat of the engine, which temperatures it can be used at and all those sorts of things. There is some concern that if there are not adequate standards, people will start using biodiesel and, because the engine will be too hot or too cold or whatever, it will give the product a bad name. They are saying they would like to see an ISO process undertaken for biodiesel so that there is consistency across the country.
Senator JOYCE—Stronger regulations.
Mr Borthwick—I know even less about biodiesel in terms of the technicalities. As I understand it—and we can check this out—there is a standard for B100, which is pure biodiesel. I think there is a standard for B5.
Ms Harwood—Yes.
Mr Borthwick—Which is five per cent biodiesel. But there are a number of producers providing blends of different types. This is leading to some alleged confusion in the market about what it is. One of the measures the government announced in the budget context was to see if we can standardise biodiesel blends between B5 and B100—say, B20 or B49 or whatever they are—to try and build some greater consumer and industry confidence in this product.
ACTING CHAIR—I think what the industry is asking for, though, is going beyond just that.
Mr Borthwick—I only just recently met with members of the Federal Chamber of Automotive Industries. This was only a week or two ago.
ACTING CHAIR—Did you say the automotive industry?
Mr Borthwick—Yes.
ACTING CHAIR—This is actually the biodiesel industry, or some elements of it anyway, that want stricter criteria.
Mr Borthwick—Our door is open to questions about it.
Senator Ian Campbell—I have met with them on a number of occasions in recent months. I do not think as an industry they have a view exactly about where they want to go. Basically in the budget we have massively increased the funding in that area. But, as you know, the government has a biofuels taskforce. Certainly we have an input into it.
Mr Borthwick—There are also issues about how different blends of biodiesel might interact with various parts of motor vehicles—this is mainly parts originating out of Europe. I think that is one of the issues that will be looked at in this context. So there is a range of issues. But the precise one you are raising we might have to pursue a little further.
Ms Harwood—Where there is a standard set, we can include that in our compliance program to see that fuel supplied which is stated to meet that standard meets that standard. But as the secretary said, there are standards for B100 and B5. There will now be some work on getting a standard for B20. So there is work underway to develop a standard for B20.
Senator JOYCE—I want to ask a question specifically on that issue now that we have got to it. I can understand why the oil industry would want greater regulation; they want to force out the new entrants that are coming into the market at the moment. That would be a good reason to get more regulation into it. With biodiesel, you have 38c that is an investment grant—help me out here—and then you have a 38c per litre excise that the farmer who buys biodiesel can claim. Is it envisaged, now that they are changing that, that you will get the 38c investment allowance but you will not be allowed, if you buy it off someone who creates or sells B50, to claim the excise. What will be the effect on the emerging biodiesel producers, especially in states such as Western Australia?
Ms Harwood—I would have to start by saying that changes to the excise regime are not my special subject. Yes, there are changes. When the new excise regime comes in on 1 July, the arrangements will affect all sorts of fuel, including biodiesel. Some categories of biodiesel have a greater change in the net tax treatment than others. That is, their relative commercial positions will change.
Senator JOYCE—As a departmental official, what do you think will happen to that emerging biodiesel industry in places such as Western Australia? We have lots of cooperative farmers creating a biodiesel industry. The only way you can get a 38c excise is to buy it off the fuel companies as B5 as opposed to buying B49, which has a greater biorenewable component, off the farming cooperatives.
Senator Ian Campbell—It is a live issue. The changes phase in over the next 11 years. I think they phase in until about 2016. It is an issue I have been dealing with with the biodiesel industry in Western Australia and around Australia. It is a live issue. But it is an issue that falls entirely within the Treasury portfolio. I am not trying to send you to another committee, Senator Joyce, but it is entirely a Treasury issue. We obviously have a significant interest in it because personally—and the department holds this view—I believe that biodiesel, of all the alternative fuels, has very beneficial greenhouse and particulate outcomes compared with a range of other alternative fuels. This is an issue that I have a concern about because I do not want to see biodiesel disadvantaged for those exact end consumers you are talking about. It is an issue for Treasury. It is an issue that I am discussing with Treasury.
Senator JOYCE—It is good because this industry has got up on one knee. It will get up and get running. It will be a great alternative industry for Australia. But this could put the lights out on it.