KEY POINTS:
Once hailed as the green bullet to our dependence on a finite supply of global-warming fossil fuels, biofuels are now getting a reputation for adding to the problems they were supposed to solve.
Since April, all petrol and diesel sales in Britain have had to include 2.5 per cent biofuels. But already, a Government-commissioned review published this month is urging a slowdown in the move to biofuels.
Environmentalists who just months ago were cheering governments' biofuel targets are now condemning the ecological and humanitarian toll of the biofuel rush, and calling for rich nations to ease off the accelerator.
Certain biofuels produced overseas, such as ethanol from US corn, have been revealed as carbon-belching wolves in lambs' clothing, with carbon footprints over their life cycles as large as, or larger than, those of fossil fuels.
In developing countries, farmers are knocking down rainforests to free up land for lucrative biofuel crops.
An April World Bank report leaked this month argues that the drive for biofuels by American and European governments has pushed up food prices by as much as 75 per cent since 2002, as land used for growing food has been diverted to biofuel crops.
So why is the New Zealand Government backing biofuels through the Biofuel Bill? (The Government wants oil companies to start meeting biofuel targets from October.)
Labour and the Greens are convinced New Zealand can do biofuels sustainably without displacing food crops. Not all biofuels are created equal, they point out. Our budding bioethanol and biodiesel industry uses waste products or used cooking oil, or non-food plants like algae and rapeseed grown on land being rested between food crops.
On the horizon are so-called second generation biofuels, which don't have the current batch's destructive side-effects. And the new law would set the sustainability bar pretty high.
Nor should biofuels necessarily pump up prices, they argue. Gull and Mobil are already selling biofuel blends at the same price as standard petrol, or cheaper.
Within five years, Air New Zealand expects 10 per cent of its fuel - enough to run the entire domestic fleet - to come from the jatropha nut. The carrier's rationale: the jatropha it will use is grown on land in Africa and India that's unsuitable for food crops, and the plant fuel is cheaper than traditional oil.
Wherever you stand on biofuels, the powerful vested agricultural and industry interests, especially in the United States, mean biofuels look set to be around for a while. Ford, DaimlerChrysler and GM sell flexible-fuel vehicles that can use blends ranging from pure petrol all the way up to 85 per cent ethanol.
World production is picked to more than double from 1.3 million barrels per day in 2010 to 2.7 billion in 2030, with the US fuelling almost half that growth.
But with all the conflicting claims, it's no wonder most of us don't know whether to be worried or happy about the prospect.
Let's see how the facts stack up.
Biofuel-blends will be more expensive than fossil-based petrol or diesel.
Not necessarily. Initially the Government was planning to set the biofuel level at 3.4 per cent of all fuel sales by 2012, but that has been lowered to 2.5 per cent.
At the higher level, BP predicted a 7 cent per litre hike in its fuel over 18 months. Now, BP says it won't know the price impact of the new level until about October, but the cost of new pipelines, tanks and blending equipment shouldn't be underestimated.
Shell agrees. The company has been involved in distributing biofuel overseas for more than 30 years and supports the introduction of biofuels here. But, it says the targets were developed with the expectation that local producers would be able to fill demand, and that situation is at least 18 months away.
Both BP and Shell expect to import the shortfall from Brazil.
However, oil minnow Gull has been selling a high octane, 10 per cent bioethanol blend since last August, at the same or lower price to competitors' petrol equivalents. Its supplier, Anchor Ethanol, makes bioethanol from fermented whey.
General manager Dave Bodger says the fuel is pumped into more than 20,000 vehicles a month.
"It's going gangbusters for us."
Mobil also sells two biofuel blends.
Officials predict biofuels will deliver a small saving to drivers with oil at US$120 a barrel, and 4c per litre savings if oil hits $200 a barrel.
Biofuels aren't suitable for all cars.
The AA has raised concerns that biofuels may cause problems for older engines. Japanese manufacturers are refusing to guarantee the performance of up to a million second-hand imports on New Zealand roads at biofuel levels higher than 3 per cent.
However, the manufacturers relied on tests of fuel that didn't contain a corrosion inhibitor ingredient used in New Zealand biofuel. The Ministry of Transport is running new tests with this ingredient. The results are expected in November.
The ministry says it's confident that blends of up to 10 per cent will be suitable for most vehicles, as is the case in the US.
Food crops are being diverted to biofuel, which is compounding the world food crisis.
Growing demand from gas-guzzling rich nations, coupled with biofuel-favouring Government subsidies, tariffs and tax breaks, mean that farmers in many countries around the world now get more money growing crops for fuel than for food.
About a third of the entire US corn crop, for example, has been diverted into bioethanol, which is subsidised by the US Government.
Grain-belt heartland Iowa is looking at having to import agricultural products soon because so much of its land is turned over to corn. And the biofuel rush has sparked financial speculation in grains.
The cumulative result: global food shortages and spiralling prices.
The scale of the effect is still being grasped. An Oxfam report last month argued the biofuel boom has dragged 30 million people into poverty, based on evidence that biofuels accounted for up to 30 per cent of the global rise in food prices. Two weeks later, a leaked World Bank report put that estimate up to 75 per cent, and 100 million people pushed below the poverty line.
Insiders suggest the report wasn't officially released because the figures so dramatically contradict White House claims that plant-derived fuels contribute to less than 3 per cent of food-price rises.
The amount of grain it takes to fill a 4WD tank with ethanol could feed a person for a year.
Biofuels aren't even green - some are adding to global warming.
It's been dubbed the "great green con". Although plants absorb carbon, major biofuel crops such as palm oil and corn have been shown to release more carbon in their cultivation than the emissions saved by their use in vehicles. Many palm oil plantations in south-east Asia are based on converted rainforests and peatland, and studies have shown the greenhouse gases released by the clearing of these natural carbon stores far outweigh biofuel carbon savings.
The fertilisers used to turbo-charge biofuel crops also cause carbon emissions. One study found US corn-ethanol production nearly doubles greenhouse emissions over 30 years.
But New Zealand will import only sustainably produced biofuels from countries such as Brazil.
Brazil's role in the local biofuel debate is as pivotal, and controversial, as its football. Biofuel believers here say unlike palm oil and corn, Brazilian bioethanol made from sugar cane is genuinely sustainable, delivering net greenhouse reductions.
Brazil is the world's largest exporter of bioethanol and is often held up as a success story.
But National environment spokesman Nick Smith cites evidence of a domino effect, whereby cane plantations take over land previously used for other crops, pushing these crops on to other land, displacing further crops and so on.
Climate Change Minister David Parker argues these claims are exaggerated. An independent literature review done for the Government's Energy Efficiency and Conservation Authority (EECA) concluded Brazil could increase its sugarcane planted area by 40 per cent without triggering this domino effect. Even taking its transportation into account, Brazilian ethanol delivers 7.6 times more energy than the energy used in making it, rising to 9.9 times more by 2020.
The new law would require that biofuels used here emit at least 35 per cent less carbon dioxide over their life than fossil fuels; that they don't compete with food production or even be produced on high-value arable land; and that their production doesn't reduce biodiversity.
But how easy will that be to enforce? Jan Wright, parliamentary commissioner for the environment (a kind of independent watchdog), has raised questions about the difficulty and cost of checking the standards are being met.
If other fuels are cheaper, she says, "oil companies will be incentivised to claim them to be sustainable".
It will likely come down to consumer pressure and watchdogs.
New Zealand biofuels are different; they're sustainable.
Parker says we have the raw materials to make biodiesel for 5 per cent of our present diesel consumption.
Biofuels made in New Zealand will mainly come from tallow (a byproduct animal fat), whey (dairy byproduct), rapeseed and waste cooking oil.
Burger Fuel has already been using old cooking oil to run delivery vans for a year.
Other fuels are being developed, including algae biodiesel, salix ethanol and other ethanols using wood.
Auckland firm LanzaTech - partly backed by The Warehouse founder Stephen Tindall - this month won a $12 million Government grant.
The firm aims to commercially produce biofuel out of the flue gas from factories.
A domestic biofuel industry would be good for New Zealand.
Dickon Posnett, head of a group of local biofuel manufacturers, says a local biofuel industry could create up to 500 jobs.
Singapore-based company Pure Power, which is growing salix crops here, argues biofuel could become a primary industry, alongside dairy.
Biofuels are a red herring and more trouble than they're worth. What we really need is to use less fuel.
Rob Bailey, author of the Oxfam report, says: "Even if the entire world's supply of grains and sugars were converted into ethanol tomorrow - in the process giving us all even less to eat - we would only be able to replace 40 per cent of our petrol and diesel consumption.
"Rich country governments should not use biofuels as an excuse to avoid urgent decisions about how to reduce their unfettered demand for petrol and diesel," he says.
Yes, agree biofuel supporters, we need to increase our fleet's fuel efficiency and encourage people to leave their cars at home.
Parker thinks electric cars, or hybrid electric/biofuel blend cars, will ultimately be more sustainable and cost-effective.
He predicts electric cars will be widely available at an affordable price within a decade.
Biofuel is no panacea, he says, but it's part of the solution.
"Those that said biofuels were the whole answer were always wrong; those that say it's none of the answer are also wrong."
BIOFUELS: WHAT YOU NEED TO KNOW
Biofuels are liquid fuels derived from renewable animal or plant materials. The main forms used for transport are bioethanol (for petrol) and biodiesel (for diesel).
Biofuels made in New Zealand will mainly come from tallow (a byproduct of animal fat), whey (dairy byproduct), rapeseed and waste cooking oil.
The Biofuel Bill would require that biofuels make up 0.5 per cent of transport fuel sales by energy content from October 1. The biofuel fraction would rise by 0.5 per cent a year until reaching 2.5 per cent in 2012.
The bill's final reading is expected before the election. Despite National's opposition, the bill would be passed with continued support from Labour, the Greens and the Maori Party.
Oil companies would meet the targets by offering blends of biofuels with petrol or diesel. Gull is already selling a 98 octane 10 per cent bioethanol blend called Gull Force10; and Mobil has followed suit with its E10 (98 octane, up to 10 per cent ethanol) and E3 (91 octane, up to three per cent ethanol).
The Ministry of Transport is testing how biofuel affects engines of older cars, with results due in November. Also, see the ethanol compatibility chart for new cars on the AA website.
