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Transcript of the Prime Minister, the Hon John Howard, MP Joint Press Conference with Dr Conall O'Connell, MP , Deputy Secretary, Department of Environment and Heritage: Phillip Street, Sydney: 22 September 2005: biofuels taskforce report; petrol prices; aviation security.\n



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PRIME MINISTER

22 September 2005

TRANSCRIPT OF THE PRIME MINISTER THE HON JOHN HOWARD MP JOINT PRESS CONFERENCE WITH DR CONALL O'CONNELL, DEPUTY SECRETARY, DEPARTMENT OF ENVIRONMENT AND

HERITAGE, PHILLIP STREET, SYDNEY

Subjects: biofuels taskforce report; petrol prices; aviation security.

E&OE………………………………………………………………………………………..

PRIME MINISTER:

Well ladies and gentlemen I’ve called this news conference to release the report of the Biofuels Taskforce which I appointed several months ago, and I’d like to welcome to this news conference three of the members of the Biofuels Taskforce. The Chairman, Dr Conall O’Connell, and Dr David Brockway, and Dr John Keniry. The other member, Mr Max Gillard, is overseas and therefore can’t be present. I would like to thank the members of the Taskforce for the excellent and in the circumstances, quite expeditious job that was done.

The Taskforce was convened to examine the latest evidence on the impacts and benefits of ethanol and other biofuels. The Taskforce has found that there are potentially greater health benefits from ethanol use than was previously thought. There was great greenhouse and regional benefits; they are similar rather to the previous research undertaken. But the biofuels industry faces considerable market barriers, including low consumer confidence and high commercial risk. And that on current settings and in the absence of further policy initiatives, the Government’s biofuels target of at least 350 megalitres by 2010 will not be met.

Now I take the opportunity this morning of re-affirming the Government’s commitment to that target. And in a world of high oil prices it’s important that unnecessary barriers preventing the development of an alternative fuels market in Australia are removed to allow consumers to make informed decisions based on sound economic, environmental and social signals. And specifically in a climate of very high petrol prices it’s important to encourage a greater use of biofuels.

And I’m announcing today a package of measures to address the market barriers and to restore consumer confidence in the biofuels industry. We intend to work with the oil companies, with consumer groups and others to achieve the implementation of these goals. Next week the Deputy Prime Minister and I will meet the oil companies to commence

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development of industry action plans. We’re going to closely monitor progress with those action plans against the Government’s announced targets. We’ll also of course take the opportunity at that meeting to discuss matters concerning the level of petrol prices in Australia at the preset time.

Now in addition to that we are going to do a number of additional things. We’re going to, at a government level, demonstrate our confidence in ethanol blended fuel by encouraging use of commonwealth vehicles involving E10 where that is possible. We’re going to undertake vehicle testing of vehicles in the Australian market to validate their operation with E5 and E10 ethanol blends. And work with the Federal Chamber of Automotive Industries to ensure that the consumers receive up to date information.

We’re going to increase fuel quality compliance inspections to ensure ethanol blends meet fuel quality standards. We’re going to simplify the E10 labels, which at the moment inadvertently operates as a warning to consumers and a discouragement to consumers from using ethanol. And importantly, subject to the results of vehicle testing, allow E5 blends to be sold without a label, as in Europe, giving fuel companies greater commercial flexibility to increase supply. We’re going to work with Australian fuels and transport industries to establish standard forms of biodiesel to provide certainty to the market. And we’re going to work with the States and Territories to adopt fuel volatility standards.

The Taskforce importantly found that there are potentially greater air quality and health benefits from ethanol use than previously thought. And to further assess and promote the benefits of biofuels, the Government is going to commission a study on the health impact of ethanol to validate overseas research under Australian conditions. And we’re also going to promote biodiesels beneficial environmental properties, such as its biodegradability through a B5 biodiesel trial in the Kakadu National Park.

The package I’ve announced today is an addition to current measures supporting biofuels, which includes a generous 50 per cent excise concession for alternative fuels, a $37.6 million capital fund, and a total of $41.2 million in production grants to ethanol producers. This has been, I believe, a very useful report. It drilled rather deeper than the earlier desktop examinations. It has clearly come up with findings that are more positive about biofuels and ethanol in particular than previously was the case. And it is important, particularly in the climate of painfully high petrol prices that we have at the moment, that every attempt be made responsibly and sensibly to encourage the greater use of ethanol and other biofuels because they can make both a cost and also environmental contribution towards easing the current situation.

There is no immediate magic solution to the problem of high petrol prices and I don’t want what I’m announcing today to be seen as some kind of quick response, it’s not. But it is another way of making a practical contribution over time to easing the situation. We have very high petrol prices at present; they’re due to the high price of crude oil around the world in circumstances that people are well aware of. This recommitment by the Government to our target is important in the medium to longer term. I will, with the Deputy Prime Minister, see all of the oil company executives at a senior level next week. We will be seeking to work with them cooperatively. We intend to meet that target of 350 millilitres, we’ll need industry action plans, we’ll need their commitment and their on going cooperation, and I expect to receive it. And we will monitor very closely the way in which the oil companies are responding.

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This is a difficult situation. I am very aware of the pain being suffered by the ordinary motorist. I am also conscious of my responsibilities not to unduly raise expectations about quick fixes. There is no quick fix; if a quick fix were available it would have been found around the world before now. I don’t have the luxury of calling for things to be done without any responsibility for delivery. I have the responsibility of sensible responses and patient explanation of the causes. Now just as the Government acted as it could to scrap the planned tiny increases in excise at the beginning of next year, we are acting now to make it more achievable to have this target of 350 millilitres of biofuels. We are removing some of the barriers to ethanol use. There is a cost advantage in ethanol blends because the excise on ethanol is much lower than on petrol. In those circumstances it makes sense to remove barriers but we’ve got to do it in a sensible way, we’ve got to have regard to the fact that previous studies have suggested with certain vehicles and certain engines ethanol could be damaging

We’re now satisfied that some of the scare campaign was plainly wrong, and it was a scare campaign conducted by some of our political opponents for a particular political reason and it was very damaging to ethanol and in a sense very damaging to the consumer because it scared them off use of a component that may have had environmental advantages as well as cost benefits. So what we are now doing is, after some very sensible analysis by the Taskgroup, we’re saying that we can do certain things that will make ethanol use very attractive, and more attractive.

We’ll do further investigation and if further changes can be made in the future then they will be made. And very importantly we are going to sit down with the oil companies and we are going to say to them that we have this Government target, we want to achieve that target and if we can achieve that target then it will be good for the motorists and good for the public and good for the environment and we want to work with you and we expect you to do it. And I’m sure that we will have the cooperation and the goodwill of the oil companies. And I again want to thank the three gentlemen and their colleague Mr Max Gillard for the work they did on the Taskforce - I’m indebted to them. It’s a very good piece of work, it’s calmly and intelligently analysed the data and come up with a very practical way forward.

JOURNALIST:

Prime Minister, was it just health and environment that has made the Taskforce decide that the benefits now do exceed cost, which is not what the 2003 report says.

PRIME MINISTER:

I might invite one of you to say something about that. I mean, I’m sure they stand by their own analysis, but perhaps I shouldn’t speak for them. I’d invite one of them to say so.

DR O’CONNELL:

The work we did suggested that on a preliminary basis there may be significant potential health benefits. Those will need to be validated, it is preliminary work and as the Prime Minister suggested there is a need for further analysis under Australian conditions. But there is some prima facie evidence that there will be reductions in particular emissions from the use of ethanol and if that is proven there is the potential for quite significant health benefits.

JOURNALIST:

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One of the concerns originally was that there might have been problems with engines taking ethanol and the damage that can do to engines. Are you now saying that that’s seems to have been a furphy, that wasn’t actually the case?

DR O’CONNELL:

We are confident that all current cars entering the market can handle E10 with very few exceptions. And I think there’ll be work done with the Federation of Automobile Manufacturers to improve the information that comes from the manufacturers about the operability with cars. We are confident that the information that consumers have to date can be improved.

JOURNALIST:

And older cars as well, will they be…

DR O’CONNELL:

In terms of older cars, pre-1986 cars, that’s cars which have mechanical fuel injectors or carburettors, we still recognise that those cars are not optimally run on E10. The suggestion has been made, and will be followed through with the Government’s programme, to test them on E5 and confirm that there will be no problems on E5.

JOURNALIST:

Is there a timeframe for testing (inaudible)?

DR O’CONNELL:

That’s a matter of the Government response because the details of which I think still need to be worked through. But my understanding is that will be as quick as possible to ensure that the labelling issue can be handled as soon as possible.

PRIME MINISTER:

What, I mean I can perhaps add something that the gentlemen with me feel you know can’t get involved in, but let’s call a spade a spade, there was a deliberate scare campaign run by the Labor Party and others because of claimed improper associations between myself and an ethanol producer. The allegations of course were absurd - there was nothing improper about the association, I’ve never denied it and I’m very proud to know Mr Dick Honan, he’s a very substantial Australian. But in the process a lot of damage was done to the ethanol industry and even worse than that Australian consumers have been potentially denied the benefits of ethanol blend for several years and that has not only environmental consequences but also cost benefits. Now that particular campaign has - forget about its impact on me or Mr Honan or the industry - think about its impact on the Australian petrol consumer. Any other questions?

JOURNALIST:

(inaudible)

PRIME MINISTER:

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Well we will be talking to them primarily about the need to develop industry action plans so we can work together to achieve this target of 350 millilitres by 2010. In other words achieve a target of more ethanol and other biodiesel blends, and that has cost benefits and environmental benefits. Now that will be the main purpose of the meeting. I will also take the opportunity obviously to talk about the outlook for petrol prices. I mean the outlook for petrol prices is not good, we have another hurricane developing, it’s now to a category five in the United States and that has already overnight had an impact on the price of crude oil. I mean these high petrol prices are being driven overwhelmingly by the high price of crude oil. You go back a year and look at the price of crude oil and look at the price of petrol then and make the same comparison now and you can see very dramatically that that is the overwhelming cause.

But we obviously are very concerned and I don’t want any motorist in Australia to imagine that we’re not. But I don’t have the luxury of calling for other people to do things without knowing whether they can be done or not. I have a responsibility to do what we can to help, but also not to make irresponsible claims because I know and people who think about it know that the root cause of this problem at the present time is the high price of crude oil.

JOURNALIST:

You talk about the environmental benefits of ethanol and yet my understanding is that the last report said that, particularly in terms of using cane and cane off cuts for ethanol was it was actually quite environmentally damaging after you add water, fertilisers, all the other things that it takes to grow cane.

PRIME MINISTER:

Well once again the members of the Taskgroup might want to deal with the scientific part of that, I don’t claim to be an expert on that. But my understanding is that the findings of this report are, in a number of respects, including the respect you referred to, different from the earlier report. And because this examination involved a good deal of own research it is more to be believed than the earlier one. But one of the gentlemen might want to add to that.

DR O’CONNELL:

In terms of any ethanol that is produced from sugar cane we wouldn’t see that there would necessarily be any additional cane production from that. Currently there’s considerable export and ethanol that would be used from cane would come off that export. So if the concern is that there would be increased areas of land transformed to cane planting that wouldn’t be something I think that we would believe.

JOURNALIST:

Mr O’Connell, on a broader scale - the NRMA’s gathering today has heard that biodiesel can be produced cheaper and virtually in (inaudible) matter. What did your findings find in regards to biodiesel as opposed to ethanol?

DR O’CONNELL:

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We certainly found that biodiesel has some greenhouse gas benefits in terms of its production. But those do very much depend on the feedstock that it’s taken from. So there’s a variety of answers depending on the variety of feedstocks.

JOURNALIST:

Mr Howard, the fuel summit has heard that more money, the Federal Government needs to spend more money on developing biofuels. What’s the Government’s monetary commitment to (inaudible)?

PRIME MINISTER:

Well we have a very big monetary commitment. To start with the excise is less than half at the present time, the excise on petrol. We have a grants programme to which I referred, and that excise level will rise to not more than 50 per cent of the current excise on petrol by the year 2012. So that represents, when you bear in mind that the gross revenue collected from petrol excise is about $14 billion a year, you can see that the advantage conferred by that concessional excise is very significant indeed. Could I say that I welcome, or I note with interest the comments now being made by the NRMA about ethanol. They’re very different from the comments that were made by the NRMA a couple of years ago in relation to the use of ethanol. I think if you go back and have a look at the record you’ll find that some of the comments being made by the NRMA and some other motoring organisations a couple of years ago were more in line with the scare campaign being run by the opponents of ethanol. Now I welcome the fact that we now have a more restrained, intelligent debate and that’s what we need. This is a very difficult issue and I am very aware of how hard it is on the average motorist. But it’s not helped by people making extravagant claims and saying if you only did this and you only did that you’d solve a problem.

I just might point out that as of this morning, according to the Shell website, the petrol price in Sydney is $1.28. If you convert it to equivalent in Australian dollars per litre - in Japan it’s $1.48; in New Zealand $1.39; in the United Kingdom $2.09; in Germany $2.30; in France $2.32. Only in the United States is it lower at $1.20, which, in fact, the gap between the American and Australian price on that comparison is narrower than normally. Now that doesn’t help anybody who’s got to fill up their tank, but I think the point I’m making is that if there were some magical solution and some government intervention that so far has not been taken up by the Australian Government, then I suggest it might have been taken up by one of these other governments.

The reality is that when you have an excess of demand over supply which is further aggravated by natural disasters it’s a difficult situation. But I believe that the steps the Government has taken this week are practical, achievable goals and we’ll keep on doing those things. We will talk to the oil companies about the issue but the principal purpose of that gathering is to discuss the achieving of the Government’s target in relation to biofuels use. One more question then we might go.

JOURNALIST:

How would you respond to the NRMA survey which finds that one in four motorists are spending less money on food and other items because of fuel?

PRIME MINISTER:

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Well I don’t know how scientific that survey was, I think it was 300 people over the phone, I don’t know who carried it out so therefore I, having had some experience in analysing public opinion surveys over the years, it depends how the question is asked, it depends how reliable the sample was, it depends on whether it was a properly weighted sample. I don’t want to be dismissive of it, but equally I don’t want to necessarily endorse its findings. But I don’t need a survey to tell me that people are finding it difficult with high petrol prices. I don’t need a survey to tell me, I know that, I’m aware of that. And thank heavens we’re living in an environment where we have full employment, or near full employment, we have rising wages, we’ve just cut tax, and we have low interest rates.

It would be a lot more difficult if those conditions didn’t exist. But we will do everything we can to relieve the pressure, but we cannot stop hurricanes, we cannot arbitrarily cut the price of crude oil, we cannot do those things and they are the drivers of this very high price.

JOURNALIST:

Mr Howard, approximately how much would ethanol actually help lower the cost of fuel in a couple of years time?

PRIME MINISTER:

Well I can’t put a figure on that, I really can’t…

JOURNALIST:

A ballpark at all?

PRIME MINISTER:

No, no I’m not even going to try a ballpark, you can’t do those things. Clearly if there is more ethanol blended into petrol and ethanol carries a lower excise than petrol well it will make an impact. But it will depend on how much; it will depend on what the usage is, it will depend upon a whole range of factors. But it is something that over time would produce a reduction. I can’t tell you how much and I haven’t tried to represent this as some magic solution. But it’s one of a number of practical things the Government can do. If we can safely and responsibly achieve a greater use of ethanol and other biofuels because of the lower excise that means petrol will be cheaper in the medium to longer term. By how much I can’t tell you because I don’t know the extent of the ethanol use. But it will be an improvement. Now they’re the sort of sensible things that the Government can do and they’re the achievable things that the Government can do and I think we have to, as a Government, focus very heavily on doing them.

JOURNALIST:

Prime Minister, on the Wheeler report, do you agree that security at airports should be looked after by a police commander?

PRIME MINISTER:

I certainly do, yes. I believe there should be an individual police commander at each of the category 11 airports and the Government’s already announced that we’re going to do that and we intend to implement that. I intend to discuss this report with the State Premiers next week.

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The reason that I’m discussing it with the State Premiers is that it’s the state police forces that have the men and the women experienced in community policing, not the Federal Police. I heard a representative of the Federal Police Association say on radio this morning that this should be totally a federal responsibility. I certainly agree with him that the running of the airports should be, and they are a federal responsibility, but the fact is the Federal Police do not have the personnel to carry out ordinary community policing tasks because in this country those tasks are carried out by the state police and they are carried out very well. And that’s their job. And what clearly is needed is for the state police services to make available an adequate number of men and women to do community policing at airports. Now it happens in some parts of the country, the Victoria police are available and they’ve had a very cooperative presence at Tullamarine. It’s not so good in other parts of the country. But I want to approach this in a very cooperative fashion and endeavour to reach an agreement. I mean we need an agreement; the Australian public will not thank any level of government if we don’t get an agreement on this at our meeting next Tuesday. It’s a meeting not only to talk about this issue but also to talk about matters relating to counter-terrorism generally. And I’m optimistic that we can get a sensible agreement. I had a very constructive discussion with the Victorian Premier two days ago and I’m hopeful on the basis of other soundings that we can get a very good outcome from this meeting and the Australian public will demand nothing less of all of us. This is an important issue for all governments to understand the public wants us to look after their interests and not to squabble about who’s responsible.

JOURNALIST:

Do you think a Department of Homeland Security would be of better use in dealing with these issues?

PRIME MINISTER:

I notice that Mr Beazley keeps calling for the creation of a Department of Homeland Security, and he’s obviously modelling that call on what’s been done in the United States. I’d point out to Mr Beazley the Department of Homeland Security does not appear to have operated very well in relation to Hurricane Katrina. There’s been widespread condemnation; it hasn’t been the all-embracing bureaucratic solution that people said it was going to be and this is just another example of my opponent slavishly copying something because it’s American or because it’s overseas. The reality is that we have quite good cooperative disaster relief arrangements in operation in this country, very good arrangements. In the past when we’ve had bushfires and floods and so-forth they’ve all operated very well. Now I don’t compare those things with the scale of Katrina; that’s unfair on our American friends. But no objective analyst would say that the Department of Homeland Security in the United States, on which Mr Beazley’s call has been modelled, has been a great success in Katrina; it’s not been that, it’s been quite the opposite.

Thank you.

[ends]