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Energy policy: towards a sustainable energy future
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SUNIlvfARY............................................................... 1

1. INTRODUCTION ....................................................... 5

1.1. BACKGROUND .................................................... 5

1.2. PURPOSE OF THIS POLICY ......................................... 5

1.3. ORGANISATION OF THIS POLICY DOCUMENT ......................... 5

2. OBJECTIVES ......................................................... 6

2.1. ENSURE A SECURE SUPPLY ........................................ 6

2.1.1 Strategy .................................................... 6

2.2. REDUCE ENERGY COSTS ........................................... 7

2.2.1 Strategy .................................................... 7

2.2.2. 'Fightback » !' will Reduce Costs for All Businesses and Industries .......... 8

2.3. REDUCE ADVERSE ENVIRONMENTAL IMPACTS ........................ 9

2.3.1 Strategy ................................................... 9

2.3.1.1. Greenhouse Gas Emissions .............................. 9

2.3.1.2. Toxic Pollutants ...................................... 10

2.3.1.3. Other Environmental Impacts ........................... 10

2.4. MAXIMISE EXPORT EARNINGS ..................................... 10

2.4.1 Strategies .................................................. 10

2.4.1.1. High Value Added Products and Services ................... 11

2.5. MINIMISE CAPITAL INVESTMENT IN ENERGY SYSTEMS ............... 11

2.5.1 Strategy ................................................... 11

2.5.2. Implementation ............................................. 12

3. SPECIFIC INITIATIVES ................................................. 12

3.1. IMPLEMENTING SUSTAINABLE DEVELOPMENT ...................... 12

3.2. DOMESTIC ENERGY SUPPLY INDUSTRIES ........................... 13

3.2.1. Electricity .................................................. 13

3.2.1.1. Brown Coal ......................................... 14

3.2.1.2. Snowy Mountains Scheme .............................. 15

3.2.2. Gas ........................................................ 15

3.2.2.1. General ............................................ 15

3.2.2.2. The Pipeline Authority ................................. 15

3.2.2.3. Coal Bed Methane .................................... 15

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3.2.3. Petroleum Refining, Distribution and Retailing ...................... 15

3.2.4. Alternative Transport Fuels .................................... 16

3.3 ENERGYEXPORT INDUSTRIES ..................................... 16

3.3.1. Coal ...................................................... 16

3.3.1.1. General ............................................ 16

3.3.1.2. Coal Industry Tribunal ................................ 16

3.3.1.3. Joint Coal Board ..................................... 17

3.3.1.4. Export Controls ...................................... 17

3.3.2. Oil Exploration and Production .................................. 17

3.3.2.1. Petroleum Resource Rent Tax ........................... 17

3.3.2.2. Oil Excise .......................................... 17

3.3.2.3. Cash Bidding ........................................ 17

3.3.2.4. Farm Outs .......................................... 18

3.3.2.5. Local Content ....................................... 18

3.3.3. Liquefied Natural Gas ........................................ 18

3.3.3.1. Introduction ......................................... 18

3.3.3.2. Export Controls .................................. .. 18

3.3.4. Uranium ................................................... 18

3.3.4.1. Three Mines Uranium Policy ............................ 18

3.3.4.2. Uranium Enrichment ................................. 19

3.3.4.3. Development of the Nuclear Fuel Cycle ..................... 19

3.3.4.4. Nuclear Waste ..................... I .................. 19

3.3.4.5. Safeguards and International Treaties ..................... 19

3.3.4.6. Australian Safeguards Office ............................ 19

3.3.4.7. The Office of the Supervising Scientist ..................... 19

3.4 IMPLEMENTING ENERGY EFFICIENCY - THE COALITION WAY .......... 19 3.4.1 Method .................................................... 20

3.4.2 Advantages ................................................. 20

3.4.3 Funding ................................................... 21

3.4.4 Incentives for participants .. ................................. 21

3.5 ENERGYRESEARCH AND DEVELOPMENT ........................... 22

COMPARISON: COALITION V'S LABOR ENERGY POLICY ........................ 23

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OBJECTIVES

The Coalition's Energy Policy has five principal objectives:

1. To ensure Australia has a Secure supply of energy for the future.

2. To reduce the real Cost of energy in

Australia.

3. To reduce the adverse Environmental impacts of Australia's energy production, distribution and use.

4. To maximise earnings from energy Exports.

5. To minimisethe Capital investment needed for future energy systems.

STRATEGIES

Energy security will be achieved by a combination of the following:

* Finding and developing new reserves of traditional energy sources.

* Developing new types of energy.

* Increasing the diversity of energy sources.

* Reducing the rate of depletion of non-renewable energy resources

- by improving the efficiency of conversion;

- by improving end use efficiency; and

- by substituting renewable for non renewable energy sources.

Energy costs will be reduced by, in cooperation with the States and Territories:

* encouraging competition;

* reducing government . imposed market distortions;

* reducing government and bureaucracy imposed impediments to efficiency;

* implementing the Coalition's Industrial Relations Policy so there is incentive for productivity improvements; and

* reducing government taxes and charges on energy and energy industries.

The adverse environmental impacts of Australia's energy production, distribution and use will be addressed by:

* establishing, through the National Environmental Protection Authority, national minimum standards for pollution control. Under the 'Inter-Governmental Agreement on the Environment' the State and Territory Governments can prescribe more stringent standards on a state, region, or site specific basis; and

* establishing a policy, for energy derived greenhouse gas emissions, that addresses the Ultimate Objective' defined in the United Nations' "Framework Convention on Climate

Change".

Strategies to help maximise earnings from energy exports will include negotiating with the states to ensure:

* reduction of taxes and bureaucratic impediments on our export industries;

* reduction of government interference in the management of these industries; and

* implementation of policies that will allow efficiency improvements in all sectors that impact on the export industries.

To minimise the capital investment required in future energy production, conversion, distribution and end-use systems, the Coalition will negotiate with State Governments, utilities, industry, private sector, and end users to:

* improve end use energy efficiency;

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* remove market distortions and barriers to improvements in end use efficiency;

* implement cost effective demand side management;

* implement integrated least cost planning, and

* facilitate the voluntary implementation of energy savings measures that will provide a net gain to Australia's economy irrespective of the environmental considerations.

The Coalition will begin by investigating and establishing the measures that will provide the greatest benefit for least cost, and the earliest

return on investment.

A Coalition Government will lead by example. We will introduce appropriate measures in the Commonwealth, for example in energy savings in buildings and in purchasing fuel efficient vehicles on a cost benefit basis.

MAJOR INITIATIVES

Taxation - Reducing the Burden

The " « Fightback » !" package contains many elements of crucial benefit to the Energy sector, and in particular, the abolition of seven taxes. Abolishing these taxes will cut taxes on business by at least $20 billion per year. The taxes to be

abolished are:

* Wholesale Sales Tax. This will save Australians $9.4 billion per year.

* Fuel Excise, including excise on petrol, diesel and avgas. This will save Australians $6.6 billion per year.

* Payroll Tax. This will save Australians $5.9 billion per year.

* Lump Sum Superannuation Tax.

* Training Guarantee Levy. This will remove an impost on employers and create more jobs.

* Customs Duties. These will be reduced to negligible levels by the year 2000. This will save Australians $3.3 billion per year. As Australian industries become more cost efficient both local and imported goods will be cheaper. And that means more jobs.

Coal Export Duty. Eliminates $49 million tax on one of our major export industries. (The Government has, in fact, adopted this particular initiative. However, whereas this initiative was fully funded in « 'Fightback » !' , the loss of revenue to the Labor Government is just one more addition to the Government's

revenue shortfall - one more addition to Australia's national debt.)

Other taxation initiatives include:

* Full rebate of Goods and Services Tax for business inputs.

* Zero-rating of GST for exporters, (that is, GST will not be added on to the price of exported goods and services).

Fringe Benefits Tax will be reduced from 48.25% to 46.25% and later to 43.25% in order to align it with the top marginal rate plus the Medicare levy. In addition the current anomalies which apply to the .mining industry will be reviewed, including the operation of the tax in remote areas.

* Major reforms of Capital Gains Tax. The revised and lower capital gains tax system will permit greater access to roll-over relief and make additional allowance for goodwill.

Review of the present depreciation arrangements to help Australian business to be able to match best international practice.

* Continuation of company tax deductions at 150% for research and development costs.

Implementing Sustainable Development

In Government, the Coalition will give practical effect to the principle of sustainable development by a major restructuring of the Federal public service. This will centre on the establishment of a Federal Department of Sustainable Development (DSD) (details in Section 3.1).

The aim is not to cut corners with respect to thorough assessment of environmental, Aboriginal heritage and other relevant factors. It is to cut through the bureaucratic and political blockages which arise from the failure to consider environmental and economic issues in an

integrated way. It is this failure which has led to

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the failure to set and achieve clear environmental targets and at the same time delayed and frustrated development proposals. The integrated structure we propose will eliminate warring Departments and Ministerial conflict from the approval process.

SPECIFIC INITIATIVES BY INDUSTRY

Electricity

Although reform of the electricity supply industry has been under way for several years, and much has been accomplished, much more needs to be done. The Coalition believes that continued and faster reform of the electricity industry is a

priority. The Government's National Grid has been stalled because of the intransigence of some state generating authorities.

A Coalition Government will not accept any further frustration of this vital reform.

We will, therefore, accelerate the pace of reform through the medium of the Premiers' Conferences and through extensive consultation with industry.

The Coalition will negotiate with State and Territory Governments and electricity utilities to:

* Establish an Australian Electricity Grid (AUSELGRID).

* Encourage corporatisation and privatisation of the publicly owned generators.

* Encourage private generation, when demand requires additional capacity be added, thereby providing competition for the publicly owned generators.

* Encourage corporatisation and privatisation of the electricity distributors, eg county councils.

* Reduce uncertainty for power projects by establishing clear unambiguous rules and approval processes.

Gas, Domestic

In co-operation with the State and Territory Governments, we will:

* remove obstacles to freely negotiated contractual arrangements between producers, transporters and consumers of natural gas;

* remove restrictions on the use of natural gas for electricity generation or any other use;

* encourage private ownership of gas pipelines;

* rely on commercial negotiations to ensure access to pipelines, subject to oversight by the TPC;

* negotiate with interested parties to ensure that government business enterprises participating in the gas industry do so on an equal basis with private enterprise;

* promote the continued development of LPG and natural gas as a transport fuel; and

* privatise The Pipeline Authority.

Gas, Exports

The remaining controls over gas exports will be abolished to bring gas into line with oil and coal.

Oil Exploration and Production

The Resource Rent Tax is a significant reform of royalty collection from the oil industry. Discussions will continue with the industry as to the best method of fine-tuning the operation of the Resource Rent Tax. The Coalition recognises the need for stability in resource taxation measures.

The Coalition will:

* Not alter the current royalty regimes applying to oil exploration and production from the North-West Shelf.

* Review excise arrangements on crude oil production in areas not under the PRRT regime.

* Repeal the cash bonus bidding system. Oil exploration program bidding systems will be developed in consultation with industry.

* Exempt non-cash/work program farm out agreements from the Capital Gains Tax.

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Rely on market forces to determine the supply of capital equipment for projects while ensuring that full and fair opportunity is provided to local suppliers.

* Continue the process of tariff reform and avoid introducing other regulations, such as mandatory local content requirements, which raise the cost of resource projects.

Coal

The Coalition will:

* Work strenuously, through the GATT and other channels, to reduce barriers to international trade, both bilaterally and multilaterally.

* Negotiate with states to remove defacto resource taxation via rail/freight excise.

* Encourage continued privatisation of port coal loaders.

* Facilitate efficiency improvements and cost reduction in rail systems.

* Abolish the Coal Industry Tribunal.

* Abolish the Joint Coal Board.

* Abolish export controls.

Uranium

The Three Mines Uranium Policy will be abolished. Mining and export of uranium will be permitted subject to adequate environmental controls and strict international safeguards.

Private sector involvement in the development of the nuclear fuel cycle in Australia will be permitted subject to projects satisfying international safeguards, and all pertinent Australian environmental, heritage and safety regulations.

The Coalition supports Australia's obligations under the Nuclear Non-Proliferation Treaty (NPT); the Agreement with the International Atomic Energy Agency (IAEA); and the

convention on the Physical Protection of Nuclear Material. We will continue to work to maximise Australia's influence in the NPT agreements.

The role of the Australian Safeguards Office will be reviewed to ensure the most stringent application (and, if necessary, strengthening) of Australia's nuclear safeguards. Application of Australia's nuclear safeguards will be maintained at a level consistent with world best practice.

Alternative Transport Fuels

The Coalition will conduct a study to clearly identify the economic and environmental costs and benefits of alternative transport fuels for Australia.

Following completion of the study, the Coalition Government will work with industry to develop suitable policy options to deliver identified benefits to Australia.

ENERGY RESEARCH AND DEVELOPMENT

Energy research and development is most appropriately carried out by the . industries requiring the research to be done. The role of

Government should be to facilitate research into areas that will have a clear national benefit, but will not or cannot be undertaken by industry.

The Commonwealth's current level of funding for research to improve energy efficiency and to develop more benign energy sources, including renewable energy, will be maintained.

The Commonwealth will target part of its R&D funding at environmental aspects of energy, production, distribution and use that have an international perspective, such as those aspects related to international treaties and obligations.

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1. INTRODUCTION

1.1. BACKGROUND

Australia, with the advantages of plentiful natural resources, high literacy, none of the problems associated with very high population density, and placed close to the most rapidly growing economies in the world, should be a nation of rapidly expanding economic opportunity, rising living standards and social progress. Furthermore, with all these natural advantages we should be one of the best placed countries in the world to manage our development in such a way as to ensure truly sustainable development.

Consider the following facts about our energy situation. Australia has abundant energy reserves. We are self sufficient in all but petroleum, in which we are currently about 85% self sufficient. At present consumption rates we

have at least:

* 300 years supply of black coal;

* 900 years supply of brown coal;

* 50 years supply of natural gas;

large reserves of coal bed methane (another source of natural gas);

* 12 years supply of oil;

* 100 years supply of oil in oil shale; and

* virtually unlimited supplies of uranium.

We also have excellent renewable energy potential. For example, enough solar energy falls on Australia in two days to provide the whole world's current energy needs for a whole year.

Much of our coal is in thick seams, near the surface so that it can be cheaply mined.

It is doubtful whether any other country in the world is as well endowed.

Yet, in spite of having all these natural advantages it is clear that the growth in Australia's economy and living standards are steadily falling behind the other countries in our region, countries with nowhere near our natural

advantages.

We are being held back from making the most of our opportunities and many other countries with less natural advantages are achieving much more. One of the reasons we are being held back is the ideology and policies of the federal Labor Government.

The Coalition's " « Fightback » !" package provides a constructive alternative to the Labor policies that are holding us back. The Coalition's Energy Policy, outlined in this document, is an integral part of the complete Coalition Policy, and should be read in conjunction with the rest of the Policy, especially the Mineral Resources Policy and the Environment Policy.

The Coalition's policies taken together provide a policy framework that will allow this country to pull itself out of the debt rut we are in.

1.2. PURPOSE OF THIS POLICY

The Energy Policy presented in this document provides a framework for clear decision making, and a direction towards a sustainable energy

future. It is a clear statement of the Coalition's Energy Policy objectives and the strategies we intend to use to achieve those objectives.

This Energy Policy takes a long term view of Australia's situation in the world, the emerging realities of world energy demand, supply, resources and energy security, and the environmental concerns related to energy consumption. This Policy provides a framework to ensure security of energy supply, and together with other Coalition's policies, sustainable development through to 2020 and beyond.

1.3. ORGANISATION OF THIS POLICY DOCUMENT

This document is organised into three main sections; vis,

* overall objectives and strategies for moving towards a sustainable energy future;

* specific policy initiatives; and

* a comparison of the Coalition's and Labor's energy policies.

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2. OBJECTIVES

The Coalition's Energy Policy has five principal objectives:

1. To ensure Australia has a Secure supply of energy through the rest of this decade, and well into the next century.

2. To reduce the real Cost of energy in Australia.

3. To reduce the adverse Environmental impacts of Australia's energy production, distribution and use.

4. To n imiee earnings from energy Exports.

5. To minimise the Capital investment needed for future energy systems.

The reason our policy is based on these five objectives, and the overall options and strategies for achieving them are outlined below.

2.1. ENSURE A SECURE SUPPLY

The first objective is to ensure that Australia has a secure supply of energy through the rest of this decade, and well into the next century.

In times when supply is not threatened it is easy to forget how important energy is to our economy, and to our stable and secure lifestyle. But two recent examples illustrate the real and potential adverse effects when security of supply has been threatened.

During the Middle East Oil crisis, in the 1970's, Japan's industry and transport systems were within a few days of being shut down. Stringent rationing of liquid fuels, electricity and food was implemented and Japan had no alternative but to bow to OPEC's demands.

Close to home many Australians can recall the effects of petrol strikes, the adverse effects on our economy and the inconvenience caused to millions of ordinary A ustralians.

In summary, when security of energy supply is threatened wide ranging economic and social disruption can occur and other concerns (for example, environmental safeguards and cost of

energy) become, in the overall communitys perspective, of lower priority.

It is interesting to note that the International Energy Agency (IEA) was established as a result of the Middle East Oil crisis; the principal objective was to improve energy security of its member nations. That is still a primary objective of the IEA.

Australia currently has a relatively secure supply of energy. However, the Coalition's Energy Policy is not simply for the short term. This policy is formulated to allow for developments and changing

world political and environmental demands well into the next century.

2.1.1 Strategy

Achieving the first objective - to ensure a secure supply of energy for Australia for the future - does not necessarily mean that Australia must rely entirely on its indigenous resources. What it does mean is that, during times of world energy crises, and in a changing world political and environmental climate, Australia needs to be assured of a secure supply of energy to meet its needs.

Energy security can be achieved by a combination of the following.

1. Finding and developing new reserves of traditional energy sources (for example, oil and gas), and improving the recovery from existing reserves.

2. Developing new energy sources (for example, renewable energy, hydrogen, oil shale, nuclear).

3. Increasing the diversity of energy sources. For example, the threat of industrial action to the security of electricity supply can be reduced by encouraging private sector ownership of generating facilities, and by increasing the variety of primary energy sources used for electricity generation. The effect on the transport sector of a disruption to the supply of liquid fuels can be reduced by encouraging the use of alternative vehicle fuels, where economic, and by continuing the electrification of railways. As they become available and economic, electric, and perhaps eventually hydrogen, powered vehicles will further diversify the energy sources for transport.

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4. Reducing the rate of depletion of existing non-renewable energy resources (oil, gas, coal).

By imnrovina the efficienc y of conversion from primary energy (eg coal, oil, gas) to end use energy (eg electricity, petrol, diesel). Conversion efficiency can be improved by using, for example, cogeneration plants, combined cycle gas generating plants, and new more efficient coal fired generating plants.

By improving end use efficiency and thus reducing demand. Some particular areas for early attention are: improving the energy efficiency of buildings, appliances, and industrial processes, and by improving the fuel efficiency of vehicles, improving public transport and improving the layout of our cities.

By substituting renewable for non renewable energy sources where they are economic. Examples are: substitute solar space heating for gas and electric heating, solar hot water for gas and electric hot water, natural day light for artificial light in commercial buildings, solar heat for gas and electric heat in industrial processing.

2.2. REDUCE ENERGY COSTS

The second objective is to reduce the real total cost of energy.

For Australia to continue to improve its standard of living we must improve our capacity to add value to our exports. Modern industrial economies are energy intensive and the cost of energy is an important factor in a country's international competitiveness. The cost of energy is even more important to Australia - a large country with low population density where transport costs have a relatively greater impact on our economy than on our competitors'. If Australia is to maintain or increase its relative standard of living the cost of energy to all users must be kept as low as possible consistent with reasonable returns on capital investment in energy production and distribution.

While reducing the cost of energy inputs to our industries will help our competitive position, the

Coalition recognises that, in the absence of other mitigating actions, reducing the price of energy could cause an increase in wastage of energy. Such wastage would be contrary to the first and third objectives of our policy. Therefore, the Coalition will implement a range of measures to ensure improved efficiency and to reduce wastage. These are covered in more detail in subsequent sections.

The Coalition . also recognises that, to reduce market distortions, the full cost of energy, including the cost of externalities not at present included in the cost of energy, must eventually be included in the price of energy.

The "total cost" of energy, around the world, will eventually include the costs of resource depletion, environmental degradation and other externalities not currently included in energy costs. We anticipate there will be a move internationally over the next decade to incorporate these costs into energy costs. As the world community moves toward agreement on how to assess these costs, Australia, under a Coalition Government, will participate in reaching such international agreements and will, in concert with our competitors and trading partners, ensure that such agreements are honoured by Australia.

However, under a Coalition Government Australia will not act unilaterally and will not be a party to international agreements that will

disadvantage our competitive position.

2.2.1 Strategy

The Coalition's strategy for reducing energy costs is to:

s encourage competition,

s reduce government imposed market distortions,

s reduce government and bureaucracy imposed impediments to efficiency,

* implement the Coalition's Industrial Relations Policy so that there is incentive for productivity improvements, and

s reduce government taxes and charges on energy and on the energy industries.

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Petroleum products, gas and electricity provide 88% of final end use energy in Australia (ABARE 1991). Therefore, it is these energy supply and distribution industries that must be initially targeted for cost reductions.

The industry specific initiatives that will be introduced for each of the Petroleum, Gas and Electricity Supply industries are presented in Section 3 - Specific Initiatives. The following section outlines the actions that a Coalition Government will implement to reduce costs and improve efficiency in all industries, including the energy supply industries.

2.2.2. T'ightback!' will Reduce Costs for All Businesses and Industries

All energy production and supply activities will benefit from the cost reduction impacts of the Coalition's « 'Fightback » !' package.

The Coalition's " « Fightback » !" package will remove at least $20 billion per year of taxes on business, plus a wide variety of impediments to efficiency. The wholesale sales tax, payroll taxes, excise duties, the training levy, the capital gains tax and other taxes add around $20 billion to business costs directly, and perhaps an additional 20-30% indirectly through the cascading effect of some of these taxes.

The current system of business taxation contains major disincentives for business and industry.

* It encourages debt over equity finance and discourages large investments with long lead times such as the Very Fast Train project, the Alice Springs to Darwin rail link and major private sector funded power projects.

The capital gains tax discourages investment in new businesses and the expansion of existing ones.

* The rate of company tax is set considerably lower than the top marginal personal tax rate, thus encouraging incorporation to limit tax liability.

* The compulsory Training and Superannuation Levies arecounter-productive to lowering inflation and creating jobs.

As stated above, under a Coalition Government taxes on business will be cut by at least $20 billion per year. Most importantly, we will:

* abolish the $9.4 billion wholesale sales tax;

* abolish the $5.8 billion payroll tax;

* abolish the $6.6 billion excise on petroleum products (55 per cent of which falls on business);

* abolish virtually all $3.3 billion of customs duties; and

* rebate Goods and Services Tax paid on most business inputs, including businesses competing with imports.

In addition, the Coalition will implement a range of other measures to reduce cost disadvantages to the business sector:

* our overall reform package dramatically lowers many business costs by 20% to 50%;

* the revised and lower capital gains tax system will permit greater access to roll-over relief and make additional allowance for goodwill;

* the Training Guarantee Levy,-which is in effect an extra tax on employers, will be abolished;

* the level of compulsory employer contributions to employee superannuation, in place at the time of the next election, will be retained but there will be no further compulsory increases. Further increases will be on the basis of choice and incentive, rather than Labor's compulsion;

we will review the present depreciation arrangements to help Australian business to be able to match best international practice;

* company tax deductions for research and development costs will continue at 150%, but we will implement strict measures to guard against abuse and we will promote new R&D links between industry and universities; and

the Fringe Benefits Tax will be reduced from 4825% to 4625% and later to 43.25% to align it with the top marginal tax rate plus medicare levy. We will review anomalies arising from the application of the Fringe Benefits Tax, especially in the mining, pastoral and tourist industries and in isolated areas.

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These tax changes are also to be seen against the background of the other elements of our reform agenda designed to reduce or eliminate major cost disadvantages to business (eg on the waterfront, in utilities, telecommunications, aviation, shipping, land transport, development approval processes, training and others).

As with other sectors, the business sector will be expected to contribute to, as well as benefit from, the reform process under a Liberal/National Government. We are also committed to bringing the corporate tax rate into alignment with the top personal marginal tax rate.

2.3. REDUCE ADVERSE ENVIRONMENTAL IMPACTS

The third objective of the Coalition's Energy Policy is to reduce, eventually to sustainable levels, the adverse environmental impacts of Australia's energy production, distribution and use. The time frame for reaching a sustainable

level will take into account the needs of industry, and the Australian economy as a whole, to remain internationally competitive.

Falling international competitiveness and falling living standards do not provide a sound basis for sustained protection of the environment.

2.3.1 Strategy

As pointed out previously the Coalition believes that a strong economy is an essential prerequisite for a successful Environment Policy.

Clearly, in today's world, it is the wealthy nations that have the most advanced policies and the strongest community support for protecting the environment.

Yet, even in countries with strong records for environmental protection, public support for environmental issues reduces in times of weak economic growth or recession. Australia's own experience during the present recession, "we had to have", is that concern for environmental issues has decreased in favour of more fundamental issues such as jobs, job security and basic survival.

The Coalition believes that a sound environmental policy and economic policy must

go hand in hand - it can no longer be environmental protection versus economic growth. We can, and must , have both.

So the first, and fundamental, cornerstone of this Policy is that we must pursue strong and sustainab le economic growth in order for us to be able to afford to implement the policies we will need if we are to achieve true, long term, economically, ecologically and socially sustainab le development.

For convenience, the strategies for reducing environmental impacts are divided into strategies for reducing energy related:

greenhouse gas emissions;

s toxic pollutants; and

s other environmental impacts.

2.3.1.1. Greenhouse Gas Emissions

Australians are increasingly conscious of the need to minimise adverse effects of human activities on the earth's atmosphere and are concerned about the possibility of significant climate change

associated with accelerated global warming. With respect to the enhanced greenhouse effect, there is little dispute that human activities have increased significantly the level of gases such as CO2 in our atmosphere. However, there is

ongoing debate and uncertainty about the precise impact of this effect on the earth's temperature and the implications for life on our planet.

But that is no reason to ignore its potentially serious impact. It is prudent to pursue policies such as energy conservation programs, which minimise greenhouse gas emissions while providing direct economic benefits through more efficient production methods.

The United Nations Conference on the Environment and Development (UNCED) held in Rio de Janeiro in June 1992 resulted in the signing by the world community of an International Convention on Climate Change. The Convention details how countries can and should respond to the issue of global warming.

Having led political debate in Australia on this issue, the Liberal and National Parties fully endorse the terms of the Convention and will in Government give full effect to our obligations under it.

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The key to the global management of greenhouse gas emissions is coordinated international action. The Coalition has always rejected the notion that Australia should take unilateral action on the basis that it would be both futile and would significantly damage our economy through reduced international competitiveness.

The international community has adopted a common approach to tackling this potentially very serious problem. It is therefore inappropriate for Australia to pursue unilaterally a specific target which is not in line with the international consensus.

In Government a further review will take place in relation to greenhouse gas emission reduction targets and timetables to take into account recent developments.

The Coalition will continue the consultative process, involving all levels of government, industry, and representative non-Government Organisations.

2.3.1.2. Toxic Pollutants

The production, distribution and use of energy produces toxic pollutants that are released to the environment. This is true for both renewable and non renewable energy sources. Under the Coalition's Energy Policy, a new energy project would have to pass a set of minimum environmental hurdles. These hurdles would be the same for all projects and would be set at a level that provided a particular, specified level of risk to the present and potential future population. Under the Inter-governmental Agreement on the Environment the State and

Territory Governments can require more stringent standards on a state, region, or site specific basis.

The Coalition will establish clear regulations and procedures for obtaining approvals for energy projects. The regulations will be performance based and will be the same for all projects. For example, new generating stations will have to demonstrate that the health risk to the

population from the full fuel cycle is below a certain threshold. The threshold will be the same whether the electricity is generated by coal, gas, wind, solar or other methods.

2.3.1.3. Other Environmental Impacts

Other environmental impacts from energy projects include:

` noise;

` visual impact;

` impacts on archaeological sites;

` impacts on heritage areas; and

` loss of arable land to waste dumps, generating stations and petroleum facilities.

As for the toxic pollutants, a standard set of performance based regulations will apply equally to all projects. The State and Territory Governments can require more stringent standards on a state, region, or site specific basis.

2.4. MAXIMISE EXPORT EARNINGS

The fourth objective of the Coalition's Energy Policy is to maximise earnings from energy exports. Here exports include both primary energy raw materials and high value added products and services. This objective must be achieved in a way that is consistent with the preceding three objectives.

2.4.1 Strategies

Energy exports include both raw materials and high value added products and services. Earnings from energy exports will be maximised in a way that is consistent with achieving objectives one to three, and with achieving the overall objective of encouraging the optimal development of Australia's energy resources for the benefit of all present and future generations of Australians.

The Coalition's overall strategy for achieving this objective is to reduce the government imposed costs on our export industries. This will be achieved by negotiating with the states to ensure:

` reduction of taxes and bureaucratic

impediments on our export industries;

` reduction of government interference in the management of these industries; and

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implementation of policies that will allow efficiency improvements in all sectors that impact on the export industries (for example railways and port authorities);

Strategies specific to the coal, natural gas and uranium export industries are included in Section 3.3. Our overall strategy for increasing the export earnings from high value added products and services follows.

2.4.1.1. High Value Added Products and Services

Australia has a competitive advantage in a number of high value added energy products and services. Examples are:

• clean coal technologies

design and construction of hydro-electric power-stations. As a result of the Snowy Mountains Scheme in the 1950's to 70's Australia gained a lead in hydro-electric technology that it has

continued to exploit and export for the past 20 odd years. Australia continues to win more than its share of international contracts for hydro-electric schemes in Asia and Africa against stiff competition from UK, France, Germany, Scandinavia, Switzerland, USA, Canada, Japan and others.

Other examples of high value added technologies in which Australia could have an advantage, given the right investment and entrepreneurial climate, are

s Synroc, a method of nuclear waste disposal that Australia has pioneered.

s Uranium enrichment. Enriching uranium doubles the value. Thus, exporting enriched uranium instead of yellow cake could

significantly increase Australia's income from uranium exports.

Certain components for natural gas vehicles such as compressed natural gas cylinders and electronic control units for diesel trucks and buses. Based on 1989 figures, Australia has

about twice as many heavy vehicles running on natural gas as any other country, and this was before South Australian and New South Wales State Transport Authorities placed orders for

several hundred natural gas buses for Adelaide and Sydney.

Photo voltaic cells. Australia is a world leader in this technology. The car that won, by a very large margin, the 1991 Darwin to Adelaide solar powered car race was powered by photovoltaic cells that had been developed at the University of New South Wales and were manufactured in Germany under license to the University of New South Wales.

Solar heat for a wide variety of industrial and agricultural pro d. Grain dryers, hay driers, fruit dryers and prawn aquiculture are but a few examples. These developments have the potential to enable Australian products to capture niche markets in Japan and elsewhere that are potentially worth many hundreds of millions of dollars annually to Australia.

We have emphasised these value added products and services because they are often forgotten.

The Coalition will establish a business and investment climate that will assist and encourage these industries to maximise their competitive advantage in the international market. In general the role of a Coalition Government will be to provide an investment climate and 'hands off regulatory framework that will facilitate export oriented industries, especially those exporting high value added products and services.

2.5. MINIMISE CAPITAL INVESTMENT IN ENERGY SYSTEMS

The fifth objective is to minimise the capital investment required in future energy production, conversion, distribution and end-use systems.

The reason for this objective is to free up investment capital for other more productive uses.

2.5.1 Strategy

The Coalition will negotiate with State Governments, utilities, industry, private sector, and end users to:

* improve end use energy efficiency;

remove market distortions and barriers to improvements in end use efficiency,

implement cost-effective demand side management;

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* implement integrated least cost planning; and

facilitate the voluntary implementation of energy savings measures that will provide a net gain to Australia's economy irrespective of the environmental considerations

(commonly referred to as 'no regrets' measures) .

2.5.2. Implementation

The Coalition, in government, will begin by determining the measures that will provide the greatest benefit/cost ratio, and which measures will give the earliest return on investment.

Next, the Coalition will introduce these measures in the Commonwealth, for example in energy savings in buildings and in purchasing fuel efficient vehicles on a cost/benefit basis.

The program will be fully self funded after an initial start-up phase. In fact, a snow-balling effect will be experienced in the first few years as the easy, low cost savings are introduced. The funds saved will be ploughed back into further efficiency improvements, always placing the priority on the measures that will achieve the maximum return for least cost.

The results will be widely publicised and the private sector will be encouraged to follow the Commonwealth's example.

The recently released Auditor-General Report shows the magnitude of the savings achievable and, therefore, the levels of funding that will be available to be ploughed back into energy efficiency improvements and R, D and D. The Report states "ANAO has estimated the total cost of energy used in Commonwealth occupied buildings at $258 million per annum and, with

some investment in energy efficiency improvements, there is the potential for savings between $29 to $46 million each year." (Efficiency Audit, Energy Management of

Commonwealth Buildings, Audit Report No. 47, 1991-92, page viii).

Section 3.4 presents further details on the implementation of this particular Coalition initiative.

3. SPECIFIC INITIATIVES

In this Section we summarise the specific initiatives that a Coalition Government will implement to achieve the objectives presented in Section 2.

3.1. IMPLEMENTING SUSTAINABLE DEVELOPMENT

The politicisation of environmental issues by Labor during the 1980's has severely restricted investment and job opportunities in resource based industries.

Existing bureaucratic arrangements have complemented the inadequate performance of the political elements of the Government. Departmental structures are adversarial and lend

themselves to pursuit of narrow interests leading to inter-departmental and Ministerial conflict without regard to the overall objectives of the Government.

The confusion surrounding the Government's approach to resource security in part reflects the fact that there was no structure or Minister with a clear policy responsibility for achieving sustainable development.

The concept of sustainable development is widely accepted as being the guiding principle for achieving integration between demands for conservation and resource use. It is based on the understanding that conservation of the environment and continued economic growth are not only compatible, they are interdependent.

In Government, the Coalition will give practical effect to the principle of sustainable development by a major restructuring of the Federal public service. This will centre on the establishment of a Federal Department of Sustainable Development (DSD).

To our knowledge, this will be the first time that any national Government anywhere in the world has given such overt recognition to the critical importance of the sustainability concept by specifically charging a major arm of its bureaucracy with the implementation of this widely endorsed objective.

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The aim is not to cut corners with respect to thorough assessment of environmental, Aboriginal heritage and other relevant factors. It is to cut through the bureaucratic and political blockages which arise from the failure to consider environmental and economic issues in an integrated way. It is this failure which has led to the failure to set and achieve clear environmental targets and at the same time delayed and frustrated development proposals. The integrated structure we propose will eliminate warring Departments and Ministerial conflict from the approval process.

Its focus will be to specify and meet Commonwealth requirements at the earliest possible stage in the process. Once satisfied, the proponents and the State or Territory concerned can proceed certain in the knowledge that there will be no last minute politically-motivated intervention from Canberra.

Achieving sustainable development does not require radical transformation in the way we live and do business. Rather, it involves:

* recognising that economic growth is essential;

* continuing to develop our renewable resources;

* correctly managing our non-renewable resources; and

* setting and applying appropriate environmental standards.

In summary, the establishment of the Department of Sustainable Development will:

* demonstrate a political will and a Government commitment to end the divisive environment/development conflicts of the Labor years;

* allow the practical implementation of the concept of sustainable development;

* provide industry with clear and predictable process and reduce delays by the imposition of strict deadlines for government decisions;

* provide a model for the States and Territories as to how approval . processes may be improved;

* provide a one-stop shop for project assessment at the Commonwealth level;

* restore confidence to potential investors and reverse the trend of declining investment in Australia by Australian firms, in favour of offshore projects; and

* encourage value added processing where it is commercially appropriate.

3.2. DOMESTIC ENERGY SUPPLY INDUSTRIES

Electricity, gas and petroleum products provide 88% of final end use energy in Australia. Initiatives specific to these three industries are addressed in the following sections.

3.2.1. Electricity

Although reform of the Electricity Supply Industry has been under way for several years, and much has been accomplished, much more needs to be done. The Coalition believes that continued and faster reform of the electricity industry is a priority. Lower tariffs will reduce input costs for commercial and industrial users and make our exports more internationally competitive.

There is widespread support for reform, both within and outside the electricity supply industry.

The 1991 Industry Commission Report, "Energy Generation and Distribution", noted that if the electricity industry's performance was as good as international best practice, then national output would expand by around $2.2 billion annually, and 8000 jobs would be created, while household disposable income would increase by around $300 per year.

The Coalition announced, in May 1991, that in Government we would work with the State and Territory Governments and electricity utilities to establish an Australian Electricity Grid (AUSELGRID) as a vital step in reform of the electricity industry. This initiative, when fully and properly implemented, will provide real competition in the electricity generation, transmission and distribution sectors of the industry.

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In addition the Coalition will encourage the State and Territory electricity utilities to work towards effective programs implementing integrated least cost planning measures.

These policy initiatives will result in improved efficiency and hence reduced costs for consumers. The reduced cost of energy will help our energy intensive export industries to improve their competitive position in the world market place. That means more export income for Australia and, in turn, higher income for Australians, lower taxes and a better standard of living.

The Coalition recognises that the Electricity Supply Industry has, in fact, been undergoing significant change since the latter part of the 1980s and has improved its efficiency substantially. However, as the industry itself points out, there is still a long way to go.

The Coalition will facilitate the change and give the industry every encouragement to assist it to achieve efficiency comparable to world best practice. In some cases the Coalition will encourage the industry to move further and

faster than its sometimes overly conservative approach would lead it without such encouragement.

The Government's National Grid has been stalled because of the intransigence of some state generating authorities. The Industry

Commission, in their report "Energy Generation and Distribution" warned that such intransigence was likely to occur. The report states:

"Despite widespread support for competition and structural change, most utilities - and, in particular, publicly owned utilities -vigorously opposed the structural changes advanced in the Commission's draft report without advancing alternative means to promote adequate competitive pressures. Except when governments have insisted, most utilities supported reforms only of the type which they themselves had initiated, even to the extent of denying the relevance to them of measures introduced by utilities in other states/territories. As a result, the degree of change endorsed by most utilities is modest and focuses mainly on administrative measures. It is clear that reforms which might erode utilities' control of their traditional areas of operation are not being seriously contemplated."

Recent evidence of State generating authorities' intransigence was reported in The Australian (10 July 1992). This article noted that:

"the SECV is displaying all the signs of an organisation arguing for its life - and so it is."

A Coalition Government will not accept any further frustration of this vital reform.

We will, therefore, accelerate the pace of reform through the medium of the Premiers' Conferences and through extensive consultation with industry.

The Coalition will negotiate with State and Territory Governments and electricity utilities to:

1. Establish AUSELGRID.

2. Encourage corporatisation and privatisation of the publicly owned generators.

3. Encourage private generation, when demand requires additional capacity be added, thereby providing competition for the publicly owned generators.

4. Encourage corporatisation and privatisation of the electricity distributors, eg county councils.

5. Reduce uncertainty for power projects by establishing clear unambiguous rules and approval processes.

6. Through the National Environment Protection Authority introduce national minimum standards for pollution control. Under the Inter-governmental Agreement on the Environment the State and Territory governments can require more stringent standards on a state, region, or site specific basis.

3.2.1.1. Brown Coal

The contribution of brown coal to the Victorian and South Australian economies is recognised. In view of the large reserves of brown coal available in Australia, (96% of Victoria's and 29% of Australia's total energy reserves), the Coalition supports initiatives to develop and use this resource as lone as electricity generated from brown coal is economically competitive with other methods of electricity generation, and as long as

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the environmental aspects fall . within the guidelines that will apply equally to all methods of electricity generation. The changes that the Coalition Government, working in cooperation with the state governments and Electricity Supply Industry, will bring to the electricity supply industry will ensure development of the least cost generation options and fuel sources.

3.2.1.2. Snowy Mountains Scheme

A Coalition Government will negotiate with the NSW and Victorian Governments to corporatise the Snowy Mountains Hydro Electric Authority. Corporatisation of the SMHEA was

recommended in the Industry Commission Hearings into Electricity Generation and Distribution, and is fully supported by the SMHEA. The SMHEA is keen to become corporatised as this will allow it to genuinely trade its "high quality of service" electricity products in the emerging competitive electricity market. This is a step towards privatisation, which in turn would be negotiated with the New South Wales and Victorian Governments.

3.2.2. Gas

3.2.2.1. General

Consistent with the broader energy and environmental policy objectives, a Coalition Government, in cooperation with the State and Territory Governments, will:

* remove obstacles to freely negotiated contractual arrangements between producers, transporters and consumers of natural gas;

* remove restrictions on the use of natural gas for electricity generation or any other use;

* encourage private ownership of gas pipelines;

* rely on commercial negotiations to ensure access to pipelines, subject to oversight by the TPC; and

* negotiate with interested parties to ensure that government business enterprises participating in the gas industry do so on an equal basis with private enterprise.

3.2.2.2. The Pipeline Authority

The Pipeline Authority has developed considerable expertise in gas pipeline design and operation. The Authority will be privatised.

This process will not involve retrospective breach of contract obligations as was attempted by the Labor Government in 1990.

3.2.2.3. Coal Bed Methane

The Coalition supports measures to increase extraction and use of coal bed methane.

3.2.3. Petroleum Refining, Distribution and Retailing

The Coalition's policy on petroleum is based on the following two broad notions:

The best way to ensure efficient, reliable and lowest possible cost energy for consumers is to promote and encourage a competitive energy market.

2. The steady liberalisation of large parts of the Australian energy market over the last decade has been beneficial to Australian consumers. A Coalition Government will maintain, and in fact speed up, this overall trend. The detailed, prescriptive policies of the 1970's are redundant and will not re-emerge under a Coalition Government.

The Coalition notes that the downstream petroleum industry is volatile, highly competitive, and of great national importance. The Coalition also notes that the retail industry is currently undergoing a severe downsizing, with many retailers leaving the industry.

The Coalition believes the long term interests of all elements of the industry and consumers will be best served by ensuring the competitiveness of the industry is enhanced, while ensuring fair trading practices are enforced.

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3.2.4. Alternative Transport Fuels

Alternative fuels include liquefied petroleum gas (LPG), natural gas, ethanol, electricity in the context of electric vehicles, and others.

Alternative fuels can also be used in stationary applications.

The Coalition recognises that there can be environmental advantages of using some alternative fuels to substitute for a proportion of petrol and diesel, especially in our cities.

There may also be other advantages such as: a favourable effect on balance of payments by displacing oil imports; improved energy security by using Australia's indigenous fuels and diversifying fuel types; and potential export markets for high value added products and services such as alternative fuel engine modification components.

However, it is not clear that providing government subsidies or protection for particular industries or fuels is the best way to deliver the benefits to Australians.

The present Government provides a wide variety of different protection measures and subsidies for different fuels. For example, LPG and natural gas are protected by a 60% federal tax on petrol and diesel. Attempting to 'pick winners" like this distorts markets and is not economically efficient. As stated in « 'Fightback » !' (Section 5.2.2):

"A more appropriate means of addressing the pollution issue is to regulate exhaust emissions directly rather than using the environment issue to disguise the milking of fuel excise for general revenue".

In Government, the Coalition will conduct a study to clearly identify the economic and environmental costs and benefits of alternative transport fuels for Australia.

Following completion of the study, the Coalition Government will work with industry to develop suitable policy options to deliver identified benefits to Australia.

It should be noted that, under « Fightback !, there will be no fuel excise on alternative fuels. Fuel excise will be abolished completely.

3.3. ENERGY EXPORT INDUSTRIES

3.3.1. Coal

3.3.1.1. General

Coal is Australia's largest export income earner. ABARE projected (1992 Outlook Conference) that world seaborne steaming coal trade will increase by 25% during the next 5 years. However, Australia's exports of coal are projected to increase by only

13%. • If the cost of Australian coal could be reduced our coal exporters could gain a larger share of the world market for coal. In addition to the initiatives for reducing costs for all industries (see Section 22.2), the Coalition will:

* Work strenuously, through the GATT and other channels, to ap ply p

yre

to European

countries to remove the high levels of subsidies from their domestic coal productions.

* Remove diesel fuel excise from road, rail and coastal shipping freight.

* Eliminate sales tax on coal industry input.

* Negotiate with states to remove defacto resource taxation via rail/freight excise.

* Encourage continued privatisation of port coal loaders. (The Port Kembla Coal Loader provides a dramatic illustration of the benefits of privatisation. In just one year following privatisation total throughput increased by 34%, throughput per man per year increased by

121%, and the wharfage charge was reduced by 22% - from $5.58/tonne to $4.35/tonne. This cost reduction saved coal shippers exporting through Port Kembla $13 million in just one year).

* Facilitate efficiency improvements and cost reduction in export rail systems, perhaps using the port coal loader privatisations as a model.

Specific legislative changes the Coalition will implement are as follows:

3.3.12. Coal Industry Tribunal

The Coal Industry Tribunal will be abolished. Industrial relations within the coal industry will be brought . within the mainstream of Industrial Relations Policy.

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3.3.1.3. Joint Coal Board

The principle of assistance to a particular .industry that underlies the powers and functions of the Joint Coal Board is no longer appropriate for a Government enterprise.

The Coalition will negotiate with the NSW Government to abolish the Joint Coal Board. The workers' compensation scheme, the occupational health and rehabilitation functions and the statistical analysis functions will be transferred to independent bodies and paid for on a 'user pay' basis.

3.3.1.4. Export Controls

Export controls which currently give the Government the right to veto coal exports will be abolished.

3.3.2. Oil Exploration and Production

Although Australia produces 85% of its crude oil requirements, this is expected to decline in the years ahead. Unless the conditions are right for oil companies to invest in our vast under-explored areas, they will explore overseas.

In 1990-91 investment by Australian oil exploration companies decreased by 30% compared with the previous year, whereas in the same period investment in overseas exploration by these same companies increased by 50%.

One reason for this trend is the increasing range of restrictions on exploration. At present 26% of Australia's land mass is locked up against exploration by Australia's mineral and resource companies (having increased from 7% in 1967 to 26% in 1990). There are proposals to lock up another 21%: If all the current proposals are implemented 48% of Australia's land mass would be locked or subject to limited access restrictions.

To reverse this trend and provide an environment more conducive to investment in exploration, a Coalition Government will implement the strategies outlined in Section 3.1.

3.3.2.1. Petroleum Resource Rent Tax

The Resource Rent Tax is a significant reform of royalty collection from the oil industry.

The Coalition recognises the need for stability in resource taxation measures. Discussions will continue with the industry as to the best method of fine-tuning the operation of the Resource Rent Tax.

In Government, the Coalition will give consideration to the issues of:

• Raising the augmented bond rate for carrying forward undeducted general project expenditure incurred from 1 July 1990 to cover the cost of capital and to ensure that gas projects with long lead times can proceed.

s Amending the definition of marketable petroleum commodity to ensure that all costs incurred to the point of delivery of commercially saleable products are deductible for PRRT purposes.

s Providing for the transfer of deductible expenditures in the event of a partial disposal of an interest in a project.

Modifying the five year rule governing GDP factor expenditure to overcome the worst effects of the transition in compounding rates from the augmented bond rate to GDP deflator by replacing the 'step' change with a

' ramp' change.

The Coalition will not alter the current royalty regimes applying to oil exploration and production from the North-West Shelf.

3.3.2.2. Oil Excise

The Coalition, in Government, will consider abolishing excise on crude oil production from areas not under the PRRT regime.

3.3.2.3. . Cash Bidding

The existing cash bonus bidding system is an up-front charge that effectively removes some funds from exploration budgets before they are spent on exploration. This reduces the amount of exploration that can be done.

A Coalition Government will repeal the cash bonus bidding system. Oil exploration program bidding systems will be developed in consultation with industry.

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3.3.2.4. Farm Outs

Non-cash work program farm-in\farm-out arrangements are used by exploration industry to manage risk, not to generate capital gains. The existing tax regime, whereby these arrangements can be assessed for Capital Gains Tax, creates uncertainty and ultimately reduces the amount of exploration conducted in Australia and Australian waters.

Under a Coalition Government, non-cash/work program farm-in/farm-out agreements will be exempt from the Capital Gains Tax.

3.3.2.5. Local Content

A Coalition Government will rely on market forces to determine the supply of capital equipment for projects while ensuring that full and fair opportunity is provided to local suppliers.

The Coalition will continue the process of tariff reform and avoid introducing other regulations which raise the cost of resource projects such as mandatory local content requirements.

3.3.3. Liquefied Natural Gas

3.3.3.1. Introduction

Liquefied Natural Gas (LNG) exports earned $1 billion for Australia in 1991. This is projected to grow to $1.75 billion by 1998 (in constant 1991 dollars). By 1995 LNG exports will be bringing

in 5% of Australia's, and 20 % of Western Australia's, export income. The export income earnings together with the spin off effects on the domestic economy will increase Australia's GDP by 1.1% and Western Australia's by 12%. And the project is projected to create 69,000 extra jobs across Australia. Thus LNG exports are an important contributor to Australia's economy.

Furthermore, LNG contributes to reducing environmental pollutants, particularly urban pollution, in the countries that buy our LNG exports. In fact, any country using LNG helps the whole world to reduce pollution - atmospheric pollution, water pollution and land pollution, because the LNG substitutes for 'dirtier' fuels.

3.3.3.2. Export Controls

The remaining controls over gas exports will be abolished to bring gas into line with oil and coal. The knowledge that export markets will not be denied to producers is a great incentive for

further exploration for energy resources.

3.3.4. Uranium

Seventeen percent of the world's electricity is now generated by nuclear energy. The proportion is projected to increase, especially in the Asia Pacific Region, during the next two decades. By Australia limiting its uranium exports, as is the case under the Labor Government's Three Mines Policy, we are penalising only ourselves. Other countries provide the needed uranium instead of Australia. We lose the export income and we have absolutely no effect on the world's nuclear energy production.

Australia has 28% of the world's low cost uranium reserves. There is great potential for further significant discoveries. However, government policies to restrict the mining of Uranium (notably Labor's Three Mines Policy)

have allowed our competitors to capture a disproportionate share of the world market.

3.3.4.1. Three Mines Uranium Policy

The Labor Government's Three Mines Uranium Policy hurts only Australia and has no impact on reducing the world supply of uranium.

The Coalition will abolish the Three Mines Uranium Policy. Mining and export of uranium will be permitted subject to adequate environmental controls and strict international safeguards. Uranium mines will be subject to the same environmental and heritage assessment approval procedures that pertain to any major resource project.

When the Jabiluka, Kintyre and Koongarra uranium deposits are mined, Australia will gain additional export income of around $235 million annually. 1270 jobs will be available during construction and direct employment will then be about 520 jobs. Flow on employment will be many times this.

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3.3.4.2. Uranium Enrichment

Safety will be paramount with any development of uranium enrichment and this will be required in accordance with other existing requirements for various steps of uranium mining and processing.

Private sector involvement in the development of uranium enrichment in Australia will be allowed to proceed subject to projects satisfying international safeguards, and all pertinent Australian environmental, heritage and safety regulations.

3.3.4.5. Safeguards and International Treaties

The Coalition supports Australia's obligations under the Nuclear Non-Proliferation Treaty (NPT); the Agreement with the International Atomic Energy Agency (IAEA); and the convention on the Physical Protection of Nuclear Material. We will continue to work to maximise Australia's influence in the NPT agreements.

3.3.4.6. Australian Safeguards Office

3.3.4.3. Development of the Nuclear Fuel Cycle

The selection of electricity generation technologies is currently the jurisdiction of the State and Territory Governments' electricity utilities. When AUSELGRID is operational private generators will be encouraged. At no stage will the Commonwealth

Government be involved in selecting the type of generation plant.

On this basis the Coalition, in Government, will remove Federal legislation and policies that preclude any particular type of generation from being considered and assessed in a fair and balanced way with all other generation methods. The Federal Government would not, therefore, oppose the development of the nuclear fuel cycle in Australia. However, any new generating station, of any type, will have to pass strict environmental, health and safety, and heritage requirements. Consistent with world trends, these requirements will be more stringent than present requirements. The world wide trend has been towards more stringent environmental controls, and this trend is expected to continue.

3.3.4.4. Nuclear Waste

The Coalition will support the continued development and commercialisation of the Synroc process for disposal of high level reprocessed

nuclear waste.

Furthermore, as part of Australia's responsible approach to the use of uranium for peaceful purposes, the Coalition will contribute to the continued international development of the technology for the safe storage and permanent disposal of nuclear waste.

The role of the Australian Safeguards Office will be reviewed to ensure the most stringent application (and, if necessary, strengthening) of Australia's nuclear safeguards. Application of Australia's nuclear safeguards will be maintained at a level consistent with International best practice.

3.3.4.7. The Office of the Supervising Scientist

The Coalition will maintain an independent monitor on uranium mining activities. It will, however, reduce unnecessary overlap between the activities of the Office of the Supervising Scientist (OSS), the Commonwealth . Environment Protection Agency

(CEPA) and the Northern Territory Regulatory Authorities. This was a matter referred to in the 1991 Industry Commission Report on "Mining and Mineral Processing". We will undertake a review of the functions of the OSS. The possible transfer of some of the roles of the OSS to the Australian Nuclear Science and Technology Organisation

(ANSTO) and the Commonwealth Environment Protection Agency will be examined.

3.4 IMPLEMENTING ENERGY EFFICIENCY - THE COALITION WAY

The Auditor General has identified potential public sector cost savings of $29 to $46 million annually from energy efficiency improvements in Commonwealth occupied buildings. Large energy savings may be available from other Commonwealth sectors.

Governments have known about these potential savings for over a decade but, despite attempts, have been unable to implement effective programs to achieve them.

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The Coalition believes it will be able to achieve these savings where the present Government has failed because it will utilise the private sector as the main vehicle for implementing the energy efficiency improvements. The Coalition's method will capitalise on the entrepreneurial skills and specialist expertise of individuals and small

specialist firms instead of the cautious approach, lack of adequate incentives and lack of specialist expertise within the bureaucracy.

The Coalition's method, and the incentives that will drive the key participants to succeed, are outlined below.

3.4.1 Method

A Coalition Government will let a Management' contract to a firm whose expertise is project management, contract management and auditing.

The Management Contractor will be responsible for planning and managing the entire program. This will involve responsibility for managing the Commonwealth's money, for ensuring return on investment, and for ensuring the information obtained from the program is presented in a way that is of maximum benefit for others to follow the Commonwealth's lead. In effect the Management Contractor will replace the elements of the public sector that have attempted to run these programs in the past.

The Management Contractor will award contracts to specialist firms. The Specialist Contractors will implement the energy efficiency improvements in the Commonwealth occupied buildings, monitor the effects of the improvements and report the cost savings.

The Specialist Contractors will be responsible for approaching . the various Commonwealth Departments, Agencies and other owners of the Commonwealth occupied buildings, for "selling" them energy efficiency improvements, for designing and implementing energy efficiency improvements in the buildings, and for monitoring and reporting on energy use in the building on an ongoing basis. The ongoing monitoring program will audit the effects of, and cost savings due to, the implemented efficiency improvements.

An important aspect of this policy is that the Specialist Contractors' remuneration will be based on a percentage of the cost savings achieved.

3.4.2 Advantages

The advantages of such a program are:

The Specialist Contractors, in conjunction with the building owners and the people responsible for paying a buildings' energy costs, will be the ones that decide what energy efficiency measures to implement.

The 'know how', is logically to be found in the private sector, not the public sector. The remuneration method will ensure that the most cost effective measures available, and all cost effective measures, will be

implemented because the remuneration to the specialist contractors will be proportional to the cost savings achieved.

* The Specialist Contractors will use their entrepreneurial skills to "sell" energy savings to customers and to design their programs to meet their customers' individual needs.

* The contractors will implement good, on-going energy monitoring programs; their ongoing remuneration depends on these being able to demonstrate the ongoing cost savings

in an auditable way.

* To remain competitive and to maximise their return, the contractors will keep up to date with the most modern and cost effective energy savings technologies available.

* There will be a real, market driven, incentive for the private sector to fund research to improve cost effective energy savings technologies.

* The private sector will implement, more quickly, energy savings measures in their own buildings than they otherwise would because they will be able to implement the measures

virtually risk free - the development problems having been sorted out in the Commonwealth program and an audited record of the cost savings attained from the Commonwealth sector being available to prove the cost savings achievable. The market, and the demonstrated cost savings in the Commonwealth buildings, will lead the private sector to implement cost effective energy savings. This approach should be seen in contrast to the Government's failed attempts which have been based on public sector processes.

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* There may well be a market driven boost to the Australian development of high technology products and services in energy efficiency.

The export potential for the technological leaders in this field, is significant. But to capture a share of the international market Australian Industries must be among the technological leaders internationally. The Coalition believes this policy will create the right business climate and provide the opportunity for Australian firms to develop an internationally competitive industry in this field.

Real jobs. A significant number of new jobs will be involved, and many will be for engineers and other highly trained positions -the type of jobs Australia needs if we are to be internationally competitive in the coming decades.

3.4.3 Funding

The Commonwealth will provide $10 million over three years as seed funding to get the project started.

Thereafter, the Commonwealth will fund the ongoing project on the basis of an appropriate proportion of the value of the savings. The savings must be demonstrated to the satisfaction of the Commonwealth.

The appropriate proportion will be worked out in consultation with the parties involved. The prime objective being to maximise the long term return to the Commonwealth. To achieve this the Commonwealth must provide sufficient return to the participants to drive the program and ensure that all cost effective energy efficiency improvements are implemented.

This method will:

* provide incentive to ensure only cost effective measures are implemented

* ensure that on going auditing of the savings is maintained to Commonwealth Audit standards (payment to the contractor is a percentage of the demonstrated savings).

The Commonwealth gets an appropriate proportion of the savings. The intention is that this saving will be targeted for other Energy programs such as funding energy related R, D and D.

The more cost effective the programs, the more money everyone makes - the Commonwealth, the Management Contractor and the Specialist Contractors.

3.4.4 Incentives for participants

The incentive for the participants will be:

1. The Commonwealth:

* Cost Savings: A proportion of the savings in energy costs in Commonwealth occupied buildings (potentially x% of $29 to $46 million per year)

Employment growth in a high tech industry. The high tech expertise will quickly see the opportunities to provide their skills and services to private industry, commerce and residential sector.

The results of the ongoing monitoring of the energy cost savings in the Commonwealth occupied buildings will provide the hard evidence needed to convince consumers in the industrial, commercial and residential sectors to i mplement similar efficiency improvements. The industry providing these services will grow rapidly.

These high tech service and component manufacturing industries, having developed and proven the technologies in Australia, will be well positioned to export their services and products.

Commonwealth funding for energy RD&D and energy efficiency improvements, after a few years, will be taken over by the private sector, thus relieving in the order of $10 million per year in federal funding.

2. Management Contractor

Initially a management fee from the Commonwealth; subsequently a management fee based on a percentage of the savings obtained from the energy efficiency programs.

opportunity to develop a valuable exportable expertise.

3. Specialist Energy Efficiency Contractors

* A percentage of the cost savings realised through the energy efficiency improvements.

Opportunity to develop exportable services and products

* the skills and technologies developed will place the contractors in a good position to extend their service to the private sector and to develop export markets.

The exact distribution of the savings between the Commonwealth, the Management Contractor, and the Specialist Contractors will be worked out in consultation with Industry once in Government.

3.5 ENERGY RESEARCH AND DEVELOPMENT

Energy research and development is most appropriately carried out by the industries requiring the research to be done. The role of Government should be to facilitate research into areas that will have a clear national benefit, but will not or cannot be undertaken by industry.

The . Commonwealth will continue to fund research to improve energy efficiency and to develop more benign energy sources, including renewable energy. The Commonwealth's current level of funding for this research will be

maintained.

The Commonwealth will target a part of its R&D funding at environmental -aspects of energy, production, distribution and use that have an international perspective, such as those aspects related to international treaties and obligations.

The Commonwealth will integrate its research with the responsible State Government bodies to enhance effective cooperative research and reduce duplication. We will also ensure that appropriate collaborative research is conducted with overseas bodies.

We will ensure there is appropriate interaction with international research bodies to ensure Australia's research compliments international research, that we gain the benefits of overseas technological developments and break-throughs in a timely manner and that, in general, the Commonwealth's R & D funds are not wasted on "re-inventing the wheel".

Under a Coalition Government, Commonwealth funding for R&D will preferentially be allocated to developing products and technologies that have potential to succeed in the international market. The Coalition believes it should not, in general,

provide Commonwealth funding for R&D to develop products or technologies aimed primarily at the Australian domestic market. The domestic market is too small and the Coalition believes it is generally more cost effective to import products or technologies to serve the domestic market.

23

COMPARISON: COALITION V'S LABOR ENERGY POLICY

LABOR COALITION

Energy Policy Labor has strategies for Clearly defined overall

objectives individual energy industries energy policy objectives.

but no integrated overall energy policy.

Strategy to achieve No overall strategy for the Broad strategies for

objectives Energy Sector. This is achieving the objectives -

despite having the full outlined in this policy resources of the Public document. Details will be Service available for 9 years completed in Government. to develop an integrated energy policy.

Sustainable Development No changes proposed to A practical policy for prevent the continued establishing sustainable divisive politicisation of development. A major environmental issues that restructuring of the Public has characterised Labor's Service to create a Federal term in Government. Department of Sustainable

Development.

National Electricity Grid One large powerful AUSELGRID would consist bureaucratic monopoly (The of a mixture of private and National Grid Corporation) government owned assets will control all of the operated from a relatively transmission lines necessary to small control centre, or form the National Grid. centres, which would be

government regulated.

National Electricity Industry Another Council made up of Not required Council bureaucrats, industry, union

and other participants to advise government.

Monitoring of the Electricity Trade Practices Commission Trade Practices Commission Industry and Prices Surveillance

Authority.

The Pipeline Authority Retrospective breach of Privatise. This process will contract obligations not involve retrospective attempted by the Labor breach of contract Government in 1990. obligations.

24

COMPARISON: FUEL PRICES UNDER COALITION AND LABOR POLICIES (Based on 1992 prices)

LABOR COALITION

petrol/diesel prices (c/L) - business use 65 - 75 (depending on 39 - 49 ` (depending on

- private use 65- 75 location) 45 - 56 location)

Cost of a Commodore/Falcon size tank full of petrol - business use $42.25 - $48.75 $25.35 - $31.85

- private use $42.25 - $48.75 $29.25 - $36.40

Annual fuel cost (private $1300 - $1500 $900 - $1120

motorist, 20,000 km, 2000 L)

Saving: $400 per year

* Net price after GST is rebated.

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