Labour pledges biofuel at the pumps by 2008

As markets recoil from a record oil price of US$70.80 ($102.50) a barrel reached on Monday during Hurricane Katrina's rampage in the Gulf of Mexico, the Government is dipping its toes into "biofuel" by pledging to ensure its supply at the pumps by 2008.

Transport Minister Pete Hodgson announced in Auckland yesterday, at the construction launch of the $169 million Roskill motorway extension, that the Government had agreed in principle to set a mandatory sales target for biofuels made from animal or vegetable byproducts.

The arrival of two biofuelled demonstration cars on the site was seen by National Party transport spokesman Maurice Williamson as a sop to the Greens, who want the motorway delayed in favour of electrifying Auckland's rail network first.

But Mr Hodgson said a balanced transport future "in case oil isn't going to last forever" compelled the Government not only to build more roads but to pay greater heed to what would run on them.

"Biofuel has great potential in New Zealand," he said.

"It can help improve the security of transport fuel supplies and offer worthwhile health and emissions benefits - the time has come to take the first small step so the industry can make investment decisions with certainty."

He is not yet indicating the proportion of fuel production oil companies will be expected to provide from renewable sources.

The Ministry of Transport is working with user groups as well as the oil and motor industries to set a target.

But he suggested refineries would probably not want to bother with less than a 3 per cent mix of biofuels with petrol or diesel.

Although enough fuel could be produced from tallow rendered from fat in animal bones to supply about 5 per cent of the country's diesel needs, Fonterra produces only enough bioethanol from dairy products to provide about 0.3 per cent of petrol substitution.

The company has been trialling bioethanol blends in its own car fleet for a year or so in conjunction with oil supplier Gull Petroleum.

But Mr Hodgson pointed to a report from the Energy Efficiency and Conservation Authority suggesting at least 3 per cent of petrol could also be produced from forestry waste, straw and waste paper.

He said any car built in the past five years could "easily" take petrol blended 10 per cent with ethanol.

"Earlier than that they can take at least 3 per cent, so we said we'd start at 3 per cent."

But car manufacturers are warning against raising the level any higher.

Motor Industry Association chief executive Perry Kerr said that although it was pleased a positive step was being taken on biofuels after years of talk, the relatively old age of the vehicle fleet here demanded caution.

Mr Kerr said it took until two years ago for Japan to allow an ethanol mix in its fuel, and then only to 3 per cent.

This was because there was no assurance fuel systems on older Japanese cars were compatible with an ethanol blend. "Those older-model cars - plus even older ones - are now here, so we need to be doubly cautious."

Mr Kerr, who represents suppliers of new cars, said if the Government were serious about curbing emissions it would accomplish more by barring "old, worn-out, obsolete-technology vehicles from crossing our wharves".