Markets: Bioenergy markets in Australia: Bioenergy markets: Ethanol
Biofuels, comprising ethanol and biodiesel, are one of the main alternatives to petrol and diesel used for motor vehicles in Australia.

Ethanol is an alcohol produced by fermenting biomass such as bagasse, sorghum or molasses, or using newer, ‘second-generation’ technologies such as pyrolysis or gasification.

It can be mixed with petrol to produce a blended motor fuel.

Facilities and capacity to produce ethanol

Production of biofuels in 2010–11 represented around 1% of Australia’s petrol and diesel production, according to the publication, Energy in Australia 2013, published by the Bureau of Resources and Energy Economics.

There are 3 major fuel ethanol production facilities in Australia. These facilities produce ethanol primarily from wheat starch, grain sorghum and molasses.

Total capacity to produce ethanol is around 440 million litres a year. Around 68% of this occurs in New South Wales, at a single production facility in Nowra.

This capacity is currently enough to meet Australia’s ethanol needs, but increasing demand could encourage new suppliers to produce ethanol.

Table 1. Fuel ethanol production facilities in Australia, 2012

Capacity (ML/pa)

Manildra Ethanol Plant, NSW


Waste starch
Dalby Biorefinery, QLD


Sorghum (grain)
Sarina Distilleries, QLD


ML/pa: Million litres per annum

Source: Biofuels Association of Australia 2012

Policies and regulation

Fuel standards

Fuel quality standards have progressively improved in Australia, with the aim of reducing the adverse effects of motor vehicle emissions on air quality and human health and to enable Australia to effectively adopt new vehicle engine and emission control technologies.

E10, a grade of standard unleaded petrol containing 10% ethanol, is offered as an alternative to unleaded petrol, largely in eastern Australia.

E85, a grade of standard unleaded petrol containing up to 85% ethanol, is offered through a small number of metropolitan fuel outlets.

(Source: Energy in Australia 2013, published by the Bureau of Resources and Energy Economics, page 92.)

Fuel quality and labelling standards are given by the federal Department of the Environment for:

Mandated ethanol sales

In Queensland , parliament passed the Liquid Fuel Supply (Ethanol and Other Biofuels Mandate) Amendment Bill 2015 on 1 December 2015. The Bill requires the fuel industry to meet targets for the sale of bio-based petrol, such as E10 ethanol-blended petrol and bio-based diesel. Initial mandates are:
  • 3% for petrol. In practice, this means that at least 30% of regular unleaded petrol sales must be E10 (because E10 is only 10% ethanol blended with regular unleaded petrol).
  • 0.5% for bio-based diesel.
Both mandates will start on 1 January 2017. Find out more about the ethanol mandate, the percentages, and the possible pathways towards 2020.

In New South Wales, 6% of petrol sales must be ethanol. The Biofuels Act 2007 imposes this mandate on major fuel sellers. Other states have considered mandates and targets.

A review of ethanol supply and demand in NSW by the Independent Pricing and Regulatory Tribunal in April 2012 found that:
  • there is enough ethanol supply to meet the mandate
  • there is not enough demand for ethanol to meet the mandate
  • several factors affect demand for E10 fuel
  • market operation issues make it difficult to achieve the mandate.
The review identifies several options for government to consider to balance the goals of having a viable ethanol industry, providing fuel choice to motorists, and minimising increases in petrol prices.

Excise and taxation arrangements

Under the Ethanol Production Grants program, grants are provided to ethanol producers for ethanol produced and supplied for transport use in Australia from locally derived feedstocks.

(Source: Energy in Australia 2013, published by the Bureau of Resources and Energy Economics, page 95.)

The intended outcome of the program is to:
  • encourage the use of environmentally sustainable fuel ethanol as an alternative transport fuel in Australia
  • increase the capacity of the ethanol industry to supply the transport fuel market
  • improve the long-term viability of the ethanol industry in Australia.
In May 2014, the Australia Government announced that it will cease the Ethanol Production Grants Programme on 30 June 2015.

The fuel excise on domestically produced ethanol will be reduced to zero from 1 July 2015 and then increased by 2.5 cents per litre per year for five years from 1 July 2016 until it reaches 12.5 cents per litre, which represents 50 per cent of the energy content equivalent rate.

In July 2011, the Australia Government extended the taxation arrangements for renewable fuels (ethanol, biodiesel and renewable diesel) for the next 10 years. The industry pays its full excise and it is granted back to them. The Government will review these arrangements after 30 June 2021. (Source: Biofuels Association of Australia webpage.)

If you manufacture or blend fuel ethanol, the Australian Taxation Office explains how excise applies to the ethanol you manufacture, and refers you to more detailed information to help you meet your excise obligations.

Grants and incentives

A number of national and state-based grants and support services are listed in the Grants and incentives section of this website.


APAC Biofuel Consultants – Mike Cochran

APAC Biofuel Consultants

Phone: +61 08 82715818
Tony D’Alessandro

Renewable Developments Australia (RDA)

Pentland, Charters Towers, Queensland 4816,
Col Stucley


Suite 5, 651 Canterbury Road, Surrey Hills, Victoria 3127
Phone: +61 (03) 9895 1250
Geoff Pain

147 David Hill Road, Monbulk, Victoria 3793
Amir Abadi

Department of Agriculture and Food, Western Australia

University of Western Australia, Nedlands WA 6907,
Phone: 0448 879 757