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Wednesday, 17 September 2003
Page: 20274


Mr ORGAN (12:26 PM) —I welcome the opportunity to speak today on the Energy Grants (Cleaner Fuels) Scheme Bill 2003 and the associated Energy Grants (Cleaner Fuels) Scheme (Consequential Amendments) Bill 2003. The Greens welcome the government's commitment to the production of alternative and renewable fuels and a phasing out of the use of so-called dirty fuels in favour of more appropriate, cleaner fuels. In this context we are generally talking about biofuels—biodiesel, ethanol and other alcohol fuels et cetera—along with the removal from fossil fuels of nasties such as benzene and sulfur.

As the Parliamentary Secretary to the Minister for Finance and Administration stated in his second reading speech last week, this scheme is part of a long-term initiative by the government to rationalise the various excise and customs duties applying to fuels either produced or imported into Australia. The purpose of this bill—which as the previous speaker, the member for Batman, pointed out has been rather hurriedly introduced; I do not feel we have been given appropriate time to consider its detail—is to establish the cleaner fuels grants scheme, which provides for grants to importers and manufacturers of cleaner fuels.

From 18 September biodiesel is due to become subject to excise and customs duty. However, under the Energy Grants (Cleaner Fuels) Scheme Bill a grant equivalent to the amount of duty will be available to importers and manufacturers, giving an effective zero excise/customs rate. This bill and the Energy Grants (Cleaner Fuels) Scheme (Consequential Amendments) Bill set up the machinery for the grants scheme.

A bit of background on this bill is appropriate. The appearance of the bill in the House can be traced back to the government's Measures for a Better Environment statement, which appeared in May 1999. In that statement the government undertook to introduce an energy credits scheme that would provide price incentives and funding for conversion from the dirtiest to the most appropriate and cleanest fuels.

The Prime Minister announced in March 2001 that the government would establish an inquiry into the total structure of fuel taxation in Australia. The inquiry handed down its recommendations 12 months later. One of the recommendations handed down was that excise and customs duty should apply to all liquid fuels, irrespective of their derivation. The government initially rejected this recommendation, at least partly on the basis of it being `contrary to the government's election commitment to maintain excise exemptions for fuel ethanol and biodiesel', but it subsequently reversed this position in the 2003-04 budget. This decision was accompanied by decisions regarding offsetting grants programs.

As previously mentioned, grants in relation to biodiesel are supposed to apply from tomorrow, 18 September. However, I understand that at present they are stalled in the other place. According to the explanatory memorandum accompanying this bill, grants will also become available under the cleaner fuels grants scheme for ethanol manufacture and importation once existing ethanol subsidy arrangements expire in 2008. Grants will also be available in relation to the manufacture and importation of low-sulfur fuels from 2006 and low-sulfur diesel from 2007.

Whilst the Greens support in broad terms these moves by the government in relation to biofuels, we are also of the opinion that these measures only go part of the way towards addressing the need for the promotion of the use of biofuels and alternative energy sources. Our reliance on old and dirty fuels is becoming increasingly unacceptable and backward. It is clear that Australia has fallen behind in this area of clean fuels. It is clear that our reliance on fossil fuels must be phased out in time. The Greens are of the opinion that government intervention in and assistance with this process must be faster.

It is extremely unfortunate that over the last 12 months the debate in Australia on the use and promotion of biofuels, specifically ethanol, has become so politicised and convoluted. There has been much discussion in this House and in the media on the personal links between the Prime Minister and Dick Honan of Manildra, the largest producer of ethanol—and the previous speaker mentioned some of that discussion. We know that Manildra is a major donor to the coalition and the major beneficiary of the import protection arrangements. We have heard the various attacks by the opposition—`Manildra-gate', as they like to call it. This has muddied the waters in regard to the whole biofuels and ethanol debate.

A further element has been the spirited anti-ethanol campaign by the oil companies to ensure that they do not lose 10 per cent of their 19 billion litre per annum market to the Dick Honans of the world or to the local ethanol industry. On top of this, there is conflicting opinion within the scientific community on the greenhouse gas status of certain biofuels such as ethanol, with some reports presenting it as greenhouse neutral whilst others, both here and overseas, indicate that it is positive by a factor of anywhere between two to one and 10 to one.

Obviously, research needs to be undertaken in Australia to determine an answer to some of these questions or to reinforce some of the opinions that have already been expressed. We need to determine what is the precise greenhouse impact of the production of ethanol and biofuels in Australia from industries such as sugarcane and wheat. There is no doubt that Australia is a late entrant to the biofuels market and to the debate, such as the one we are currently engaged in, that has been taking place in other parts of the world over the last 30 to 40 years. We know that ethanol blended fuels and alcohol fuels are being widely used in South America, the United States and Europe; yet in Australia we are being bombarded with mixed signals about the industry.

Last week the Sydney Morning Herald ran the headline `Ethanol found to be bad for millions of cars' and cited the findings of the ethanol working group that a third of Australia's 10 million cars would not run satisfactorily on a petrol blend of 10 per cent ethanol. Yet, in the same report, Bob Gordon, Executive Director of Australian Biofuels Association, pointed out that car companies which approve the use of ethanol and other alcohol based fuels in the US have said the opposite in Australia. What is the truth? What is going on here?

Australia's total ethanol production at present is small: 135 million litres are produced per annum and about 37 per cent, 50 million litres per annum, of domestically produced ethanol is used in fuel blends. The balance is used for pharmaceuticals, food beverages, chemical manufactures, paint et cetera. The government has set a target of 310 million litres of biofuel by 2010 and will pay a capital subsidy for new or enhanced capacity until the target is reached, with a maximum grant of $10 million per plant.

I understand that the industry is not satisfied with these measures, as they do not provide enough certainty. I have been told that the industry is seeking a 10-year excise-free period in order to develop the industry and to invest. It is not happy with the five-year period announced in the recent budget and on offer from the government. The industry has indicated to me that this is stalling investment in the industry and that the government has to answer for it. The government needs to reassess its support for the ethanol industry within Australia and to reconsider where that support will come from and the time frame for it.

Biofuels have a role in reducing greenhouse gas emissions, but the Greens are of the opinion that it is also of crucial importance that the government has a more comprehensive and meaningful strategy to fulfil our obligations in addressing the global greenhouse problem, to which Australia is such an embarrassingly large contributor. The Greens acknowledge the government's move in relation to biofuels and the steps it has taken on this issue. It is unfortunate, to say the least, that there are questions about the government's motivations in regard to part of this strategy. We hope that these issues are addressed soon.

The issues in relation to greenhouse gas emissions and fossil fuels are too important for the government to move slowly on. We call on the government to confront head-on our obligations on this issue and show the world that Australia is taking this matter seriously and taking our obligations to the rest of the globe on this issue seriously. We must support local industry, local jobs and innovation in the biofuels and alternative energies area. Government must encourage the industry and provide certainty for investment. It must provide a framework in which that investment can be carried out over coming decades. This is not happening at the moment.

I can only reflect the comments of other speakers in saying that I hope politics and self-interest will be put aside and we can move forward on the ethanol and biofuel issues in a way which will provide a positive outcome for Australia's consumers and the environment.