Budget to include $36 million for biodiesel grants

After dumping a mandatory requirement for biofuel to be added to petrol, the Government has decided to give the local industry a boost with a $36 million subsidy over the next three years.

Energy Minister Gerry Brownlee said the upcoming budget would include a biodiesel grant fund that would be handed out over three years.

The grants will be available to domestic biodiesel producers selling their products for a range of end users.

Some biodiesel is already produced in New Zealand from waste cooking oil, tallow and rape seed oil for vehicles, boats and boilers.

An industry analysis said that biodiesel produced in New Zealand was expected to result in reductions of greenhouse gas emissions of between 50 and 90 per cent compared to ordinary diesel.

Mr Brownlee said transport was one sector he hoped would benefit from the grants with blends of 5 per cent biodiesel in diesel widely accepted as long as the biodiesel met fuel quality requirements.

The grants will be up to $9 million in the first year - starting in July, up to $12 million in the second and up to $15 million in the third.

It will be paid at a maximum rate of 42.5 cents per litre of biodiesel that meets the Government's fuel quality regulations.

In December the incoming Government repealed obligations placed on oil companies to put biofuels into petrol and diesel, starting with 0.5 per cent and reaching a 2.5 per cent in 2012.

The obligation was introduced by the previous government to reduce New Zealand's greenhouse gas emissions.

The move was heavily criticised by some in the industry as devastating some companies that had invested millions of dollars to meet the new market.

National criticised the Government's measures as they had not set standards for sustainability of biofuels - which can be made from plants.

Mr Brownlee said if there were no obligations there would be no motivation to stop people flooding the country with unsustainable biofuels.

- NZPA