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Tuesday, 14 June 2011
Page: 5903


Mr WINDSOR (New England) (19:02): I rise to support the Taxation of Alternative Fuels Legislation Amendment Bill 2011 and cognate bills before the House today. I do so reflecting on a few memories of what has happened in this building. When I first entered this parliament there was a move to achieve a renewable energy target for biofuels, and the member for Gilmore would remember those days. A little more than a decade later fewer biofuels are produced in Australia than were produced when we originally set a target. So I am pleased to have been part of the negotiations with the government that has actually removed biofuels from the taxation regime, and I will go on a little to explain why.

About seven or eight years ago the Howard government determined that a period of seven years be allowed for renewable energy and some of the transitional fuels that the member for Gilmore talked about, LPG in particular, to be exempted from the taxation and excise system. That grandfather clause comes into effect on 1 July. It was the intent of the coalition to include LPG and other transitional fuels—fossil fuels and biofuels—in the fuel excise regime, as of 1 July this year. In discussions that we have had with the minister and others within the government and in the broader community, it has become very obvious that one thing is quite different now to what it was seven or 10 years ago. That particular point of difference is that there is concern about climate change and greenhouse gas emissions. In structuring a fuel taxation system and excise regime that takes into account the need for a transition towards cleaner fuels and renewable energy—and, in a sense, I see the legislation before the House today as part of a transitional process—I see the balance that has been struck by these bills as being quite fair. It is much fairer than what would have been determined had the end of the grandfathering provisions that the Howard government set up seven or eight years ago been applied, whereby both renewable and transitional fossil fuels would have come into the system at much higher taxation rates.

Irrespective of which side of parliament we are talking about, both sides of this parliament have a five per cent target to reduce greenhouse gas emissions by 2020. One way of achieving that is to encourage renewable energy sources. In terms of the zero taxation rate, the renewable energy source that we are talking about today is biofuels. How one could suggest that we should impose a taxation regime on a renewable energy source when, in fact, through the various carbon taxation and emissions trading scheme discussions we are trying to encourage renewable energy of all sources fascinates me. So I am pleased to see that the government has recognised about charging any taxation on biofuels—be that ethanol, biodiesel or some of the variants of those two fuels; and I think there is enormous potential for algae to produce biodiesel in our community as well and for lignocellulosic ethanol to be produced. It is being produced in some parts of the world at the moment. Obviously, there are some cost issues there, but at some stage biomass-to-biofuels will become a much greater reality than it is now. In China they are working on various processes as we speak, as they are in Canada and in parts of the United States. In fact, in the United States, Mr Deputy Speaker Adams—and I am sure you would recognise this, as a great follower and student of global politics—some 39 billion litres of transportation fuel are biofuel. That is 10 per cent of the transportation effort. So, in a raw sense, that suggests that there has been action. Some people in this House would say, 'Well, the United States is doing nothing in terms of moving towards controlling or reducing greenhouse gas emissions.' On that one issue, 39 billion litres is about the total fuel usage for Australia—of diesel and petrol. So 10 per cent of the field market of the transportation fuel is now a renewable fuel source in the United States.

I would like to make a few comments about the Productivity Commission's recent findings on analysing biofuels and other emissions reductions globally. In the main I think it was a very good report, but there are a couple of things I would like to take issue with.

But some would suggest that the production of biofuels in the States—the 10 per cent that I am talking about that has moved to a renewable energy source—is coming essentially from food acreages. That is not strictly the case. In a lot of cases, as with the major producer of ethanol in this country, it is actually a value-add to an agricultural product. The member for Gilmore talked about the Manildra operation in her electorate, which is essentially a starch and gluten producer, with a number of other products—extenders et cetera. An enormous amount of grain is consumed domestically. The residue of that particular value-add to grain production is in fact a biofuel, which is ethanol—which the member for Gilmore uses in her four-cylinder car, as she described a few moments ago.

I have been quite supportive of what the Productivity Commission said in terms of the greenhouse gas emissions debate that this parliament is having, and I am part of the Multi-Party Climate Change Committee that is deliberating on a number of issues now. But the Productivity Commission made some points on biofuels and actually made some errors. I would like to see how they arrived at the conclusions that they did. They were essentially saying that the subsidies, as they call them, to biofuels in Australia are a fairly ineffective way of creating a pathway through to cleaner fuels. They would suggest that the use of a pricing mechanism—an emissions trading scheme or a carbon tax—is a much more effective way of dealing with the issue of getting people to change behaviour.

I had a briefing with the Productivity Commission and raised this issue with them. I find it fascinating—and the Howard government used to run this line as well—that they would argue that the removal of a tax is in fact a subsidy; that the non-placement of an excise on a renewable energy source is in fact a subsidy. As I understand it, as the basis of their analysis, looking at transportation fuels, not only in Australia but in other parts of the globe, they have used that assumption—that the non-placement of a petrol tax on a renewable energy source or a biofuel is in fact a subsidy to that industry. When you see the way in which the value-add to grain occurs—Australian grown grain goes through the Manildra operation and the by-product is the fermentation of the starch, which is the biofuel—they have not taken into account the other processes that are involved there. My view, and I will be asking the Minister for Climate Change and Energy Efficiency to get the Productivity Commission to revisit some of their calculations, is that I do not think they have taken into account the appropriate life-cycle analysis in terms of how most grain is actually produced in this country now—in fact, I think they have taken into account a fairly archaic agricultural practice, where the carbon footprint and fuel usage is quite high, and then relayed that through the various processes and come out with a negative in terms of the life-cycle analysis. There are plenty of life-cycle analyses that are done in other parts of the world—under no-till farming, for instance, and other improved technologies—which would come up with a very different life-cycle analysis.

The third thing that the Productivity Commission have not done in my view—although they did refer to the Chinese biomass-to-biofuel arrangements, which are in their infancy, but nonetheless people are working on that technology as we speak, in many parts of the world—is to look at the potential, the life-cycle issues, the food issues and the acreage or land substitution issues that may or may not occur when you go from biomass to biofuel, or lignocellulosic ethanol, or from algae to biodiesel. They did not look at the potential in terms of transportation fuels into the future. In fact, they have painted a fairly negative picture of biofuels generally, based on, I think, two assumptions—the removal of the tax is a subsidy, and therefore should be counted against the production of biofuel, and the fairly archaic life cycle analysis the Productivity Commission seems to have had running around for some years now, which is based on food acreages going towards bioenergy. Biomass to biofuel is quite exciting and we should be putting research dollars into it.

The other issue I will raise briefly is that of the inadequate funding of our local roads and where our fuel taxation money goes. Most people would know that the current taxation regime for petrol is 38c per litre, plus GST on top of that of 12c a litre or a bit more. So we are paying about 50c a litre in tax. The last time I looked at the calculations, about eight cents of that was going back to roads of any sort. For every cent of excise I think $368 million is actually raised. I have always been a supporter of the Roads to Recovery program and am pleased to see that both sides of parliament have actually agreed on the concept. Not quite a cent a litre out of the 50c goes back to Roads to Recovery. I know that there are some Financial Assistance Grants et cetera that go to local roads, but that is only a percentage of what used to be the road use tax actually going back to local roads. I make the plea to both sides of parliament that it is about time we put more of the revenue from fuel excise into our local roads. I would argue that at least 3c a litre annually should go into the Roads to Recovery program. That would give local government at least a chance not only to maintain the current infrastructure in the fashion that it should be, but also to improve it in some cases.

I encourage people to think quite seriously in this new age, when we are looking at reducing emissions, about how certain fuels, like LPG, are transition fuels and about how certain other fuels are very clean, so there should be a difference in the way they are taxed. The transition fuels, which are pollutants in the sense that they are petroleum products, should be and are in this legislation taxed at about one-third the rate of petrol. Biofuels are not taxed at all, and neither should they be in this day and age.