ATSE says that with strong governance, guaranteed funding and appropriately focused international linkages, the "impressive cadre" of Australian researchers in the bio-industries could come together far more effectively than through the fragmenting, competitive, grant-driven, step-by-step processes that characterise much of Australia's research and development.

It calls for the Biofuels Institute to be established along the innovative lines of the recently announced Global Carbon Capture and Storage Institute, the National Low Emissions Coal Initiative and the soon-to-be-created Australian Solar Institute.

These models, building on the clustering and industry-creating experiences of a number of Cooperative Research Centres, are expected to be able to go further than CRCs realistically can, ATSE says.

The report states that recent world events have brought the issue of fuel supply into extremely sharp focus. Australia has limited transport fuels alternatives, but can advance strongly in Generation 2 biofuels.

Australia has modest prospects in the domain of Generation 1 biofuels – ethanol and biodiesel – where a fledgling industry is established, based mainly on food by-products, within an uncertain policy environment.

While there is some room for growth, ATSE says competition for scarce resources – including water and agricultural land well-suited for food production – make it unlikely that a substantial Generation 1 industry could further develop in Australia without market-distorting mandates or subsidies.

But in the Generation 2 biofuels domain, where non-food resources dominate, Australia may be well-situated to establish a thriving future industry, based on the prolific and lower-value resources which it has in abundance.

ATSE says the significant potential for the economic conversion of lignocellulosics (woody plants) to ethanol and specialised algae strains to biodiesel warrant an enhanced commitment to R&D in this sector.

* Click here to read the full ATSE report.