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Wednesday, 24 February 2010
Page: 963


Senator LUDWIG (Special Minister of State and Cabinet Secretary) (10:18 AM) —I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

Carbon Pollution Reduction Scheme Bill 2010

Carbon Pollution Reduction Scheme 2010

In the final hours of parliamentary sittings last year the government made the commitment that on the first sitting day this year, we would introduce into parliament legislation for the Carbon Pollution Reduction Scheme (CPRS).

The government did this through introducing the CPRS legislative package into the House of Representatives on 2 February 2010.

We said the bill introduced would be inclusive of the amendments agreed to by the coalition party room in November 2009.

And that is what this bill contains.

Let me make it clear on behalf of the government that our position on the CPRS is based on five strong foundations:

Firstly, it reflects a scientific consensus, accepted by governments around the world, that climate change is real and happening now, and will inflict severe costs on this country.

Second, the government’s target for emissions reduction is both responsible and achievable and the CPRS is the best mechanism to achieve those targets.

Third, the CPRS is the lowest cost way to reduce emissions for Australian households.

Fourth, the CPRS is the most globally responsible approach to the threat of climate change—it ensures Australia meets its emissions reduction targets.

And fifth, the CPRS reflects the consistent policy of the government that formed a key element of our 2007 election platform that was supported by the Australian people.

The alternative approach offered by the opposition is nothing more than a pretend policy and it cannot be trusted.

Mr Abbott, the Leader of the Opposition, thinks climate change is, in his own words, ‘absolute crap’.

The opposition leader’s climate change plan is nothing more than a climate con job.

It does less, costs more and will mean higher taxes.

There are three essential problems with the opposition leader’s climate con job.

Firstly, it will not work; it does not require anything of emitters of carbon pollution and there is no cap on carbon pollution.

Secondly, it slugs taxpayers instead of big polluters.

Thirdly, it is unfunded, inevitably meaning higher taxes.

The Tony Abbott climate con job does less, costs more and will mean higher taxes.

This is the contrast that the Australian parliament faces today.

Climate change science

It is extremely important, of course, that we take account of the climate change science.

Human induced emissions are increasing concentrations of greenhouse gases in the atmosphere.

Global carbon dioxide emissions from fossil fuels in 2007 were nearly 40 per cent higher than those in 1990.

The Intergovernmental Panel on Climate Change (IPCC) said in its 2007 fourth assessment report that:

… warming of the climate system is unequivocal—

and—

very likely due to the observed increase in anthropogenic greenhouse gas concentrations.

Its findings are supported by the national science academies in all major developed and developing countries, including our own.

No government can ignore these findings. No political party or political leader can responsibly ignore the science.

The Australian government accepts that climate change is a reality and that we must act.

Despite the claims of many in the coalition, there is no evidence warming has stopped.

Globally, 14 of the 15 warmest years on record occurred between 1995 and 2009.

The Bureau of Meteorology reports that 2009 was the second hottest year on record in Australia.

The past decade was the hottest decade on record in Australia and globally.

The current Leader of the Opposition is risking Australia’s economic and environmental future by saying he is:

… hugely unconvinced by the so-called settled science on climate change.

He made that statement on 27 July 2009.

Every other responsible political leader in Australia —including the former member for Bennelong and the member for Wentworth—has previously accepted the global scientific consensus and resolved to act in Australia’s national interest.

Impacts on Australia

The science shows that in future, without global action, the earth will continue to warm and sea levels will continue to rise.

Australia is already the driest inhabited continent on earth and is heavily exposed to the impacts of climate change.

Australia faces huge environmental and economic costs from climate change impacts, including on water security, agriculture, energy supply, health, coastal communities and infrastructure.

Climate change is already affecting water availability in Australia.

If global emissions continue unabated, irrigated agriculture—and the thousands of associated jobs—in the Murray-Darling Basin may well disappear by the end of the century.

Australia is a largely coastal society, with around 85 per cent of the population living in the coastal region. This means as many as 247,000 existing residential buildings valued at up to $63 billion are potentially at risk from a 1.1-metre sea level rise.

The Great Barrier Reef is already showing impacts of climate change through mass coral bleaching and could be effectively destroyed by mid-century if there is not action.

Climate change will affect the frequency and intensity of bushfires, heat waves and extreme tides in Australia.

We know only too well the impact that these events can have on the lives of others in our community.

Yet the Leader of the Opposition has rejected the science, mainstream conservative thinking and the best economic advice.

And he has rejected, therefore, acting in Australia’s national interest.

CPRS: the best mechanism

Australia’s emissions challenge is clear and it has bipartisan support, as we understand it.

In May last year the government set out its target range: a five per cent unconditional reduction, with up to 15 per cent and 25 per cent both conditional on the extent of action by others.

This target range was supported by the coalition at the time and reaffirmed on 2 December 2009 by the office of the Leader of the Opposition:

                The Coalition is committed to the bipartisan targets as they currently stand.

The challenge posed by those targets is clear:

  • In 2020 Australia’s emissions are projected to be 664 million tonnes of carbon dioxide equivalent; and
  • At a five per cent target, Australia’s emissions reduction challenge is to reduce 2020 emissions by 138 million tonnes; at a 15 per cent target, the challenge is 194 million tonnes; and at 25 per cent, the challenge is 249 million tonnes.

That is the challenge that both political parties —both sides of politics—have committed to on the grounds that there is a bipartisan position concerning the targeted cuts in emissions by 2020.

The debate today, therefore, should fundamentally be about how best to rise to that bipartisan challenge.

On this front, the Howard government’s Shergold report, the Garnaut review and the United Kingdom government’s Stern report all canvassed different approaches to taking action to achieve emission reductions and came to the same conclusion that an emissions trading scheme is the lowest cost and most effective mechanism to deal with climate change.

Even the current Leader of the Opposition in his 2009 book Battlelines acknowledged that:

                The Howard Government—

in 2007—

                proposed an emissions trading scheme because this seemed the best way to obtain the highest emission reduction at the lowest cost.

That appears at page 171 of the book of the member for Warringah called Battlelines.

The business community also recognises the value of the emissions trading approach. The Business Council of Australia has said:

                … the best way for Australia to transition to a low emissions economy is through a market-based emissions trading scheme—

and the international community accepts that view. Thirty-two countries around the world already have emissions trading schemes, and others, including the US, Japan and Korea, are developing such schemes currently.

Virtually no other developed economy in the world agrees with the opposition leader’s more recent rejection of emissions trading.

And there is a simple reason why, and that is that emissions trading is the most effective and lowest cost means to reduce carbon emissions.

The Carbon Pollution Reduction Scheme requires emitters to buy a permit for each tonne of carbon pollution they produce.

The government will determine the number of permits that will be available each year and, by doing so, will set a cap on pollution levels.

A cap each year allows a targeted reduction in emissions to be achieved over time.

A carbon price is established, therefore, by the auctioning and trading of permits.

The carbon price creates an incentive for polluters to reduce their emissions in the cheapest, most efficient way.

After dismissing the CPRS, the current Leader of the Opposition has proposed what he calls a ‘direct action’ policy as an alternative—but it is a con job.

His plan lets polluters off the hook and shifts the burden to ordinary families.

The fact is no cobbled-together list of subsidies, as outlined in opposition leader’s policy announced today, could ever hope to match the effectiveness of putting a clear price and cap on carbon pollution across the economy because, unlike the CPRS, the opposition leader’s policy is less effective. It will not work.

It will cost more because it does not create incentives to find the low-cost methods to reduce emissions. It is a ‘pick winners’ approach.

It also has no cap on emissions; it therefore cannot guarantee to meet an emissions reduction target.

The opposition leader’s position also cannot link to international markets to take advantage of cost effective emissions reductions in other countries, and it will shift the cost of emissions reductions from big emitters of carbon pollution to households.

Finally, the proposal does not provide compensation to pensioners, carers and low- and middle-income households, something to which the government has paid particular attention.

Former Prime Minister John Howard’s own Shergold report found that relying on subsidies alone to reduce emissions will be more expensive than a market-based approach like the CPRS.

Likewise, Professor Garnaut concluded that without a carbon price, the cost of achieving emissions reductions will be much higher.

Lowest cost way to reduce emissions

The government, for its part, is determined to implement a scheme which tackles climate change at the lowest cost. Ultimately there is no cost-free way of reducing carbon emissions and tackling climate change.

Any politician who tells the community otherwise is simply not telling the truth—and cannot be trusted. The Leader of the Opposition, in announcing the coalition’s policy, stated it would not cost the community and it would not cost jobs. It is a position that defies rational thought. It is not true.

The fact is the CPRS is the lowest cost way of reducing emissions.

It also imposes the lowest costs on Australian families.

The impact on household costs will be just above a one per cent price rise.

The average price impact of the CPRS on households is estimated at around $624 per year by 2013 for the average household.

Around 90 per cent of all households under the proposals for the CPRS will receive assistance—on average that will be around $660 per year.

All pensioners and low-income households will be fully assisted.

That is because the money raised from emitters of carbon pollution, who have a liability to purchase permits, will be used to assist working families with the price increases under the scheme.

The CPRS is globally responsible

Any country that accepts the science, as I said before, and the threat that climate change represents has a responsibility to act.

No country can address this problem alone—it will require an unprecedented level of international cooperation.

The government has said that Australia will do its fair share as part of the global effort—we will do no more and no less than other countries.

Last December, the world met in Copenhagen as part of the effort to forge a global agreement to tackle climate change.

The outcome, called the Copenhagen accord, is less than we, and like-minded countries, wanted.

But it is an important step forward towards coordinated global action on climate change.

For the first time, leaders of both developed and developing countries have agreed to:

  • specify emissions reduction targets or actions by both major developed and developing nations;
  • limit global warming to less than two degrees;
  • provide the finance necessary to support mitigation and adaptation action in developing countries; and
  • measurement, reporting and verification by both developed and developing countries.

However, the Copenhagen conference also left much work to do and Australia remains committed to achieving a comprehensive agreement under the UNFCCC.

Countries are already acting and Australia is by no means going it alone.

Thirty-two countries already have emission trading schemes and others are developing their own.

Others including the US, China, and India have set targets and are taking climate action.

In recognition that the Copenhagen accord did not deliver a final binding treaty, the government has said that we will not increase Australia’s emissions reduction target above five per cent until three conditions are met:

  • the level of global ambition becomes sufficiently clear;
  • the credibility of those commitments and actions is established; and
  • there is clarity on the assumptions for emissions accounting and access to markets.

The government’s aim and intention is to reach conclusion on these matters of course in partnership internationally as soon as possible.

A consistent and responsible approach to climate change

The CPRS is the principal mechanism by which we will achieve our targets and act on climate change in the national interest. It is the only fundamental foundational mechanism by which we will achieve the targeted reduction that I averted to earlier, 138 million tonnes by the year 2020 to achieve the five per cent reduction.

But we have also put in place around $15 billion in complementary measures to assist the transition to a low-carbon economy and increase the demand for low-pollution jobs. These are very important measures. They include:

  • increasing the renewable energy target to 20 per cent of electricity from renewable sources by the year 2020;
  • support for energy efficiency;
  • $4.5 billion for industrial scale carbon capture and storage and large scale solar power generation; the Australian Climate Change Science Framework to set climate change research policies; and
  • $126 million Climate Change Adaptation Program to better manage climate change impacts.

However, projections show that even with these measures Australia’s emissions will continue to rise, reaching 120 per cent of 2000 levels in 2020.

That is why we need a substantial, economy-wide approach that reduces emissions in the most efficient lowest cost mechanism possible.

For the last three years, Labor both in opposition and in government has backed the Carbon Pollution Reduction Scheme as the most effective and lowest cost means to reduce carbon pollution.

The current Leader of the Opposition has had five different positions on this issue. The government has been consistent and the new Leader of the Opposition completely inconsistent on this issue.

He supported emissions trading during the Howard government period when the former Prime Minister, Mr Howard, concluded and made absolutely clear that the science demanded a response from government and that the lowest cost most efficient mechanism for achieving targeted emission reductions was an emissions trading scheme.

As part of that government the now Leader of the Opposition accepted that position. Then of course when it was opportune to afford him the opportunity to drag down the then Leader of the Opposition, the member for Wentworth, the now Leader of the Opposition claimed that climate change was ‘absolute crap’.

Then he said at one point that the Liberals should support the CPRS unamended. Then he demanded amendments to the legislation last year when it was previously in a different form before the parliament.

And now he opposes the Carbon Pollution Reduction Scheme in totality for his own political gain.

Indeed, in his own words, the opposition leader has described himself as a ‘weather vane’ on climate change. He shifts around on the most important public policy challenge that we face.

It is the responsibility of any political leadership figure in this country to adopt a credible position and he has already failed that test.

His erratic approach now forms Liberal Party policy.

And you cannot trust a leader on issues like this if he thinks the climate science, the subject of considered peer review work by many, many scientists around the world that have stood up to intense scrutiny, is ‘absolute crap’. His position cannot be respected.

What we know is that the Leader of the Opposition does not accept the climate science and he is looking for a political fig leaf. Hence we see the policy position that has announced today and it cannot work.

What will work is an emissions trading scheme in the form of the Carbon Pollution Reduction Scheme.

Conclusion

The government respects the climate science and the need to act.

Our position has been consistent for years.

And we are acting in an economically responsible manner seeking the most effective and lowest cost means to achieve targeted emissions reduction.

The bills before the House today establish a clear framework to tackle this great challenge.

If the opposition still has any credibility, character or consistency, they will support this legislation based on the agreement that was endorsed by the coalition party room less than 10 weeks ago.

That was a credible stance to engage responsibly on behalf of the Australian community with the government to negotiate amendments and agree to the Carbon Pollution Reduction Scheme to secure passage of the legislation.

The responsible stance that the former Leader of the Opposition took on that issue on behalf of the community led to him being torn down as the Leader of the Opposition for politically opportunist reasons. What we now see from the opposition is a completely unrealistic, unworkable, incredible, economically irresponsible policy response.

What this country needs to deal with climate change is an emissions trading scheme to achieve the least cost emissions reductions.


Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2010

The Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2010 contains consequential and transitional provisions relating to the Carbon Pollution Reduction Scheme.

The Bill seeks to amend 12 Acts and one set of regulations.

National Greenhouse and Energy Reporting

The most significant amendments relate to the National Greenhouse and Energy Reporting Act 2007.

This Act provides the existing national framework for the reporting of information on greenhouse gas emissions, energy consumption and energy production. To maintain the Government’s commitment to the streamlining of reporting of greenhouse and energy data, the Act will be the starting framework for monitoring, reporting and assurance under the Carbon Pollution Reduction Scheme.

A number of changes are proposed to strengthen the Act and align it with the requirements of the Scheme, as outlined in the Government’s White Paper titled Carbon Pollution Reduction Scheme: Australia’s Low Pollution Future, which was released on 15 December 2008. Under the amendments, one report will satisfy an entity’s reporting requirements for the Scheme and current reporting requirements under the National Greenhouse and Energy Reporting Act 2007.

Coverage of synthetic greenhouse gases

The Carbon Pollution Reduction Scheme covers synthetic greenhouse gases. As some of these gases are already regulated under the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989, amendments will be made to that Act to align it with the Scheme.

Establishment of the Australian Climate Change Regulatory Authority

The bill contains a number of consequential amendments relating to the establishment of the Australian Climate Change Regulatory Authority.

As well as administering the Carbon Pollution Reduction Scheme, the new Authority will take over administration of both greenhouse and energy reporting and the renewable energy target. This necessitates a number of legislative amendments to replace two existing statutory bodies—the Office of the Renewable Energy Regulator and the Greenhouse and Energy Data Officer—and transfer their functions to the Authority.

The creation of the Australian Climate Change Regulatory Authority also gives rise to a number of other consequential amendments—for example, to apply financial management and accountability requirements to the Authority.

Measures to prevent market manipulation and misconduct

Australian emissions units and eligible international emissions units are to be financial products for the purposes of the Chapter 7 of the Corporations Act 2001 and Division 2, Part 2 of the Australian Securities and Investments Commission Act 2001. The bill amends these Acts accordingly.

These amendments will provide a strong regulatory regime to reduce the risk of market manipulation and misconduct relating to emissions units. Appropriate adjustments to the regime to fit the characteristics of units and avoid unnecessary compliance costs will be made through regulations. The Government has consulted on those regulations, which will be made shortly after passage and apply from commencement of this legislation.

As required by the Corporations Agreement between the Commonwealth, States and Territories, the Ministerial Council for Corporations has been consulted about the amendments to the corporations legislation and, to the extent necessary, has approved those amendments.

Taxation treatment of emissions units

Schedule 2 of the bill amends various taxation laws to clarify the income tax and goods and services tax treatment of emissions units.

The main consideration in designing the tax treatment of units is that the tax treatment should not compromise the main objectives of the Scheme. This means that tax should not influence decisions between purchasing, trading and surrendering units or alternatively reducing emissions. The preferred tax treatment will help implement the Scheme and reduce compliance and administration costs for taxpayers and the Australian Government.

For income tax, the amendments establish a rolling balance treatment of registered emissions units which is similar to that for trading stock. The result of the treatment is that the cost of a unit is deductible, with the effect of the deduction generally being deferred through the rolling balance until the sale or surrender of the unit.

The proceeds of selling a unit are assessable income with any difference in the value of units held at the beginning of an income year and at the end of that year being reflected in taxable income. Any increase in value is included in assessable income and any decrease in value allowed as a deduction.

The Bill also amends the goods and services tax law. It characterises a supply of an eligible emissions unit or a Kyoto unit as a supply of a personal property right and not a supply of or directly connected with real property. The amendments will promote certainty about the application of the normal GST rules to Scheme transactions.

Conclusion

The consequential amendments contained in this bill are important for the efficient and effective operation of the Carbon Pollution Reduction Scheme. The amendments seek, where possible, to streamline institutional and regulatory arrangements and minimise administrative costs with the Scheme.


Australian Climate Change Regulatory Authority Bill 2010

This bill would establish the Australian Climate Change Regulatory Authority—a new statutory authority that would be responsible for administering the Carbon Pollution Reduction Scheme.

It is one of a package of bills to establish the Scheme.

The Authority will be responsible for auctioning and allocating emissions units, maintaining a national registry of emissions units and ensuring that firms comply with their obligations under the Scheme.

The Government’s intention is to establish an effective, efficient and independent regulator.

The Authority will be a body corporate headed by a Chair and between two and four other members. Through the Chair, it will employ Australian Public Service employees on behalf of the Commonwealth.

It will have a modern set of information-gathering, inspection and enforcement powers, conferred on it by the Carbon Pollution Reduction Scheme Bill 2010.

The Authority will be at arm’s length from Government. As with other independent regulators, the Minister will only be able to provide directions on general matters and there are limited grounds on which a member of the Authority may be removed from office.

The Authority will also be accountable. It will be required to produce three yearly corporate plans and annual reports, and comply with the Financial Management and Accountability Act 1997.

The Authority will take over the functions of the existing Office of the Renewable Energy Regulator and the Greenhouse and Energy Data Officer, so that a single regulatory body will have overall responsibility for administration of climate change laws. This transfer of functions is to be affected through the Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2010.

While it will have strong powers to ensure that Scheme obligations are complied with, the Authority will also have an important role in advising and assisting persons in relation to their obligations under the Scheme—something that is formally reflected in the Authority’s functions.


Carbon Pollution Reduction Scheme (Charges—Customs) Bill 2010

This bill, which is part of the legislative package to establish the Carbon Pollution Reduction Scheme, is one of three technical bills which anticipate the possibility that the charge payable by a person to the Commonwealth for issue of an Australian emissions unit as the result of an auction, or for a fixed charge, is a tax within the meaning of section 55 of the Constitution.

This bill caters for the possibility that the charges I have mentioned are, in whole or part, both a tax and a duty of customs by providing for the imposition of such a charge under this bill.


Carbon Pollution Reduction Scheme (Charges—Excise) Bill 2010

This bill, which is part of the legislative package to establish the Carbon Pollution Reduction Scheme, is one of three technical bills which anticipate the possibility that the charge payable by a person to the Commonwealth for issue of an Australian emissions unit as the result of an auction, or for a fixed charge, is a tax within the meaning of section 55 of the Constitution.

This bill caters for the possibility that the charges I have mentioned are, in whole or part, both a tax and a duty of excise by providing for the imposition of such a charge under this bill.


Carbon Pollution Reduction Scheme (Charges—General) Bill 2010

This bill, which is part of the legislative package to establish the Carbon Pollution Reduction Scheme, is one of three technical bills which anticipate the possibility that the charge payable by a person to the Commonwealth for issue of an Australian emissions unit as the result of an auction, or for a fixed charge, is a tax within the meaning of section 55 of the Constitution.

The Commonwealth does not consider that these charges are taxes for constitutional purposes. However, the Government has taken an approach of abundant caution, with the charges bills providing safeguards in case a court reaches a different view on this question.

This bill caters for the possibility that the charges I have mentioned are, in whole or part, a tax. In those circumstances, this bill imposes the charge, but only to the extent the charge is neither a duty of customs nor a duty of excise.


Carbon Pollution Reduction Scheme (CPRS Fuel Credits) Bill 2010

This bill seeks to establish in legislation the CPRS fuel credit measure. It will provide transitional assistance to eligible industries and fuels that will not benefit from the cent-for-cent fuel tax reduction made under the Excise Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2010.

The CPRS fuel credit will offset the increase in eligible fuel prices by an amount equal to the reduction in the fuel tax rate. CPRS fuel credit amounts will be adjusted automatically with adjustments to the fuel tax made under the Excise Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2010.

The CPRS fuel credit program will give transitional assistance to the agriculture, forestry and fishing industries for the period 1 July 2011 to 30 June 2014. For the period the Government has fixed the emissions unit charge at $10 per tonne, based on current taxation arrangements, this credit will equal 2.455 cents per litre.

Activities incidental to the agriculture, forestry and fishing industries currently receive 50 per cent of the fuel tax credit under the Fuel Tax Act 2006 until 30 June 2012 after which they will be entitled to a full fuel tax credit. As these incidental activities will therefore receive a partial benefit from the reduction in fuel tax until 30 June 2012, they will be entitled to a partial CPRS fuel credit until that date. This CPRS fuel credit will be 50 per cent of the full CPRS fuel credit while the reduced fuel tax credit rate applies, and the full CPRS fuel credit thereafter until 30 June 2014.

CPRS fuel credits will also provide transitional assistance to heavy on-road transport users for the period 1 July 2011 to 30 June 2012. The industry will be entitled to a CPRS fuel credit of 2.455 cents per litre based on current taxation arrangements and the introduction of an emissions unit charge fixed at $10 per tonne.

Liquid petroleum gas (LPG), liquid natural gas (LNG) and compressed natural gas (CNG) are alternative transport fuels and will face a Carbon Pollution Reduction Scheme emissions unit obligation. However, as LPG, LNG and CNG are currently outside the fuel excise system they will not benefit from the fuel tax reductions applying to other fuels. The CPRS fuel credit program will therefore be extended to these fuels.

To be eligible for a CPRS fuel credit for the supply of gaseous fuels, an entity must be the liable entity for that fuel under the Carbon Pollution Reduction Scheme Bill 2010.

Suppliers will benefit from a CPRS fuel credit for differing transitional periods depending on the fuel.

The CPRS fuel credit will be provided to LPG suppliers for the period 1 July 2011 to 30 June 2014 as it is predominantly used for private motoring as an alternative to petrol.

The CPRS fuel credit will be provided to LNG and CNG suppliers for the period 1 July 2011 to 30 June 2012. This treatment is the same as for heavy on-road transport as LNG and CNG are predominantly used for this purpose.

The Government will review these measures upon their conclusion.

As the volume of emissions from these fuels is substantially lower than the volume from petrol and diesel, the Australian emissions unit auction charge impact on them will be lower. To reflect this, these fuels will receive less than the full amount of the CPRS fuel credit.

From 1 July 2011, based on current taxation arrangements and the introduction of the emissions unit charge fixed at $10 per tonne for one year, CNG will receive a CPRS fuel credit of 1.91 cents per litre which is 78 per cent of the full credit, LNG will receive a credit of 1.23 cents per litre which is 50 per cent of the full CPRS fuel credit. LPG, which has the three-year assistance period, will receive a credit of 1.64 cents per litre, which is 67 per cent on the full CPRS fuel credit, for the first year after which the credit will be adjusted in accordance with increases in the emissions unit charge.

The CPRS fuel credit program will be administered by the Australian Taxation Office and claims will be made in the Business Activity Statement in the same manner as fuel tax credits.

Full details of the Carbon Pollution Reduction Scheme (CPRS Fuel Credits) Bill 2010 are contained in the explanatory memorandum.


Carbon Pollution Reduction Scheme (CPRS Fuel Credits) (Consequential Amendments) Bill 2010

The Carbon Pollution Reduction Scheme (CPRS Fuel Credits) (Consequential Amendments) Bill 2010 will legislate amendments to the Fuel Tax Act 2006, the Income Tax Assessment Act 1997 and the Taxation Administration Act 1953 necessitated by the introduction of the CPRS Fuel Credits Bill and the administrative arrangements announced by the Government.

The measures in the CPRS Fuel Credits (Consequential Amendments) Bill are mechanical in nature. For example the existing formula in the Fuel Tax Act for determining the net fuel amount, which is the amount either owed to the Commissioner of Taxation or that the Commissioner owes, is being replaced. The new formula includes the CPRS fuel credit and increasing or decreasing adjustments for CPRS fuel credits.

Full details of the Carbon Pollution Reduction Scheme (CPRS Fuel Credits) (Consequential Amendments) Bill 2010 are contained in the explanatory memorandum.


Excise Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2010

This bill seeks to amend the Excise Tariff Act 1921 to confirm in legislation the Government’s commitment in the Carbon Pollution Reduction Scheme: Australia’s Low Pollution Future White Paper. The Government will cut fuel taxes on a cent-for-cent basis to offset the initial price impact on fuel of introducing the Carbon Pollution Reduction Scheme.

The Government recognises that people have limited flexibility to respond quickly to changes in fuel prices but that, over time, transport choices can respond to price changes.

To give households and businesses time to adjust to the Scheme, this legislation introduces a mechanism to automatically adjust the rate of fuel tax on all fuels that are currently subject to the 38.143 cents per litre rate of excise.

Fuel tax consists of excise duty on domestically manufactured fuels and excise-equivalent customs duty on imported fuels. Fuel tax is predominantly applied at a rate of 38.143 cents per litre across the range of fuels including petrol, diesel, kerosene, fuel oil, heating oil, biodiesel and fuel ethanol.

Different fuels emit different amounts of carbon when they burn and their prices will increase according to the volume of their emissions. To minimise compliance costs, the fuel tax cut will be made ‘across the board’ to currently taxed fuels. The fuel excise adjustment will be based on the expected rise in the price of diesel resulting from the introduction of the Scheme. This will ensure there is cent-for-cent assistance for diesel users.

Diesel emits more carbon than petrol on a per litre basis so the fuel tax cut will provide more than cent-for-cent assistance for petrol users, which make up the majority of motorists. However, diesel use is becoming more common as fuel and vehicle standards improve. Basing the fuel tax cut on diesel will therefore ensure that the Government’s cent-for-cent commitment is delivered for the most common fuels used by households.

Any reductions will take place on 1 January and 1 July of each year, to harmonise with the Business Activity Statement reporting period.

The first fuel tax reduction will occur on 1 July 2011 with the commencement of the Carbon Pollution Reduction Scheme. On 1 July 2011, based on current taxation arrangements and that the emissions unit charge will be fixed at $10 per tonne, the fuel tax will be reduced by 2.455 cents per litre to 35.688 cents per litre.

After the fixed emission unit price of $10 per tonne lapses on 30 June 2012, the need for further reductions, and the amount, will be assessed based on the average Australian emissions unit auction charge over the preceding six-month period. If the average unit charge at the time of the assessment is greater than the average unit charge that formed the basis of the previous reduction, then the fuel tax rate will be further reduced. This approach will apply to adjustments that occur from 1 July 2012.

If the current average unit charge amount is less than the previous average unit charge amount then the rate of fuel tax will remain the same — the fuel tax rate will not be increased if the emissions charge has fallen.

Information on the six-month average Australian emissions unit auction charge will be published by the Australian Climate Change Regulatory Authority in accordance with section 271 of the CPRS Bill.

The final reduction will be made, if necessary, on 1 July 2014. The fuel tax rate at that date will be the ongoing rate, that is, the fuel tax rate will not revert to the 38.143 cents per litre rate. At this time the Government will review the mechanism introduced by these amendments.

The amendments to the Excise Tariff Act will commence on 1 July 2011 assuming that the Carbon Pollution Reduction Scheme commences on that date.

Full details of the Excise Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2010 are contained in the explanatory memorandum.


Customs Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2010

I am introducing today a Bill to amend the Customs Tariff Act 1995 to confirm in legislation the Government’s commitment in the Carbon Pollution Reduction Scheme: Australia’s Low Pollution Future White Paper. The commitment is to cut fuel taxes on a ‘cent for cent’ basis to offset the initial price impact on fuel of introducing the Carbon Pollution Reduction Scheme.

This amendment will introduce a new section into the Customs Tariff Act to ensure that the reductions made to the excise rates on fuels due to the introduction of the Scheme also apply to the relevant imported products.

Where a relevant excise rate, as defined in the Excise Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2010, is reduced, this amendment will substitute the same rate to the excise-equivalent customs duty rates. The substitution will apply to the subheadings in Schedules 3, 5, 6, 7, 8 and item 50(1A) in Schedule 4 to the Customs Tariff Act.

Only the rate of excise-equivalent duty - that is, the non-ad valorem - component of the duty will be substituted.

The amendments to the Customs Tariff Act will commence on 1 July 2011 assuming the Carbon Pollution Reduction Scheme Bill 2010 commences on that date.

Full details of the Customs Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2010 are contained in the Explanatory Memorandum.


Carbon Pollution Reduction Scheme Amendment (Household Assistance) Bill 2010

This bill delivers on the Government’s commitment to assist low and middle-income households with the expected increases in the cost of living arising from the introduction of the Carbon Pollution Reduction Scheme.

Climate change threatens Australia’s way of life and our future prosperity.

Australians want action on climate change.

That’s why the Government has moved to introduce the Carbon Pollution Reduction Scheme.

It will allow economic growth without growth in emissions.

However, the introduction of the Scheme will have a modest impact on the cost of living for households.

That is why the Government is providing low and middle-income households with upfront assistance to adjust to the impacts of the scheme.

Through a package of cash assistance, tax offsets and other measures, the Government will help these households maintain their standard of living while moving to a low pollution future.

This bill delivers on the Government’s commitments given in the Carbon Pollution Reduction Scheme White Paper that:

  • pensioners, seniors, carers, veterans, people with disability, the unemployed, students and other allowees will receive additional support, above indexation, to fully meet the expected overall increase in the cost of living flowing from the scheme;
  • low-income households will receive additional support, above indexation, to fully meet the expected overall increase in the cost of living flowing from the scheme; and
  • middle-income households will receive additional support, above indexation, to help meet the expected overall increase in the cost of living flowing from the scheme.

The assistance in this bill delivers on these commitments.

The average overall cost of living for households is expected to be $624 higher once the scheme is fully up and running (by the middle of 2013), or about $12 per week. However, the average amount of assistance that the Government will provide to help with this will be $660.

8.1 million households, out of a total 8.8 million households will receive direct cash assistance. All pensioners, people with a disability, carers and low income households will be fully compensated for cost increases they face.

This bill takes account of changes to the Carbon Pollution Reduction Scheme announced on 4 May 2009 that introduces an initial $10 per tonne fixed carbon price in 2011-12 and a flexible carbon price in 2012-13. The composition of the Household Assistance package reflects this staged approach.

The Bill is also fully consistent with the amendments to the CPRS package agreed with the former Opposition leader, Mr Turnbull, and introduced and debated in the Parliament in November and December of 2009.

The Bill also takes account of other policy changes in the Budget, principally the Government’s Secure and Sustainable Pension Reform, which will affect how assistance is paid.

The Carbon Pollution Reduction Scheme will see a modest increase in the overall cost of living as we start to recognise the costs of carbon pollution in our everyday lives.

It is anticipated that the Carbon Pollution Reduction Scheme will result in increases in the cost of living of 0.4 per cent in 2011-12 and 0.7 per cent in 2012-13, resulting from an initial $10 per tonne fixed carbon price in 2011-12 and a flexible carbon price in 2012-13.

For many households government payments only represent a share of their income. Therefore increasing payments in line with headline Consumer Price Index impacts alone will not fully restore their standard of living following the introduction of the Carbon Pollution Reduction Scheme.

To adequately compensate these households, compensation needs to go beyond the average household Consumer Price Index impact.

To ensure fairness, household composition has also been taken into account in designing the assistance.

This household assistance will be funded from the sale of carbon pollution permits. The Government has committed to use every cent raised from the introduction of the scheme and the sale of carbon pollution permits to help households and businesses adjust and move Australia to the low pollution economy of the future.

Increases to pension, benefit and allowance payments

The measures contained in this bill will increase the amount of certain social security and Veterans’ Affairs pension and allowance payments by 2.5 per cent over two years. This includes a 1 per cent increase from 1 July 2011 and a further 1.5 per cent increase on 1 July 2012, including upfront indexation.

These payment increases include bringing forward the expected Consumer Price Index related indexation increases that will automatically flow from the Scheme’s introduction. These indexation increases are expected to be 0.4 per cent in 2011-12 and 0.7 per cent in 2012-13. The 0.4 per cent expected indexation increase for 2011-12 will be brought forward and paid from 1 July 2011. The 0.7 per cent increase in the expected indexation increase will be brought forward and paid from 1 July 2012.

Because assistance for the cost of living increase provided through certain payments will be brought forward, subsequent indexation arrangements will be adjusted to avoid duplicate assistance.

These increases will apply to a range of income support payments including the age pension, carer payment, veteran service pensions, disability support pension, Newstart allowance, Youth Allowance, parenting payments and the special benefit. A list of affected payments is included in the bill.

Increases to family tax benefit

Similar to pension and allowance increases, family tax benefit will be increased to help low and middle-income families meet the expected overall increase in the cost of living flowing from the Carbon Pollution Reduction Scheme. The increases to family tax benefit will include the upfront payment of the expected automatic indexation increases that will flow from the scheme’s introduction. These automatic increases are expected to be 0.4 per cent in 2011-12 and 0.7 per cent in 2012-13. Subsequent indexation points for family tax benefit payments will be adjusted to avoid the duplication of assistance.

The per-child maximum standard rates of family tax benefit Part A for under 16 year olds and the family tax benefit Part A supplement will be increased by 2.5 per cent over two years, in line with changes to pensions and allowances.

Per-family standard rates of family tax benefit Part B and the Part B supplement will also be increased by 2.5 per cent over two years.

Additional increases are also being made to the base rate of family tax benefit Part A to assist recipients of these payments.

Adjustments will be made to indexation of family tax benefit Part A and Part B rates on 1 July 2012 and 1 July 2013 (and over further indexation points if necessary) to prevent duplication of the amounts brought forward on 1 July 2011 and 1 July 2012.

A new family tax benefit combined end-of-financial-year supplement will be created for families eligible for both family tax benefit Part A and Part B, where the main income earner has income above $58,000 per year. The value of the supplement will be up to $240 per family in 2011-12 and up to $620 per family in 2012-13 and later years. The supplement will phase in at four cents in the dollar when the primary earner’s income reaches $58,000 until the supplement reaches the maximum amount. The entitlement to this supplement will cease when a family’s entitlement to family tax benefit Part A or Part B ceases.

Measures delivered through the tax system

Assistance is also being provided through the tax system. These measures provide additional assistance to eligible low and middle-income households through increases to the low income tax offset and various tax offsets for taxpayers who maintain a dependant.

Low income tax offset

From 1 July 2011, the low income tax offset will increase by $150 from $1,500 to $1,650. From 1 July 2012, it will increase a further $240 to $1,890. This will increase the taxable income up to which a taxpayer is entitled to an amount of low income tax offset to $71,250 for the 2011-12 income year and to $77,250 for the 2012-13 income year and later income years.

Senior Australians tax offset

These increases in the low income tax offset will increase the income level above which senior Australians eligible for the senior Australians tax offset begin to pay tax. From 1 July 2011, eligible senior Australians will have no tax liability until their income reaches $31,474 for singles and $27,680 for each member of a couple. From 1 July 2012, eligible senior Australians will have no tax liability until their income reaches $32,737 for singles and $29,280 for each member of a couple. Adjustments will also be made to the Medicare levy thresholds for senior Australians.

Dependency tax offsets

Measures for households include assistance to eligible adults who maintain a dependant. These increases will apply to the dependent spouse offset, the child-housekeeper offset, the invalid-relative offset, the parent/parent-in-law offset and the housekeeper offset.

From 1 July 2011, these dependency offsets will increase by $60 while, from 1 July 2012, they will increase by $90. These increases will be in addition to the annual increases in these offsets that occur due to automatic indexation.

Transitional payments

A carbon pollution reduction transitional payment will be payable for each of the 2011-12 and 2012-13 income years to independent adults in low-income households who can show they have not been assisted in line with the Government’s commitments.

The amount of the carbon pollution reduction transitional payment for the 2011-12 income year will be $200 per claimant and $500 per claimant in 2013.

The carbon pollution reduction transitional payment will become payable to qualifying individuals for the first year from 1 July 2012 and will be assessed with reference to the individual’s income in the 2011-12 financial year. The person will have until 30 June 2014 to lodge a claim for the 2012 carbon pollution reduction transitional payment.

The second year of carbon pollution reduction transitional payment will be assessed with reference to the individual’s income in the 2012-13 financial year and will become payable from 1 July 2013. A person will have until 30 June 2015 to lodge a claim to receive the 2013 carbon pollution reduction transitional payment.

Conclusion

Through the measures introduced by this bill, the Government will provide upfront support to low and middle-income households to help in adjusting to a low pollution future.

The Government will update the household assistance package on the basis of any new information on the estimated carbon price before the scheme starts. Each year, the adequacy of this assistance will be reviewed in the context of the Budget.

Ordered that further consideration of the second reading of these bills be adjourned to the first sitting day of the next period of sittings, in accordance with standing order 111.