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Waste-to-Energy: Is there a missing piece?

Written by Equilibrium on 16 April 2019

In the transition to a low-carbon economy, there is a constant search for energy that is not produced from fossil fuels. Australia’s renewable sector contributes roughly 17% of total electricity generation, 9.7% of which is produced by bioenergy. Biofuels also represents around 1% of Australia’s petrol and diesel production.

It is well recognised that biofuels will play an extremely important part in any low carbon, low emission plan for Australia’s future and there have been some noteworthy initiatives to promote and support this, including the Queensland biofuel mandate, the Energy Grants Scheme, Queensland’s Resource Recovery Industry Development Program, and Victoria’s Advanced Organics Processing Technology Grants program.

While the bioenergy and waste-to-energy sector within Australia is transitioning rapidly towards providing a solution to materials that have not historically been recycled, it’s starting to reveal significant gaps in Commonwealth legislation and policies, particularly with respect to defining waste-to-energy streams and how biodiesel is dealt with under the Excise Tariff Act 1921.

Under The Schedule, diesel produced from non-renewable resources has a current excise rate of a little over $0.40 per litre, while biodiesel has a rate of duty of only 10% of this amount. Biodiesel is defined as a fuel that is, in simple terms, derived from animal or vegetable fats or oils. However, many diesel fuels manufactured from other resources, including those defined as waste materials, fall outside of this definition.

The Australian Taxation Office’s Excise Guidelines recognise that recent technological developments have seen hydrocarbon fuels manufactured from various sources other than just crude or waste oil. The Guidelines go so far as to accept that “Technology now exists that allows fuel to be manufactured from feed-stocks such as waste plastic, used tyres and general household waste.”

While acknowledging that renewable diesel can be sourced not only from the hydrogenation of animal fats or vegetable oils, anything that is produced from materials outside of the original definition is still termed diesel and the full rate of duty is payable, irrespective if it has been derived from other feedstocks as outlined above.

Although it is recognised that the duty payable on biodiesel and renewable diesel was offset briefly through the Energy Grants (Cleaner Fuels) Scheme, which closed in July 2015, for companies now looking to invest in new waste-to-energy technologies and facilities, there is currently little to no regulatory framework to support them to produce renewable diesel fuel.

This ambiguity could be seen to be constraining Australia’s sustainable energy future with the current legislation reducing the ability to grow this sector, and as such inhibiting the ability for the industry to reach the economies of scale required to deliver cheaper low carbon fuels, and in particular those derived from waste materials that may not be recyclable.

Based on estimates from the Clean Energy Council and the Clean Energy Finance Corporation there is a potential investment opportunity of between $3.5 billion and $5 billion until 2020 in energy from urban waste, agricultural waste and forest residues. Waste-to-energy provides an innovative and multifaceted solution. Not only does it alleviate the environmental pressure on landfills, it also reduces fossil fuel consumption and carbon emissions.

The Queensland Biofutures 10 Year Roadmap and Action Plan recognises the need to improve the excise rate of biofuels. Biofutures broadly refers to the sector focusing on “the development and manufacturing of products from sustainable organic and/or waste resources.” It is defined as a priority industry for Queensland, predicted to contribute $1.8 billion to the annual Gross State Product and support 6,640 full-time jobs in the state. The roadmap acknowledges the limited funding and poor excise and taxation treatment especially compared to successful global biotechnology sectors where there are strong subsidies.

It is clear that Australia is faced with regulatory framework which has not matched the accelerated pace of development in the combined energy and waste sector. Redefining the legislation to reconsider the definition of biodiesel to include waste as a resource and other alternative manufacturing processes for biodiesel production will assist in ensuring waste-to-energy technologies are given the necessary relief to ensure a sustainable future for renewable fuels.

This article was authored by Madelaine Waters, Environmental Consultant at Equilibrium.

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