You need JavaScript to view this

An Innovation Systems Assessment of the Australian Biofuel Industry. Policy and Private Sector Implications

Abstract

A strong biofuel industry in Australia has the potential to provide numerous benefits to the nation and its peoples. The benefits include; reduced emissions of greenhouse gases and harmful particulate matter, a boost to rural development goals, enhanced fuel security and a lower balance of payments. For biofuels to be seriously considered as alternatives to traditional petroleum based automotive fuels they must be economically viable. The findings from a series of Australian Bureau of Agricultural and Resource Economics (ABARE) investigations suggest that ethanol and biodiesel production would be economically viable, in the Australian context, with oil prices in the range of 30-40 USD a barrel. Despite the price of oil being in or above this range for over two years a strong home grown biofuel industry has failed to develop in Australia. The purpose of this master's thesis therefore is to identify the critical issues facing biofuel industry development in Australian and to propose possible policy and private sector strategies for dealing with them. The analysis was done in the following three steps; the first was to map the development of the ethanol and biodiesel industries, the second was to analyse the performance of the industries overtime and the third  More>>
Authors:
Publication Date:
Jul 15, 2006
Product Type:
Technical Report
Report Number:
CTH-ESA-R-2006-16
Reference Number:
RN07000147; TVI: 0620
Resource Relation:
Other Information: Examination paper. 30 refs., 6 figs., 8 tabs.
Subject:
09 BIOMASS FUELS; BIOFUELS; AUSTRALIA; ETHANOL FUELS; DIESEL FUELS; ENERGY POLICY; FUEL SUBSTITUTION; FINANCIAL INCENTIVES; MARKET; PRICES; AUTOMOTIVE FUELS
OSTI ID:
20805584
Research Organizations:
Chalmers Univ. of Technology, Goeteborg (Sweden). Div. of Environmental Systems Analysis
Country of Origin:
Sweden
Language:
English
Other Identifying Numbers:
Other: ISSN 1404-8167; TRN: SE0607467
Availability:
Also available as a PDF-document from: https://www.chalmers.se/ee/SV/forskning/forskargrupper/miljosystemanalys/publikationer/pdf-filer; Commercial reproduction prohibited; OSTI as DE20805584
Submitting Site:
SWD
Size:
70 pages
Announcement Date:
Dec 20, 2006

Citation Formats

Nielsen, Jason D. An Innovation Systems Assessment of the Australian Biofuel Industry. Policy and Private Sector Implications. Sweden: N. p., 2006. Web.
Nielsen, Jason D. An Innovation Systems Assessment of the Australian Biofuel Industry. Policy and Private Sector Implications. Sweden.
Nielsen, Jason D. 2006. "An Innovation Systems Assessment of the Australian Biofuel Industry. Policy and Private Sector Implications." Sweden.
@misc{etde_20805584,
title = {An Innovation Systems Assessment of the Australian Biofuel Industry. Policy and Private Sector Implications}
author = {Nielsen, Jason D}
abstractNote = {A strong biofuel industry in Australia has the potential to provide numerous benefits to the nation and its peoples. The benefits include; reduced emissions of greenhouse gases and harmful particulate matter, a boost to rural development goals, enhanced fuel security and a lower balance of payments. For biofuels to be seriously considered as alternatives to traditional petroleum based automotive fuels they must be economically viable. The findings from a series of Australian Bureau of Agricultural and Resource Economics (ABARE) investigations suggest that ethanol and biodiesel production would be economically viable, in the Australian context, with oil prices in the range of 30-40 USD a barrel. Despite the price of oil being in or above this range for over two years a strong home grown biofuel industry has failed to develop in Australia. The purpose of this master's thesis therefore is to identify the critical issues facing biofuel industry development in Australian and to propose possible policy and private sector strategies for dealing with them. The analysis was done in the following three steps; the first was to map the development of the ethanol and biodiesel industries, the second was to analyse the performance of the industries overtime and the third was to identify the mechanisms which have either induced or blocked their growth. The strategies proposed by this thesis were derived from analysing the inducing and blocking mechanisms and the related issues. The innovation systems approach was chosen because of its ability to provide insights into key industry players, their network interactions and the institutional setup within which they work together to develop, diffuse and use their products. The data needed for the analysis stated above included information related to the development, diffusion and use of ethanol and biodiesel; that is, details about the industry actors and their activities, industry networks, product standards, excise arrangements, government policy and so on. This was complemented by interviews with top level managers from the most influential ethanol and biodiesel producers, a large financial investment group, a university research centre and a government department. The Australian ethanol and biodiesel industries, when viewed from an innovation systems perspective, have undergone considerable structural change since the early 2000s. Many new producer firms and other actors have entered the field, product standards have been created, fuel excise arrangements have been set and some industry networks and advocacy coalitions have also been formed or strengthened. Numerous inducing and blocking mechanisms were identified as influencing the ability of the ethanol and biodiesel industries to develop, diffuse and utilize their respective biofuels. The inducing mechanisms identified include broad contextual factors such as climate change, high oil prices and rural development goals. These drivers have inspired grant schemes, government fuel contracts, formation of lobby groups and consumer demand for cheap home grown alternatives. The overall performance of the ethanol and biodiesel industries has varied overtime with the key challenges coming from their ability to; legitimize their offerings, form markets and develop new knowledge. Legitimation is a major challenge for both the ethanol and biodiesel industries. It is acceptance by consumers which lies at the heart of the ethanol challenge while for biodiesel it is acceptance by engine manufacturers and automotive groups that is currently blocking greater acceptance. The ethanol scare campaign of 2002-03 should serve as a reminder to the biodiesel industry that having engine manufactures and automotive groups on side is crucial for successful market development, especially for the mass market which can be highly temperamental and easily manipulated. The ethanol and biodiesel industries both have considerable market formation challenges with the problem being most acute for the ethanol industry. The principal mechanisms blocking market formation for fuel ethanol is poor consumer demand combined with a limited distribution network. The market formation challenge facing the biodiesel industry consists of uncertainty due to up coming fuel tax credit reform, the need to choose a mass market entry blend and a limited distribution network. Knowledge development is another challenge facing the ethanol and biodiesel industries and one with long term implications. For Australia to minimize its dependency on technology imports, and for it to be able to derive greater economic value along the whole value chain, it must overcome the current lack of research and development which characterises the biofuel sector. Possible strategies for dealing with the biodiesel industry critical issues include; forming a biodiesel specific industry association, working closely with government agencies and engine manufactures to run credible engine compatibility trials, choosing a common mass market entry blend, and forming a broad coalition of advocates to lobby governments for greater market formation and research and development support. Possible strategies for dealing with the ethanol industry critical issues include; developing closer ties with Oil Majors, working with automotive groups to promote clear and concise information about engine compatibility, promoting fuel ethanol's environmental and health benefits, and taking a more active stance towards supporting research and development of second generation production technologies. The results of this thesis support the idea that those who actively seek to overcome the critical issues facing the ethanol and biodiesel industries stand to be the long term economic winners in the global quest to develop new industries that can deliver alternatives to petroleum based automotive fuels.}
place = {Sweden}
year = {2006}
month = {Jul}
}