Three of Australia's peak automotive industry and consumer bodies have urged the federal government to support a maximum limit of10 percent of ethanol in petrol and not to mandate its use.
The landmark determination by the three bodies sets a clear agenda for government deliberations.
The joint agreement by the Australian Automobile Association, the Federal Chamber of Automotive Industries and the Australian Institute of Petroleum comes at a time when the Federal Government is determining its policy on the inclusion of ethanol in petrol.
The three organisations have considered issues of price, operating efficiency, and supply.
They say that while a 10 percent ethanol level is acceptable, mandatory introduction would severely disadvantage consumers and potentially have negative impact on raw material suppliers.
The FCAI, representing car makers and importers, has determined existing vehicle warranties could support and ethanol level of up to 10 percent. However FCAI chief executive Peter Sturrock has warned ethanol levels in excess of 10 percent could cause severe operational malfunctions including loss of drivability, loss of fuel economy and accelerated wear of engine components and fuel lines.
"A proportion of ethanol greater than 10 percent would place Australia outside world's best practice and would seriously impact on world maker's ability to purpose build cars for our market," Mr. Sturrock said.
"Certainly it would have an effect on warranties."
"Apart from that challenge it is irrefutable that high ethanol levels lead to increased fuel consumption."
The Executive Director of the Australian Automobile Association, Lachlan McIntosh, said that mandating a fixed proportion of ethanol in petrol would have serious ramifications for the 6.4 million motorists his organisation represented.
"Ethanol has lower energy content than petrol and costs more to produce. The likely outcome would be more expensive petrol with reduced fuel economy," Mr McIntosh said. "That would only serve to anger motorists who are very sensitive to petrol prices."
"There is also a concern about the effect on engine components. Manufacturers consider warranties void if a vehicle has been using petrol with ethanol content higher than 10 percent."
"AAA is keen to encourage the introduction of alternative fuels such as ethanol but is concerned to ensure that overall quality and price is not distorted by use of other products in the fuel mix," he said.
The Australian Institute of Petroleum said local sugar growers could be disadvantaged by a "flood of imported ethanol."
According to AIP Executive Director Bryan Nye moves to help the local sugar industry which provides the raw stock could be thwarted by imports.
"There are serious issues of impact on costs and efficiency the Australia's already struggling oil refining industry," Mr Nye said.
"In trying to help primary industry, a government mandate on ethanol could put our industry on the floor."
"Any consideration of mandates should also consider all bio-fuels not just ethanol."