The decision comes after several months of consultation with affected parties, including oil companies, motor vehicle industry groups and potential biofuel producers.
The government is focusing on two types of biofuel - bioethanol to be blended with petrol, and biodiesel to be blended with diesel.

Enough biodiesel can be produced from tallow to provide around five per cent of New Zealand's diesel, while the dairy industry could today produce enough bioethanol to meet only 0.3 per cent of our petrol needs.
However, an Energy Efficiency and Conservation Authority (EECA) commissioned report has been released at the same time.

It suggests that at least three per cent of our
petrol needs can be competitively met from bioethanol from forestry waste, straw, and waste paper. Biofuel has great potential in New Zealand," said Pete Hodgson. "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 that the industry can make investment decisions with certainty."
Biofuels are already used in many Western countries including the US, Australia, most European countries and Canada. Biofuels are a success in these markets because high quality standards have been set, as they have been here, and because fuel and vehicle manufacturers endorse their use. The Japan Automobile Manufacturers Association has already said that it would not have a problem with the use of a three per cent ethanol petrol blend though there are distribution and storage issues to be identified and addressed.
It will be important to have a non-biofuel alternative available at least for the first few years. This is so people, particularly with older Japanese imports, have a choice.
"The industry now has the certainty it needs to invest and I hope that we will be pleasantly surprised by how quickly it responds. I want to see the transport sector given the choice of biofuel as soon as possible, and by 2008 at the latest."

Representative organization for the new car industry here, the Motor Industry Association – MIA – believes however, that a little more caution is required when it comes to the adoption of biofuels.

The MIA suggests that before a decision can be made regarding the ready availability of biofuels, the current New Zealand car park needs to be considered.

"It’s pleasing that after years of discussion the Government is taking a positive step on biofuel, but we caution the oil companies in their implementation of this initiative that they need to consider the local vehicle fleet," said Perry Kerr, CEO of the Motor Industry Association. "The New Zealand vehicle fleet very much reflects the Japanese domestic fleet of ten years ago, and it wasn’t until June 2003 that the Japanese Government permitted an ethanol mix in local fuel, and then only to a maximum of 3%."

Kerr’s statement is backed up by his acknowledgement of the Japanese government’s reluctance to accept blended fuels until late in the piece because there were no assurances from the auto manufacturers that older model cars had fuel systems able to contend with ethanol-blended fuels.

"Those older-model cars, plus even older ones, are now here, so we need to be doubly cautious," said Mr. Kerr.

Given the commitments which are now in place by new vehicle franchise holders to protect the owners of cars imported and sold by third parties, the new vehicle industry would not be supportive of any ethanol / petrol mix higher than 3%.

In terms of biodiesel, like with ethanol, the Japanese domestic vehicle market has had no experience with this type of blended fuel in general use. "We have only recently sent to the Japanese Automobile Manufacturers Association a copy of the New Zealand biodiesel standard. We may therefore get a similar response to that for ethanol, that is that the Japanese vehicle manufacturers do not recommend that a biodiesel blend is used in used Japanese imports in New Zealand" Mr Kerr added.

In conclusion, Mr Kerr underlined the aging of our vehicle fleet. "Biofuels will have a small influence, but if the Government was really serious about reducing emissions they could make a lot more progress much more quickly by preventing old, worn out, obsolete-technology vehicles from crossing our wharves".

The AA meantime, has welcomed the Government’s announcement that it will do no more than set sales targets for ethanol blended petrol and biodiesel, taking on the issue of cost, rather than the appropriateness of biofuels in relation to our national carpark.

"The Government has wisely left the question of how to achieve its biofuel objectives to fuel wholesalers rather than dictate solutions. Fuel wholesalers will probably achieve these targets through strategic partnerships with large fleets, which can place the problem of vehicle fuel compatibility in the hands of professionals," said AA Policy Manager Jayne Gale.

"We support the Government’s commitment that the decision to use biofuels is to be a matter of consumer choice rather than compulsory as we do have some concerns that it should not increase the costs for motorists. In Australia, for example, the Government subsidises ethanol production by 36 cents per litre. We would not like to see the introduction of ethanol fuel further increase motoring costs."

Ms Gale said experience overseas also showed that biofuel blends would simply not sell if they were priced higher than unblended product.

However, the AA is not ignoring the issue of biofuels compatibility with cars. It believes that full disclosure be made to the general public at the pump and furthermore, suggests that individual owners garner their own information as to how well their vehicles will run on biofuel.

"The AA broadly supports the objectives of introducing biofuels, which will be cleaner and reduce dependence on imported oil. If and when the product is made available at retail outlets, the Government needs to ensure that customers know the fuel they are purchasing contains a blend, and whether it is suitable for their particular vehicle without compromising safety, vehicle warranties or vehicle parts," she said.

"It is essential that any biofuel blends sold at retail outlets are clearly and distinctively labelled as such. There is considerable confusion within the motor industry over which vehicle models are compatible with biofuel blends and at what level of blend. The AA recommends that members only use biofuel blended fuels when they know their vehicle has been approved for use with them."

Newer vehicles are more likely to have been designed to run on biofuels. New Zealand has an extremely varied fleet with a large proportion of older vehicles, so it may be some time before we know about the compatibility of all makes and models. Buyers also need to check that replacement parts fitted to their vehicle are also compatible with blended fuels.

"Biofuels are cleaner than mineral fuels and naturally renewable. As such this step toward their introduction is very welcome. The transition to more sustainable transport fuels is likely to take decades and we support the Government taking a ‘gradual evolution’ rather than ‘revolution’ approach," said Gayle. "This will give New Zealand greater experience with biofuels".

For those in the auto trade, you guys and gals are likely to be the first in the firing line when it comes to the consumer determining whether or not biofuels are OK for their cars. It is likely that the mass populace will be paying attention to the biofuel issue and they will likely be getting their information first and foremost from the television media. They’ll be wanting to talk to you next, so it’s perhaps prudent to figure out exactly what you believe is right. l