Introduction

I am very pleased to be here today to open the EECA Biofuels and Electric Vehicles conference.

I welcome you all here today, and I especially welcome our overseas visitors and keynote speakers.

It's impressive to have speakers of such a high calibre here in Wellington. 

Around the world governments and companies are grappling with the challenges of increasing energy security.

It's important that we share our knowledge where we can, so that we all can benefit and make progress on this critical challenge.

Some of you may be surprised to see that I've turned up today, given the government repealed the biofuel sales obligation before Christmas.

Lost amongst much of the commentary on that decision were the high hopes and optimism I expressed about the future of the biofuel industry in New Zealand.

There's no doubt that New Zealand has great potential to develop a thriving biofuels industry, and that's what I'd like to talk about today. I'll also touch on electric vehicles.

Repeal of the Biofuel Sales Obligation

The government moved swiftly to repeal the biofuel sales obligation for three reasons.

First, we were very worried that the obligation would have led to oil companies importing biofuel from overseas, which could have been produced from unsustainable sources.

There was not enough biofuel being produced in New Zealand for oil companies to meet the obligation from domestic sources, and nothing compelling them to do so.

The Parliamentary Commissioner for the Environment had noted that importing biofuel without environmental standards for production could contribute to the hugely damaging environmental and social impacts occurring in countries like Indonesia and Malaysia.

In the absence of workable and practical sustainability standards, the government was not prepared to have New Zealand contribute to deforestation and the destruction of arable land, for questionable greenhouse gas reductions.

The second reason we repealed the obligation was our concern about the uncertain costs that would have been placed onto consumers.

The evidence from oil companies was that meeting the obligation would add anywhere from two to eight cents a litre to the cost of fuel.

In these tough economic times the Government does not regard that as a desirable outcome, especially when the environmental benefits of doing so were so unclear.

The Government believes that biofuels should be introduced gradually and when they offer cost advantages rather than cost increases to the price of transport fuel.

That will only happen through a market-based approach rather than a mandatory approach.

The third reason is that this government generally prefers choice not compulsion, and in voluntary action over mandatory action.

It's very appropriate therefore that this conference is titled "Driving Choices".

We think that biofuels should be introduced through companies responding to commercial, environmental and marketing considerations, not because the Government tells them they have to.

That doesn't prevent us looking to some incentives to make biofuels more competitive. I'll talk more about that shortly.

But first let me turn to the biofuel developments taking place around the country.

Biofuel Developments

Biofuels have not disappeared from the New Zealand economy as a result of the repeal of the sales obligation, contrary to some of the hysteria expressed at the time.

There are a number of exciting biofuel developments taking place around New Zealand.

In February I visited the EcoDiesel factory in south Auckland, which will soon start producing high quality biodiesel from tallow.

I hope to visit some other projects around the country as the year progresses.

These projects have the potential to provide jobs for New Zealanders and economic growth in the regions, as well as achieve environmental goals.

Gull and Mobil are currently selling biofuels, and I commend them for doing so. 

They demonstrate that we should not need a law to make retailers offer a product, if there is a genuine demand for it, driven by interest from consumers.

I'd also note the successful trial Air New Zealand recently carried out of a jatropha-based aviation biofuel. 

The government did not tell Air New Zealand to find a renewable alternative to conventional jet fuel but there is clearly a commercial advantage for an airline that can promote a cleaner, green voyage, to and from a clean green country.

Air New Zealand is responding to the market - a market concerned about reducing greenhouse gas emissions.

The Future

New Zealand has a great opportunity to make sustainable biofuels from land based energy resources that do not adversely compete with food production.

These include tallow and used cooking oil which are immediately available for biodiesel, as well as exciting developments in the use of oil seed crops. 

In the longer term, we have the potential to capitalise on New Zealand's strengths in forestry primary production, biotechnology and biological process engineering to produce biofuels.

Scion, our forestry Crown Research Institute, has recently investigated bioenergy options for New Zealand. 

Their research shows how New Zealand could be self sufficient in transport fuels made from purpose grown forestry on marginal land - that's land currently used for low intensity, low return, sheep grazing. 

While the technology to turn trees into transport fuels is proven in the lab, it is not yet commercial. 

But it is likely to be at some point and the use of trees for energy would add to the range of products from our current and future forests. 

But trees do not grow overnight.  What we need to understand right now is how to encourage the development of forests for energy, including biofuels, so that we have the ongoing resource available when the technology is commercial. 

From New Zealand's point of view, this looks like a low risk investment. 

Forests have multiple potential uses.  They act as carbon sinks.

They provide land management benefits, and they offer a feedstock resource for lumber, pulp and paper, engineered wood products, like laminated veneer lumber, and biomaterials, such as biochar for carbon capture and bio-sequestration.

Sustainability

Not all biofuels are created equal. 

Some biofuels do have the potential for significant benefits, but the wrong biofuels can result in environmental and social harms. 

These concerns have led to scepticism on the part of the consumer.

Research by EECA shows that while half of New Zealanders support biofuels, a huge 38 percent are unsure or don't know. Sales figures anecdotally presented back this assertion.

The main reason those New Zealanders say they can't make up their minds is due to questions about the sustainability of biofuels.

We need to give confidence to New Zealand consumers that they can identify and choose biofuels that do provide an environmental benefit.

EECA is now working on voluntary sustainability reporting for biofuels, based on what the UK currently does in practice, as Nick Goodall from the UK's Renewable Fuels Agency will be explaining to you later.

This reporting will mean that people can get the information they need to ensure that when they choose to use biofuels they are choosing biofuels with environmental benefits.

We know that consumers are increasingly seeking out products that help the environment. 

I am confident that New Zealanders will make the right choices, armed with good, reliable information.

A consistent tax incentive for biofuels

As I've signalled on a number of occasions, the Government is concerned at the imbalance in the tax treatment between bioethanol and biodiesel.

Bioethanol sales do not incur associated excise tax like the petrol it substitutes, whereas biodiesel incurs the same road user charges as mineral diesel.

Bioethanol and biodiesel should be treated equally.

I am particularly concerned that this imbalance disadvantages New Zealand biofuel producers whose current focus is biodiesel, in favour of imported ethanol

As we enter a time where investors are considering where to put their money, it is important to provide certainty that all technologies are encouraged equally, and are not penalised by distortions in government charges.

The National Party went into the election promising to provide consistent tax incentives for sustainable biofuels and officials are currently working on how that promise will be delivered.

It is proving more difficult than expected but I'm confident we can devise a mechanism to give effect to our policy. I hope to make further announcements soon.

Electric Vehicles

Due to Mitsubishi and Hyundai, we have had the opportunity to see modern electric vehicles in action in New Zealand.  

The combustion engine has powered our transport for many decades now, but now electric vehicles are beginning to present viable alternatives.

Electric cars have a number of advantages.  Their motors convert energy to power more efficiently than a combustion engine. 

They are quiet, and do not contribute to air quality problems. 

If we run them on New Zealand's largely renewable electricity, they reduce our transport greenhouse gas emissions.

Later today you will hear from a number of speakers working closely with electric vehicles, including car company Holden, from across the Tasman, which plans to have electric vehicles in Australasia from 2012.

Holden is just one of a number of the world's big car makers that are planning to produce electric models commercially.

Electric cars are no longer some kind of science fiction fantasy.  They have moved from the drawing board to reality.

As desirable as electric cars may be for New Zealand and many New Zealanders, they will start off being expensive.

The Government believes it is appropriate to provide an incentive for electric vehicles through an exemption to road user charges.

My colleagues, the Minister of Transport and the Minister for Climate Change Issues and I, believe that those who invest in an electric vehicle should be rewarded.

The Minister of Transport is currently discussing the details of the exemption with officials.

While I look forward to seeing more electric vehicles on our roads, it won't happen overnight.

Conclusion

There is no doubt the world faces significant economic and environmental challenges in the coming years.

New Zealand is well placed to weather those changes. 

We have good resources of renewable energy, including the capacity to produce our own biofuels. 

We have clever scientists and entrepreneurial business people who are keen to explore these new options. 

And we have the will and the ability to change and adapt to meet these oncoming challenges.

This conference gives you the opportunity to share your knowledge and learn from others.

I hope you enjoy the opportunity, and profit from it.