If you are one of the growing numbers of Australians looking to reduce your petrol bills by filling up with E10, you might be in for a surprise.

Unless the price difference between "regular" unleaded fuel (also known as 91 RON) and E10 is 4 cents per litre or greater, refuelling with E10 is probably costing you more.

(RON stands for research octane number. In modern vehicles, under certain operating conditions, higher RON can provide improved fuel efficiency.)

The relationship between fuel types and vehicle efficiency is complex and depends on factors such as the energy content of the fuel, the specific technologies installed in individual vehicles, the temperature, the humidity, as well as how and where a motorist drives.

What is a biofuel mandate? A biofuel mandate is a government policy that requires the fuel industry to meet targets for the sale of bio-based fuels. Two Australian states have introduced biofuel mandates — Queensland and NSW.

A biofuel mandate is a government policy that requires the fuel industry to meet targets for the sale of bio-based fuels. Two Australian states have introduced biofuel mandates — Queensland and NSW. In Queensland, the bio-based petrol mandate requires that 3 per cent of the total volume of regular unleaded petrol sales and ethanol-blended fuel sales by liable retailers must be bio-based petrol (ethanol). That mandate will increase to 4 per cent from July 1, 2018.

In Queensland, the bio-based petrol mandate requires that 3 per cent of the total volume of regular unleaded petrol sales and ethanol-blended fuel sales by liable retailers must be bio-based petrol (ethanol). That mandate will increase to 4 per cent from July 1, 2018. In NSW, fuel retailers must ensure that ethanol makes up a minimum of 6 per cent of the total volume of their petrol sales.

Ethanol has a lower energy content than petrol, so generally speaking it provides "less bang for your buck". This means that you probably won't drive quite as far on a tank of E10 as you would on a tank of 91 RON or 95 RON — or "premium" unleaded — fuel.

This is fine if the price of E10 is low enough, but this is often not the case.

The RACV is currently quoting a 3 cent per litre price differential across Victoria, which means that refuelling with E10 is a false economy for the average motorist.

But here's where things get a bit more complicated: ethanol increases the octane rating of fuels. Modern vehicles may be able to take advantage of higher octane fuels, but older cars cannot.

Higher octane can enable the engine management system on modern vehicles to optimise spark timing to suit the engine load and fuel grade, which will increase power and improve fuel efficiency in some circumstances.

For the folks driving modern vehicles, the small performance benefit provided by E10's higher octane will help make up for the fuel's lower energy content and on average their driving costs could end up the same as driving on regular unleaded.

New South Wales and Queensland both have mandates for the sale of E10, however, a large percentage of Australian vehicles cannot take advantage of this fuel.

About 10.7 million Australian vehicles require 91 RON fuel as a minimum. At least 40 per cent of these will not derive any benefit from the higher octane provided by E10 at current prices.

Global studies show that ethanol blended fuels can lower well-to-wheel CO2 emissions, but the environmental benefit varies. ( ABC Goldfields-Esperance: Sam Tomlin )

Biofuels environmental benefit varies

Sifting through the scientific literature to try to find a definitive answer on the benefits of ethanol in fuels can be frustrating, as there is some dispute about the overall benefits of biofuels — ranging from their performance benefits and actual "well-to-wheel" environmental impacts, through to changes in land use and impacts on poverty.

In many states without an ethanol mandate, those currently using E10 may be those who can least afford any extra costs. ( ABC TV )

You can find a study and anecdotal evidence to support pretty much any position you want to take, which can make life very difficult for analysts and policymakers.

It appears that the EU is evaluating its renewable fuels policies, particularly with regard to first-generation biofuels, and Australia may benefit from their learnings.

Generally speaking, global studies show that ethanol blended fuels lower well-to-wheel carbon dioxide emissions, but the environmental benefit varies significantly depending on the feedstock, the production process and the source of electricity that powers ethanol's production (most particularly when that electricity is produced by coal).

Presently, the sustainability certification of Australian produced ethanol is not transparent. We know from studies conducted by organisations including the European Commission that when coal is used to produce ethanol, it can result in "little or no greenhouse gas emissions saving for ethanol compared to gasoline" on a well-to-wheel basis. This is a significant consideration for Australia, given our current reliance on fossil fuels.

Servos may need help selling the E10 message

New South Wales has the most stringent ethanol mandate in Australia and has seen a strong swing towards premium fuels. It is true that motorists could save significant amounts of money by refuelling with E10 in NSW as opposed to the premium 95 RON, but clearly many NSW motorists don't want to.

Unfortunately, in many states without an ethanol mandate, those currently using E10 may be those who can least afford any extra costs. Market research conducted by ABMARC in 2013 indicated that a large percentage of E10 users had vehicles significantly older than the national average, which was considered to be an indicator of socioeconomic disadvantage.

So, is there any reason to consider an ethanol mandate? Yes. Energy security.

At the moment, Australia is not meeting our emergency fuel reserve obligations as required under the International Energy Agency program treaty. This treaty requires us to hold oil reserves equivalent to at least 90 days' of our previous year's daily oil imports. Recent reports indicate that we are holding only 50 days' reserve.

Biofuels, including ethanol, can provide a small but meaningful improvement to our energy security by displacing imported oil, and helping to extend existing reserves.

However, the challenges of integrating biofuels into the supply and distribution network should not be underestimated, and assistance may need to be provided to fuel distributors and retailers to help them manage the costs associated with providing E10 at all of the nation's service stations.

Consumers should not be forced to use particular fuels unless there is full transparency on their well-to-wheel environmental credentials. ( ABC News )

Consumers deserve transparency on biofuel costs

Any biofuels mandate should ensure a minimum price difference so consumers can achieve a cost saving, although this must be applied carefully to avoid unintended consequences.

A fuel nozzle at a Shell petrol station in Canberra on October 08, 2013. ( AAP: Lukas Coch )

Consumers should not be forced to use particular fuels unless there is full transparency on their well-to-wheel environmental credentials, as well as their long-term community and industry benefits.

Further, any mandate should be accompanied by policies that encourage innovation within the biofuels sector, with obligations around R&D expenditure to enable development of new generation biofuel production and fuel-efficient technologies.

In setting new policies, it is important to ensure that the policy goals can be achieved, and that individuals and the community are not disadvantaged.

This poses a very real problem for policymakers that is likely to be difficult to solve.

Natalie Roberts is the managing director at engineering group ABMARC, which conducts research and testing on fuels and emissions for the transport industry and consumers.