Criticism of the Department of Minerals and Energy’s (DME’s) Draft Biofuels Industrial Strategy grows, the potential advantages of some of the recommendations made in Treasury’s recently released windfall tax report on developing a biofuel sector in SA have largely gone unnoticed.
The task team which compiled the windfall tax report recommends that if government wishes to intervene to address supply-side issues in non-petroleum-based fuels, the manufacture of biofuels should be given precedence over new facilities for the manufacture of synthetic fuels from coal or gas, given the former’s expected greater benefits to the economy.
In contrast, DME’s draft strategy does not compare biofuel plant establishment with the establishment of other synthetic fuel plants. Treasury’s report has different recommendations for the duration of incentives, the fuel levy exemption and how the equalisation fund will function. Prominent in Treasury’s suggestions is that the duration of incentives should be longer.
The DME proposes incentives should be in place until 2013, but the windfall report suggests incentives should fall away only after 10 to 15 years. W hereas the draft strategy proposes no tariffs on biofuels and energy crops, the windfall report proposes a new import policy that prioritises biofuel imports over fossil fuel imports when local production can’t supply blending targets in terms of the fuel levy exemption. This, says the report, is motivated by the need to reduce reliance on fuel imports from the Middle East and to stimulate south-south trade.
Sandile Tyatya, DME’s chief director of clean energy, said Treasury’s report was compiled independently of draft strategy and that the reports are not linked in any way. e said he could not comment on the content of Treasury’s report. It is not clear whether the DME will consider the proposals made in the windfall report when it reviews its draft strategy. – Wilma den Hartigh
