State Government announced this week that it will mandate a minimum five percent ethanol content in unleaded fuels sold in the state from the end of next year.
State Treasurer Andrew Fraser said the new law would see 183 million litres of fuel ethanol produced each year, providing new jobs and opportunities for farmers.
Speaking to state parliament this week, Mr Fraser said that a mandate would motivate investment in the ethanol industry.
Acknowledging that around 25 percent of car models cannot be run on ethanol blended fuels, Mr Fraser said that allowances would be made to ensure drivers still have access to regular and premium unleaded.
"The proposal would apply the mandate in such a manner that regular unleaded petrol would remain widely available," Mr Fraser said.
"The proposed ethanol mandate would apply to all petrol wholesalers and petrol retailers who own ten or more sites.
Mr Fraser said that this approach would have 73 percent of Queensland's petrol retailers selling ethanol blended fuels, while smaller stations could continue to offer regular fuels.
"As we confront climate change this proposal assists us now and more importantly into the future, through providing a platform for further research and development in next generation technology," Mr Fraser said.
Similar proposals in Western Australia have failed, with the WA Government announcing that it will not look to institute any mandate requiring any ethanol content in unleaded fuel.
Describing the WA Government's decision as "a victory for common sense", Australian Lot Feeders' Association President Jim Cudmore urged the Queensland Government to reconsider.
Mr Cudmore told Farm Weekly that ethanol mandates lead to higher grain and food prices, potential job losses, and huge compliance costs as the industry waits for more advanced ethanol technologies.
The Federal and Victorian Government have so far opposed ethanol mandates.