The Federal and State Governments still provide significant assistance to the biofuels industry.

In 2006/07 it was $95mill, with ethanol support per litre greater than that provided to US producers!!

Regardless, numerous reports demonstrate that the costs of Government grain derived ethanol support outweigh the benefits.

The food versus fuel debate is no furphy.

The International Food Policy Research Institute in Washington states that world wide ethanol production is responsible for between 25-33% of increases in global commodity prices between 2000-2006.

The OECD projects that cereal use for biofuel production will nearly double from 2007 to 2017.

This will exacerbate current grain and food inflationary/ interest rate pressures.

The answer is to either reduce fuel consumption or use renewable fuel sources not linked to food supply.

Second generation ligno cellulosic technology which uses switch grass, saw dust etc is one such example.

The only report that I have yet seen which mentions the economics of ethanol production reported that only cane sugar can be a viable alternative to oil at the prices going at the time of the report in February.

That report in The Guardian, reproduced in part in the Sydney Morning Herald, quoted cane sugar at about $35 a barrel of oil equivalent, corn at $80, beet sugar at a bit over $100, wheat I think was $134, and others came after.

So why the rush to make ethanol from grain?

The recent decision of the US government to subsidise ethanol when it will be made from corn has brought some very big side benefits to the world economy.

Firstly, it caused grain prices to rise to about the real cost of production.

This should make it possible to remove the subsidies on grain production which have corrupted the market for so long.

Secondly, by bringing on an early price rise in grain it will as a consequence induce a much earlier increase in production, thereby heading off even greater shortages and higher prices down the track.

If the subsidies on grain production are removed, and they should be, the price will then reflect the real cost of production.

The grain will not really be costing more because of this.

The difference will be that the full cost will be transparent.

Meanwhile, there appear to be good prospects for sugar cane.

Expect to see, no matter what the political philosophies, a dramatic shift in US relations with Cuba.

And keep an eye on the Ord River.

recent studies in USA have shown a nett energy benifit from ethonal from grain, as compared to 1979 studies oft used by anti ethanol.

why is corn and wheat price now rapidly retreating even in the face of greater grain conversion to ethonal...because grain prices increased MAINLY because of rolling production problems around the globe.

don't let the facts stuff up a good story.

we exported 7 million tonnes of wheat last year even in this drought....most years we give it away.

keep our grain here, make fuel and livestock feed from it, lessen our dependence just a little on crude.

the food vs fuel debate is a complete furphy....not ok to turn corn into ethonal but ok to turn corn and sugar in huge percentages of US production into lolly water...turn it up

maybe its time consumers and government alike started taking a serious look at alternative sources such as the Industrial Hemp Plant (no not its cousin Marijuana!!).

consumers should re-educate/educate themselves on the benefits of the world's most renewable resource, which in fact has been around for centuries.

Why is hemp confused with marijuana and blacklisted, well it all has to do with its history...did you know that hemp products were once the biggest traded commodity worldwide, from fuel, paper, textiles and fibres to food products.

Get behind your local hemp industries!

Here is a plant which can be utilised in its entirety.

Start asking questions, start doing your own research and you will be amazed of its potential.

Its not called a 'Billion Dollar Crop' for no reason.

yours truly 4hemp

My uncle, a professor, was involved in the alternative fuel research back in the late '60s and '70s.

He was advocating, even back then, the use of ethanol and other alternative fuels.

He was actively involved in modifying vehicles and engines for use on alternate fuels.

Some of the stories he has told me as to what went on defies belief.

His funding was eventually stopped under circumstances highly suspicious as the team developed some pretty good alternatives, all his developments are held under secrecy by the Federal Government until needed.

In short, it is not yet in the interest of the Federal Government to encourage too much alternatve fuel development as the "system" will collapse, imagine the financial chaos if everyone plugged their car into solar energy.

Too much would be lost by too many to allow that to happen.

Regretably, we are all in for a lot more pain BEFORE anything will be allowed to be done.

Consiracy theory - you had better believe it.

We are sugar cane farmers from the Bundaberg – Childers area and this year will struggle to make a profit.

That is before we replace some capital items that we will have no other choice but to replace as they are just worn out.

In the past two years we have faced the smut incursion, rising costs in water charges, power, fertilizer, chemicals and of course fuel.

The situation we are now in has been brought about by the massive increase in the price of fertilizer, for some blends a 100% increase since September 2007, yes in only 8 months.

Fertilizer representatives tell us that it is due to the world price increase in the cost of fertilizer some due to a 137% export tariff imposed by China on Urea.

The increases in the price of fertilizer and agricultural chemicals alone will have contributed to the rising cost of food.

I also read a report that the Murray Irrigation area only produced 20,000 tonne of rice this year instead of 1.2 million tonne, quite a large short fall.

In regards to Ted O’Brain’s comment, cane production has ceased in the Ord region.

Australia could follow Brazil and produce ethanol from sugar cane, one of the most efficient methods, as well as produce or own flexi fuel cars.

Brazil have legislated that their cars have to run on an ethanol fuel mix of at least 20% to 25% ethanol (E25) and have produced and run some vehicles on 100% ethanol, so the technology is there.

It has been proven that the addition of ethanol to petrol reduces the harmful emissions.

This could make Australia become a little less dependant on imported oil.

As there is a world surplus of sugar this should also have little impact on the cost of food.

It is time the Australian Government took a stand and took some positive action instead of pushing from an oversight body that may lead to a reduction in the cost of fuel of 1 cent a litre.

If the average car traveled 20,000 klms a year and used around 12.5 litres per 100klm they would save a massive $25.00 a year. If the car is more fuel efficient the saving is even less.

Something that leads to a long term solution with more positive results needs to be done.

It is time Kevin Rudd walked the walk instead of talking the talk.

Speddo was pretty close to the mark.

The influence of the fossil fuel industry and its friends in government on alternative fuel R&D funding AND COMMERCIALISATION (the big gap) has been enromous.

New Australian and US technologies to produce ethanol from lignocellulosic feedstock (EXL), developed 20 years ago, have only last year managed to get some forestry and sugar farmer support to demonstrate the commercial potential of the technologies.

Their studies show the potential to produce ethanol from diverse woody surplus and waste (as well as dedicated) feedstock, in a greenhouse-friendly and water-conservative system, for less than 30 cents a litre.

This is way below any other ethanol production system.

Ethanol has serious potential as a future fuel.

There has been way too much 'accepted wisdom' about ethanol that is simply wrong, although written by 'experts'.

I absolutely agree with advocates of sugar for ethanol - the issue of US-grown corn being used, and detracting from wold food supplies, is dominating the world media, and none of them seems to pay any attention to Brazil's success in using sugar.

My view about sugar is that it should be restricted or rationed for human consumption, since it contributes to obesity and diabetes, and that most of the sugar cane industry should be diverted to making ethanol.

I am not a farmer, so I had no idea until I read the comments on this blog, that the sugar cane industry was in trouble - surely this is the way to revive it.

I also agree with the comment on hemp - a very versatile plant, which can be used for many purposes.

Australia has an abundance of all the natural resources necessary to obviate the need for fossil fuels, but Government, Opposition, and indeed most of the media seem to be stuck in "analysis paralysis" which prohibits creative, lateral thinking.

Ted O'Brien argues that we should remove US subsidies for grain production (because they are distortionary) and yet subsidise ethanol production (because it then raises the price of grain to levels which cover the costs of production).

Basic economics dictates that any Government intervention in the grain or ethanol market will artificially distort the price of grain.

It would be contradictory for any Australian Government to increase support for industry as our stance at the WTO has been to reduce protection and regulation.

Micko should look at current corn and wheat prices compared to long term averages.

Also the International Food Policy Research Institute in Washington concluded that world wide ethanol production is responsible for 39 percent of the increase in corn prices, 22 per cent of increase in wheat prices and 21 percent of the increase in rice prices between 2000-2006.

In terms of the energy, the 2007 (not 1979) CSIRO report on the issue states that grain derived ethanol has only two thirds of the energy of conventional fuel therefore more ethanol is required to drive the same number of kms.

The report also states that grain derived ethanol provides only a 1-4% greenhouse gas benefit over unleaded petrol

See http://www.rirdc.gov.au/reports/EFM/07-071.pdf

All recent Australian reports on Government support for the ethanol industry has concluded that the costs outweigh the benefits.

Accordingly, let's focus on second generation ethanol technologies using non-food crops which are more cost-effective, environmentally beneficial, have a greater energy output to input ratio than grain ethanol and mitigate ‘food versus fuel’ arguments.

I have recently conducted research on biomass fuels - used for both fuel and electricity. Through my research there is a lot of potential for regional communities in Australia to benefit, as well as utilising wind, tidal, & geothermal sources.

A small electricity plant serving 4000-6000 people annually would only need 10 small B-double of biomass (plant/tree/grass/green waste mass) a week. Investment? only $100,000.

Council collected waste would faciltate this quite easily.

Most people didn't know anything about biomass fuels, or even cared about it. They had only heard of biomass fuels in the form of ethanol, and hence the food for fuel debate.

Then they get on this bandwagon, and end up becoming against biomass fuels, even though they have no idea of what is involved.

It is almost like they are just waiting for the Government to do something, or waiting for fuel and coal to run out, then they'll start caring.

Why do we have to wait until fuel and coal run out before implementing alternate sources?

Can't our Government take initiative now?

Challenging times are ahead..