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Thursday, 2 June 2011
Page: 5750


Mr TRUSS (Wide BayLeader of The Nationals) (13:00): It is almost 10 years since I launched Australia's first national biofuels policy in Townsville during the 2001 election campaign. That policy set an objective that renewable fuel—namely ethanol and biodiesel—produced in Australia would contribute at least 350 million litres to the total fuel supply by 2010. To implement that objective the coalition committed to provide excise-free treatment of biofuels and a grant process, a capital subsidy for new or expanded domestic production infrastructure of 16c per litre of biofuel.

When the coalition moved in government to implement this policy in 2002, we witnessed one of the most dishonest campaigns ever launched by the Labor Party. Labor sought to discredit and denigrate the use of ethanol at every opportunity, with claims that it was damaging car engines—which was later proved to be false—and other similar claims which it systematically fed to its friends in the media. The ethanol industry still suffers today in the aftermath of that disgraceful Labor scare campaign. Nevertheless, the coalition's commitment was met. It certainly started slowly in the wake of the vilification campaign, but I am very proud that the vision that I outlined in 2001 has come to fruition. We now need to move to the next step, increasing the level of biofuels and renewables in our liquid fuel supply.

There have been many champions of ethanol over the years but none has been greater than Dick Honan. The Manildra group of companies have been real champions of the industry. They have a very innovative process, making ethanol as a by-product of their Nowra starch plant. They had a problem with effluent that needed to be disposed of and they developed a really clever solution. They had a lot of resistance from the fuel companies and they suffered very badly in the aftermath of the ethanol smear campaign, but they have won through and their product is now widely used across the country. Dick Honan, above anyone else, is the father of the Australian ethanol industry. He can be proud of his achievements but he knows that there is still a lot more to be done as well. There are other important contributors—particularly CSR and other players in the sugar industry, and I note the new grain based plant at Dalby—and a number of other innovative ideas, because ethanol can be sourced from a wide range of feedstocks.

Not much has changed since that time in 2001 as far as the Labor Party is concerned. The Taxation of Alternative Fuels Legislation Amendment Bill 2011 and the other bills before us show that, once again the government is incapable of producing a coherent policy response to an energy related issue. In June 2004, the then coalition government released its energy white paper, which proposed to adjust the excise rate applicable to all fuels based on their energy content relative to petrol. The rate was to be halved for alternative fuels as an industry development and environmental measure. The new rates were to be phased in from 2011 to 2015. This policy received bipartisan support at the time from the then Labor opposition. But the policy was not enacted in legislation before the coalition lost office, although significant good-faith investment was made in ethanol facilities by companies like CSR based on the white paper. The new income from the coalition policy was incorporated in the forward estimates in the 2010-11 budget papers, apparently without the Labor government even realising it had done it. On budget night, both the Treasurer's office and the office of the Minister for Resources and Energy denied that an excise on LPG was being introduced. But by 7 am the next morning the Assistant Treasurer and the Minister for Resources and Energy had issued a media release confirming that a new excise regime on alternative fuels would in fact be introduced after all and announced a consultation process.

After the 2010 election, as part of a deal with the member for New England, the government announced that ethanol excise would be phased in over 10 years, rather than five. This would have been an acceptable position had it applied to all alternative fuels but, inexplicably, the phase-in period for other alternative fuels was to remain at five years. This was stage 1 of the government's descent into policy confusion on this matter. Following the consultation process, on 24 January 2011 the Assistant Treasurer released an exposure draft of legislation. At the same time the government deferred the introduction of the new excise rates by five months, to 1 December 2011. This legislation would have allowed the excise-free import of unlimited amounts of subsidised ethanol from the United States. The US ethanol industry receives subsidies of $6 billion per year, or about 15c per litre, and also receives tariff protection, as does Brazilian ethanol. Under the government's proposed legislation, the Australian ethanol industry would cease to exist on 1 July this year. The United States also subsidises biodiesel, including exported biodiesel. It took the Minister for Home Affairs four months to act on Australian Customs recommendations that countervailing duties be imposed on subsidised US biodiesel, despite this being one of the most straightforward cases ever brought. The US government had legislated for the subsidies. They were clearly breaching the rules, but it took the government such a long time to act to protect the Australian industry, as it had an obligation to do—stage 2 of the government's policy confusion. Next, the member for New England indicated that, rather than just an extension of the phase-in period, he would prefer no excise on ethanol at all. It must be said that the member for New England is also not always particularly noted for his policy consistency. Remember his bill proposing that Australia reduce its greenhouse gas emissions by 30 per cent by 2020 and by 80 per cent by 2050? That is a position from which the member now distances himself.

Astonishingly, the minister did not bother to discuss the legislation with the opposition. He pulled the bills on the day they were scheduled to be introduced into the House—policy confusion stage 3. So now, with only seven sitting days left before excise is automatically imposed on ethanol, we finally get to the debate about the government's proposals, and what a mess it is. Ethanol, biodiesel and methanol are now to remain excise free for at least 10 years but LPG, LNG and CNG are to have excise phased in over five years at half the energy-equivalent rate. The minister even had the hide to criticise me for allegedly opposing bipartisan fuel tax arrangements while he himself was throwing the whole package out the window.

Indicative of the quality of this legislation is the regulation impact statement attached to it, which is actually based on the earlier legislation that the minister withdrew before it was even tabled. The regulation impact statement extols the virtues of imposing an excise on biofuels. 'Significant deviations from the announced policy may unsettle investment decision making,' it says. What a laughing stock the government has become. It is hard to justify treating some alternative fuels differently from others. In the case of LNG and CNG, use is restricted almost entirely to heavy vehicles. There is little financial gain to the government in taxing those fuels, the cost of which will fall disproportionately on bus users, particularly metropolitan bus users.

When we were in government, we implemented programs to help people with LPG conversion grants for new and used vehicles. It was the sound, environmentally responsible thing to do—$550 million was spent on grants to support 283,000 vehicle conversions or new LPG vehicles. Labor has halved and capped that program and will now tax people who have made the conscious decision to do the right thing for the environment. Adding insult to injury, Labor is singling out LPG, having shelved plans to tax ethanol and biofuels. Again, at the very least the government should treat all alternative fuels equally. Trying to pick winners puts the LPG sector at a distinct disadvantage.

This tax leap from zero to 12.5c per litre over five years will trap around 700,000 motorists, including families who can ill afford it—yet another Gillard government tax slug. It will also affect the fleet of small business operators and, notably, 70,000-plus taxis. The tax will be the death knell for the $300 million LPG conversion industry and its 2,500 employees, who have been hung out to dry by this government.

Labor's craving for new taxes is akin to that of a junkie looking for their next hit. What will Labor tax next? All this is on top of the all-pervasive carbon tax and the hikes it will impose on the cost of everything. At a time when Holden and Ford are releasing new Australian-built LPG vehicles, Labor has taxed the fuel. What of their green car plan? The logic and policy inconsistency shown by this government is simply beyond belief. The bill is a bizarre, counterintuitive twist from a government that claims the moral high ground on environmental matters. LPG is a cleaner alternative fuel. The Gillard government is now penalising the very drivers it should be rewarding. It likes to parade its environmental credentials but it is actually damaging the industries that could help reduce our CO2 emissions.

Finally, I would like to say something about the further development of the biofuels industry. The lack of consumer information on biofuels and the residual effects of the ALP campaign against biofuels use continues to lead to uncertainty amongst consumers about the benefits and safety of biofuels. Research on second-generation biofuels, such as ethanol from cellulose and biodiesel from algae, is lacking. Similarly, research is needed on optimisation of agricultural feedstocks and car-manufacturing innovation. What is needed is a support package comprising measures such as a consumer information campaign, guaranteed warranty cover for all Australian manufacturers of cars using E10 and research and support for the development of second-generation biofuels, including agricultural research.

There are many exciting opportunities available. Industry is now making important investment decisions which will underpin the further development of Australian biofuels. I commend Holden, on the launch last year of their E85 Commodore, and Caltex, for rolling out E85 outlets in capital cities and regions. Holden and Caltex, with other partners, are looking to establish a plant in Victoria to generate 200 million litres of ethanol a year from waste. Ford has focused on the LPG market and developed a new generation LPG engine which markedly improves engine efficiency. Toyota, of course, has gone down the hybrid route.

Only last week the CSIRO reported that Australia could cut jet fuel imports by $2 billion a year and reduce aviation carbon emissions by 17 per cent. But Australian research has only been laboratory scale to date, according to the CSIRO. These companies and research bodies deserve support within the framework designed to secure Australia's energy future. The government promised us an energy paper by 2009. Two years after this deadline, we are yet to see even a draft. The opposition will support the 10-year moratorium on excise on biofuels and methanol, even though the biofuels industry itself accepts that it will need to accommodate some excise in the future. The industry is entitled to 10 years of certainty to secure its future, and the opposition will provide that certainty.

But the opposition will not support the different treatment of different alternative fuels, as the government proposes. The opposition will not support the government's new excise on LPG, LCG and LNG, which will unfairly discriminate against public transport users, taxi users and motorists, who have invested in good faith in a clean fuel.

For a government that likes to pride itself on, and argue in the media about, its environmental credentials and that wants to impose new taxes to reduce CO2 emissions and to be a world leader in addressing climate change, this bill is incredible—a bill that will impose a tax on some of fuels that could in fact make a real difference.