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Tuesday, 1 November 2011
Page: 7708


Senator MARK BISHOP (Western Australia) (11:14): I last spoke on the merits of the policy behind a similar package of bills when they were defeated by the opposition back in December 2009. I therefore do not intend to cover all the ground but instead want to concentrate on the impact on local government of this clean energy legislation. Local government, as we all know, form a large part of the top 500 polluters—not only because of their landfill responsibilities but also because of the significant pressures on their operating costs. I have spent a considerable time on this issue with local government in Western Australia and they have been effective in having had their case heard in Canberra. In summary, the concerns of local government relate to the increased operating costs for the conduct of council business, including electricity for streetlighting, fuel for heavy vehicles and other council transport, consumables for road construction, and other infrastructure outlays.

The long-term capital costs of investing in clean energy initiatives—those activities necessary if advantage is to be taken of the new, low-cost energy regime—include new, energy efficient streetlighting; upgrades to community facilities; and the impact of landfills, which are large producers of methane gas in particular. These are very reasonable concerns and, while they are readily answered, they reflect local concerns regarding the likely cost of services provided. They are also consistent with a very longstanding commitment local govern­ment have toward environmental manage­ment across the board—a direct reflection of their grassroots community responsibility, of course. It reflects the level of concern expressed at the community level about local action on local issues. This is especially the case with environmental controls.

It is now accepted that improved, liveable urban areas and the continuing viability of local industry production are dependent on good local administration—and that includes not just waste management but also control over stormwater, transport, building design and siting, industrial growth and investment, and general land-use planning, in which environmental criteria are largely predomi­nant. It is local government which actually makes it happen and where the consequences of high-level policy change is first felt.

With respect to the first and major matter, increased costs, provision is already made through the indexation of financial assistance grants to local government. The indexation will reflect increased operating costs. On top of normal cost increases incurred by councils, Treasury estimates the cost infla­tion caused by this legislation across the entire economy will be only 0.7 per cent. For local government that same estimate will be less, at 0.5 per cent. For road construction costs in particular, the estimated impact will be only 0.2 per cent. That should be compared with the impact of the GST, which was 2.5 per cent—an increase which was quickly absorbed by the economy.

I should also make it clear for those councils where general rates can be 50 per cent of their income that state based rate-pegging policies should not be a disadvan­tage. I am advised that rate-pegging is generally linked to increases in the CPI. Ultimately, this is something to be negotiated between councils and state governments. Nor should the new costs affect the capacity of ratepayers to meet increased rates. For most—that is, more than six million people—they too will be compensated for any cost increases.

Within these costs for councils, it should also be pointed out that increased fuel costs for heavy vehicles and earthmoving equipment will not eventuate until 2014. It is at this time that carbon charges will be applied to transport fuel across the board—that is, except for LNG, CNG, LPG and ethanol, all of which will continue to receive the full fuel tax credit. Also, the current fuel discount provided to heavy vehicles and off-road equipment will be slightly reduced, although it will remain at a discount compared with ordinary road users.

This brings me to the implications for local government in converting their business to be more carbon efficient, especially energy efficient. The largest single energy cost for many councils is the cost of streetlighting. It s estimated by the Austra­lian Local Government Association to be 50 per cent of councils' electricity bills. With projected increases in power costs of 10 per cent in 2012-13, ALGA estimates that this will increase councils' costs nationally by $29 million. Streetlighting will account for $17.5 million of the increase. However, as ALGA also acknowledges, energy use has great potential for abatement.

To help manage council energy costs, the government announced the Low Carbon Communities Program in 2010. This program has now been expanded to $330 million. The new package includes $200 million in funding for the Community Energy Efficiency Program. This program will help local government and community organisations upgrade the energy efficiency of their facilities, including streetlighting. I am very aware many councils have made great strides in recent years to better control their costs. Of course, electricity usage has always been high on that agenda. Shortage of capital has, however, been a constant problem, hence the need for this program. A further $100 million will be available to consortia of local government and commu­nity groups to improve the energy efficiency of low-income households. Additionally, the government has also provided a new Clean Energy Finance Corporation, funded to $10 billion. This will clearly assist councils and community groups wanting to invest in clean energy options.

Finally, I want to address the difficult issue of landfill sites. ALGA asserts landfill sites comprise 191 of the 500 identified major polluters, the subject of this legislation. Landfills generate methane gas, which is a greenhouse gas with the most significant effect on the environment. What is worse, landfills continue to produce methane for up to 20 years after closure, making this a significant imposition for landfill operators. Briefly, the policy for landfill in this package is as follows. The new carbon price in this legislation will only apply to the emissions from waste deposited after 1 July 2012. It will only apply to large facilities which emit more than 25,000 tonnes of CO2. Smaller sites will not be considered until at least 2015-16. I should note that this should remain unchanged unless there is evidence of waste diversion to smaller sites. Further, initiatives at these landfills to reduce and capture emissions such as methane will qualify as credits under the Carbon Farming Initiative. These can be used to offset up to 100 per cent of the carbon price incurred, not five per cent as it is now.

Where energy is generated, renewable energy certificates will be issued under the Renewable Energy Target. These can also be used as offsets. This will create a greater incentive to better manage waste through recycling, composting and the capture of methane for power generation. Many of the managers of these landfill sites are local government authorities. For some, these initiatives are not new. However, we need to acknowledge that, in response to ratepayers' concerns, the management of landfill dumps has been radically reformed in the last decade in particular. I should mention here local government's enthusiasm under the former Greenhouse Friendly program when investments were made to obtain carbon offsets. This sometimes entailed considerable investments, which were not realised in some cases when the program was cancelled in June 2009. That investment has included not just sophisticated approaches to recycling practices and composting of garden refuse; it is also the better management of toxic substances and the collection of methane gas. It has led to the generation of bioelectric generators of which there are currently 66 in operation.

Local governments around Australia should be applauded for their leadership. That is why they are so well placed to take advantage of the new Clean Energy Finance Corporation, to be chaired by Ms Jillian Broadbent AO. The clean energy fund will drive innovation through commercial invest­ments in clean energy through loans, loan guarantees and equity investments from the private sector. Local government is well placed to take advantage of this fund, especially when combined with the potential of other carbon credit initiatives now magnified for existing landfill facilities and newer ones. Innovative work at the local level is progressing quickly and will now accelerate.

Income generated from the current generation of initiatives can be increased from new investment and hence be fully applied as a direct incentive to clean up polluting emissions as a direct cost offset. Indeed, this model is the essence of the entire policy. Its aim is to encourage investment in clean energy, to better manage and minimise emissions, as a real element of our economic system—that is, a self-funding model minimising punitive charges normally levied under the old-style regulatory regimes.

For many this legislation represents a brave new world with many uncertainties for some. However, that will dissipate as knowledge improves. ALGA recently expressed very fulsome support and that is appreciated, but I am sure there is a lot of detail yet to be worked through with local government. I know from my own contact with local government in WA that there is some way to go before all of the detail and the implications are understood. Among those are details of applying for grants, priorities, scale of grants and the processes of applying for investment finance. There are some questions too about the reliability of measurement of emissions—currently being dealt with in detail. There are also new streamlined reporting obligations being developed by COAG. There is interest in the new biodiversity scheme. This scheme is available for carbon farming initiatives on private and local government land to support the protection of biodiverse carbon stores.

I conclude by assuring local governments the government will continue to work with you and to consult with you. We will ensure that your support for this package is maintained and strengthened through your participation.