Biofuels mandate will create long-term stability in market, Jacinda Ardern says amid concerns fuel prices will jump

The Prime Minister says the Government's planned biofuels mandate will help create long-term stability in the fuel market, something she says recent price volatility has shown a need for.

But National is worried the mandate will lead to prices rising, pointing to officials' analysis saying prices could jump 5 cents per litre for petrol or 10 cents for diesel.

The Government in December announced it would introduce a Sustainable Biofuels Mandate, requiring fuel companies to reduce the total greenhouse gas emissions for transport fuels they sell by introducing more biofuels into their supply. 

Work on a mandate first began under Helen Clark before being nixed by the subsequent National Government. When announcing the mandate last year, the Government said it wouldn't be implemented until April 2023.

Jacinda Ardern confirmed on Monday that the Government is still looking to "reinstate it".

"I think the really important reason why is because we're really vulnerable at the moment," she told AM. "Our fuel security, you can see the impacts on pricing by our ongoing reliance on fossil fuels. This is something about ensuring that we have greater security it's also about, of course, emissions."

"In the long term, this is one of the ways that we can keep more stability in what we see in our fuel market."

Ardern on Monday told AM "it's very difficult" to understand the potential impact on fuel prices as different fuel companies may go about increasing biofuel supply in different ways.

"What we're requiring is fuel companies to have a percentage use of biofuels, so in the mix having a particular percentage of biofuels. It would depend on how they choose to implement that," she said.

"It will also depend on how they create it, whether or not they're in the position to produce themselves, whether or not they're importing. There's a range of factors that make it difficult for us to say at this point."

"I think the really important reason why is because we're really vulnerable at the moment."
"I think the really important reason why is because we're really vulnerable at the moment." Photo credit: Getty Images.

It would be wrong, she said, to assume that by not introducing the biofuels mandate that fuel would remain cheaper. 

"You'll see right now what we're experiencing is the impacts of our reliance on fossil fuels and our reliance on overseas markets. We do have to change up the way that we are accessing and the nature of our fuel supply in New Zealand."

The cost of living has risen dramatically in recent months. In January, StatsNZ revealed inflation was at a 30-year-high and some banks expect it to only worsen. The cost to fill up a vehicle is one major part of that, with oil prices skyrocketing off the back of Russia's invasion of Ukraine in late February.

"The Government only recently responded to the Cost of Living Crisis by reducing fuel excise by 25c per litre temporarily and announced a temporary reduction in RUC rates," National's transport spokesperson Simeon Brown said. 

"Forging ahead with a Biofuel mandate will only put that pressure back onto working families. It is giving with one hand, and taking with another.

"Motorists already pay for the effects fuel has on the climate through the Emissions Trading Scheme which adds approximately 19c to a litre of fuel. Not only will this biofuel mandate increase fuel costs but it will mean consumers are paying twice for the effects fuel has on the climate.

"While National is supportive of biofuels and reducing our carbon emissions, the Government cannot double dip into Kiwis’ pockets by taxing them through the ETS and the biofuel mandate."

But Ardern said Kiwis won't be seeing any immediate change in prices. 

"Am I expecting overnight an impact at the pump for consumers? No. Nor is it as straightforward as just saying overnight, we're going to have an extra five cents," she said.

"We're working really hard to try and actually mitigate the impact right now in the middle of the war. We will keep doing. This is about actually the future, our long term supply and also what we're doing to try and build greater fuel security."

Energy and Resources Minister Megan Woods last year said that as land transport accounts for half of national carbon dioxide emissions, "we need to take action to start to mitigate transport’s impact on climate change".

“The Sustainable Biofuels Mandate will prevent around one million tonnes of emissions from cars, trucks, trains and ships over the next three years and up to 10 million tonnes by 2035 to help us meet our climate commitments."

The cuts required of retailers will come in progressively with the Government setting a percentage each year. 

Biofuels benefit the environment due to how they cycle carbon. 

"When the biomass the fuels are made from grows, it absorbs CO2," the Government says. "Roughly the same amount of CO2 is released when the fuels are burnt. This cycle means that the emissions of sustainable biofuels are much lower than fossil fuels."