Market modeling of a Sustainable Biofuels Mandate in New Zealand

To increase the use of lower-carbon fuels in the transport sector and contribute to climate change mitigation goals, New Zealand is considering a Sustainable Biofuels Mandate. As currently proposed, the mandate would take the form of a transport fuel greenhouse gas (GHG) intensity reduction target and seek to avoid negative sustainability impacts, particularly regarding competition with food and feed production, biodiversity impacts, and the conversion of land containing large stocks of carbon. To help, this paper considers three scenarios for how the government could implement its sustainability aims for this policy. It focuses on various limits that could be placed on food- and feed-based biofuels, and the authors assess the combination of biofuel pathways that could be used to meet the mandate in 2025 in each scenario, and also the associated GHG impacts and costs.

As the table below shows, the GHG reductions are highest in Scenario 1, where no food- or feed-based biofuels are allowed, and this comes at a greater cost than Scenario 2, where such biofuels are limited to 50% for compliance and high indirect land use change (ILUC) biofuels are not allowed. GHG emissions actually increase compared to no policy action in Scenario 3, where there is no limit on the amount of food- or feed-based biofuels. Scenario 1 comes at a greater cost to consumers than Scenario 2 because supplying high quantities of waste-based biofuels is more expensive than supplying food-based biofuels. However, the average cost of carbon abatement when considering ILUC emissions is only about 20% lower in Scenario 2 than in Scenario 1.

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