Biofuels are a long-term solution for a long-term problem

Recently the Royal Australian Navy signed a statement of co-operation with the United States Navy to explore the increased use of environmentally friendly fuels.

The agreement will enable the RAN to access biofuel technology being developed in the US, and continue work with American fleets on joint operations, achieving the goal of a joint ''great green fleet'' deployment in 2016.

But biofuel often gets cast as a green monster: the costs of biofuels have overshadowed their environmental benefits, not to mention the significant advantages to defence forces in ensuring energy independence. So, why are American and Australian defence forces pumping the biofuel tank?

It may not be for the near-term economic benefits. Recent studies by the RAND Corporation indicate that scenarios in which biofuels directly reduce military costs are highly unlikely. RAND researcher James Bartis concludes that ''pending a major technical breakthrough, renewable jet and marine fuels will continue to be far more expensive than petroleum-based fuels''.

But near-term economic costs aren't the only things that need to be considered in the biofuel pipeline. Costs to strategy, personnel, operations, and the environment should also shape Defence planning.

Oil price volatility and the concentrated location of the world's petroleum reserves, particularly in regions suffering from governance problems, mean that American and Australian defence forces are dependent on external markets and actors.

The Centre for a New American Security calculates that for every $10 increase in the price of a barrel of oil, the US Air Force increases its annual fuel cost by $US619 million. Spiking oil prices bring added concern when driven by the political interests of oil-producing states.

Developing biofuels and controlling their production is likely to provide more dependable access to fuel. It will go some way to mitigate the current vulnerabilities faced by both Australian and American militaries that rely on unstable markets.

Building domestic biofuel industries may potentially generate economic benefits for both Australia and the United States. Provided that the production of crops for manufacturing biofuels is made economically viable, there's a window of opportunity for both countries to leverage the consumption of alternative fuels.

The recent Australian Defence Force Posture Review found that reductions in Australia's domestic oil refining capacity could be significant if the global fuel supply chain was under major stress. It also concluded that while the fuel supply chain can meet current requirements and more likely operational requirements, ''its resilience under the stress of major operations is less certain''.

Ensuring cost-effective biofuels is no small feat. But nor should this goal be seen as too hard because policy makers baulk at the idea of investing precious budgets in ''alternatives'' when finite resources may currently be cheaper. Creating viable renewable fuels is a long-term solution for a long-term problem.

A synchronised move towards biofuel independence will continue to improve interoperability between American and Australian defence forces, strengthening the strategic alliance.

An estimated 3000 US troops have died trying to transport oil, while one in eight US Army casualties in Iraq was the result of protecting fuel convoys. While biofuel may not directly reduce the associated logistical constraints and risks in the transportation of fuel to battlefields, a move towards energy independence goes some way to addressing these concerns.

Developing more efficient energy sources will reduce fuel demand and associated logistical challenges. Investing in research to develop biofuels beyond their current optimal performance ranges could, in the long term, reduce the need to transport large volumes of fuel and the associated human costs of this logistical operation.

Going even further to develop renewable energy sources to power military equipment will dramatically improve operational risk and increase defence resilience in battle zones.

Based on current Treasury modelling it's estimated that the carbon tax will cost the Australian Defence Force $81.9 million in 2012-13. This may be a relative drop in the (shrinking) ocean of the ADF's budget. But it's sizeable enough to cause a splash.

Meeting carbon emission budgets may be a driving factor in Defence's move towards biofuels both in Australia and the US: money drives many things, especially tanks, planes, and ships.

Greening defence will pay both environmental and reputational dividends. In 2009-10 the ADF accounted for more than half of the Australian government's total energy use.

Defence forces are often perceived as overly gung ho fuel guzzlers: the US Department of Defence is one of the world's largest fuel users.

Minimising the environmental footprint of the ADF by investing in alternative fuels will demonstrate that Defence recognises it's got a role to play in mitigating climate change and a responsibility to reduce its impact on the environment.

And a greener military will result in a more flexible force as well.

Eliza Garnsey is a research analyst at the Australian Strategic Policy Institute.