A 38 CENTS a litre Federal Government subsidy to Australian ethanol producers, due to expire in September, has been extended to June 30, 2008.
The subsidy will then be reduced in yearly instalments until July, 2012, to a yet-to-be established level.
Deputy Prime Minister John Anderson said producers of ethanol, a renewable energy source made from fermented agricultural products such as sugar and grain, had told the government they needed longer-term arrangements in place to give them investment certainty.
"Our decision will establish an environment where ethanol producers can invest in confidence knowing the arrangements that will apply to their industry for the next nine years," Mr Anderson told a budget breakfast in Brisbane recently.
He said at a meeting, ethanol industry stakeholders ‹ which included representatives of the oil industry, fuel distributors and marketers, the automotive industry, motoring organisations and existing and potential ethanol users ‹ agreed to cooperate towards future industry development.
"There was unanimous agreement that the government measures, including labelling, the 10 per cent cap on ethanol blends and the nine-year program of industry assistance announced in the budget had provided a secure legislative platform for the industry to go forward," Mr Anderson said.
A small taskforce of stakeholders has been formed to plan specific measures to restore public confidence in ethanol, following what Mr Anderson claimed was "sensational but inaccurate publicity regarding ethanol in the Sydney market last year".
Jim Pedersen, who chairs Canegrowers ‹ an organisation which represents more than 93pc of Queensland's cane growers ‹ described the continuation of the subsidy as a positive step, but said many growers would be disappointed Canberra had not introduced a mandatory requirement for all petrol to be blended with some ethanol.
"The rebate is helpful but on its own it doesn't provide the encouragement we would have wished for at a time when the sugar industry is seeking to add value to its production by developing new income streams from by-products like ethanol and bioplastics," he said.
Mr Pedersen said five years was the absolute minimum needed to encourage investment in an industry which had potential to provide huge environmental, public health and economic outcomes while assisting the sugar industry to recover.