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Wednesday, 17 June 2009
Page: 3610

Senator MILNE (6:11 PM) —I rise this evening to make a few comments on the Tax Laws Amendment (2009 Measures No. 2) Bill 2009. In particular I want to speak to schedule 7 of the bill. Schedule 7 amends the Fuel Tax Act 2006 to remove the requirement for business entities to be members of the Greenhouse Challenge Plus program in order to claim fuel tax credits above $3 million.

The Greenhouse Challenge Plus program will cease operation from 1 July this year, and we need to remind ourselves that the Howard government introduced fuel tax credits in 2006 for business on the proviso that they became members of the Greenhouse Challenge Plus program. That condition was intended to encourage large fuel users to monitor and reduce their emissions. Sadly, that has not happened, and I would be very interested to know the government’s assessment of the effectiveness of the Greenhouse Challenge Plus program in encouraging large fuel users to monitor and reduce their emissions. They may well have monitored them, and I would be interested to know what they say about the actual total of emissions, because from my reading of it emissions from fuel transport and fuel use is a fast-growing area of greenhouse gas emissions in Australia.

A few weeks ago the World Business Summit on Climate Change called upon political leaders to agree to an ambitious and effective global climate treaty in Copenhagen in December, including a call that:

Governments should strive to end the current perverse subsidies that favour high emission transport and energy infrastructure and promote deforestation.

They particularly said in the Copenhagen call that governments should end subsidies for fossil fuel use. I would be very keen to hear from the government what the justification is for continuing the subsidies that they have here. For a technical reason this is removing the linkage to the Greenhouse Challenge Plus program, and I would like to know what the justification is for ongoing fossil fuel subsidies. The Copenhagen call came from a mainstream summit. It was organised by the Copenhagen Climate Council, and the participants came from a wide range of business, government and NGO organisations including HSBC, Unilever, McKinsey, Swissray, Coca-Cola, Greenpeace International, Carbon Disclosure Project, Business for Social Responsibility and so on.

As I understand it, the government spent $4.7 billion during 2007-08 on providing subsidies to fossil fuel users right across the economy. This represents a nine per cent increase in fuel tax subsidies from 2006-07. Government statistics do not allow for a proper analysis of who is and who is not receiving the fuel tax credits, but by way of example they do reveal that in 2007-08 the mining industry received $1.5 billion, about 30 per cent of the total. I will repeat that: the mining industry received $1.5 billion in fuel tax credits. Anyone who thinks that there is a serious attempt being made at transformation to a low-carbon or zero carbon economy needs to look very carefully at that because we are still spending billions in Australia subsidising fossil fuel use.

If you were to assume that fossil fuels were unlimited, infinite in their supply, and that there was no problem with climate change, you would still have to ask: what is the excuse for this level of corporate welfare? There is no excuse in a climate constrained world where we have reached peak oil. While we have President Obama talking day in, day out about the need for America to develop its own energy security policy, to get off foreign oil, to make the transition out of fossil fuels and to invest in public transport and so on, we have this government, the Rudd government, talking about the climate challenge with, at the same time, no intention whatsoever of getting rid of the fuel tax credits act. We should be abolishing the fuel tax credits act and directing the forgone revenue towards clean transport and production technologies. When is Australia going to have a plan for peak oil? When are we going to wake up to the fact that this dependence on fossil fuels, particularly in the mining industry, is going to mean we suffer major dislocation?

We had what constituted an oil price spike—or minor shock, if you like—when prices started going through $100 and higher last year. Because oil prices have come down it is assumed that that will continue. It will not. ABARE has it wrong. It has had it wrong in relation to oil prices for generations. The reality is that we are going to see oil prices go up again. If the government actually took the time to look at who owns the oil in the world they would find that it is owned by national regimes that can switch off the oil if they choose to do so. There is plenty of evidence to show that the reserves being touted are inflated, that those reserves are not there.

When I was elected to the Senate in 2005 we had the inquiry into Australia’s future oil supply and alternative transport fuels. I do not know how many times the government has to be presented with evidence that we are running out of oil. Now we have a subsidy for ongoing fossil fuel use, and in the next tax bill to come before the Senate we will be providing subsidies to go out and find more oil. We will have a subsidy to use more oil and a subsidy to find more oil. At what point are we going to realise that it is running out, that we need to be getting off it and that we need a strategy to move away from our oil dependency, not one to subsidise its use to make it cheaper, assuming that by subsidising exploration we are suddenly going to find oil?

We need a national strategy which looks at not only oil depletion but energy security in Australia. I am surprised that the mining industry in particular has not realised its own vulnerability. I can only assume it is because the government’s next step will be to say that it is okay to liquefy coal. That has been ABARE’s answer up till now—that it does not matter if we run out of foreign oil because we can always liquefy coal. If we liquefy coal we will accelerate global warming. We know that is exactly what would happen with liquefied coal because carbon capture and storage is not real and, if it is ever going to be real, will not be real within the next 15 to 20 years.

So what are we going to do? Where is Australia’s plan? My colleague Senator Ludlam put this question yesterday to Mr Conroy, who squibbed it by saying: ‘Yeah, the government’s got a plan in here. It’s somewhere under the environmental provisions.’ I am talking here not about environmental provisions but about energy security provisions. I am asking how this economy is going to cope when oil goes through $150, if not $200, per barrel. What are we going to do then? What possible justification could you have then for providing this level of subsidy to force increased use of oil by making it cheaper, at the same time giving out subsidies—as we will see in the next tax bill that comes through—for imagining you can find more?

The oil companies themselves will tell you that they are now in deeper, more dangerous waters, that it is more and more difficult, that they are into areas where there is less certainty of being able to pump at an economically viable level. It is utterly and totally irresponsible to be continuing the fuel tax credits act. Rather, we should be getting rid of that and not the Greenhouse Challenge program.

Having said that, of course, we have always been sceptical about the Greenhouse Challenge program. It was a Howard government initiative and relied on voluntary action by industry to achieve abatement. It was an inadequate response to the challenge posed by climate change, because it was a purely voluntary scheme. Yes, it was a good idea to have it but, being voluntary, it was never going to end in the kind of systemic shift that you would expect. For too long it was used as an excuse not to implement effective policies on climate change. I assume that the reason behind the timing for its abolition is that the government thought its Carbon Pollution Reduction Scheme would be passed and that the start times for the changes were meant to be complementary. However, the government’s capitulation to business and to the very industries that benefit massively from the subsidies I have just been talking about means that the legislation the government imagined would be there will not be there and we will not have the CPRS or the Greenhouse Challenge program.

While we thought, and still think, that the Greenhouse Challenge program, because it was voluntary, was not as effective as it might have been, it was one of only two programs that compelled large-scale industries to implement any kind of abatement activities. Removal of this membership requirement and the abolition of this program mean that, until the current uncertainty with the CPRS is resolved, there will be no government program that engages with large-scale emitters on abatement issues. That is because the government has refused to force these emitters to implement the energy efficiency opportunities that they have been required to identify under the Energy Efficiency Opportunities Act and because they have not required them to implement it. So they get off the hook on that front as well. It is notable that for many other issues the government is seeking to extend the life of a program until relevant inquiries are completed. As I mentioned, the Tax Laws Amendment (2009 Measures No. 3) Bill 2009 seeks to extend the life of current exploration tax incentives under the Petroleum Resource Rent Tax Assessment Act until the Henry review reports in December and that future tax policy can be clarified. So it is notable that the government is prepared to extend programs that subsidise fossil fuel use by industry but not programs that are focused on delivering any kind of environmental benefit.

This raises the question of whether the government will now indicate whether it is going to extend the life of the Greenhouse Challenge program until agreement is reached on the Carbon Pollution Reduction Scheme and the date for implementation is finalised. I am particularly keen to hear from the government what the justification is—when we are trying to reduce fossil fuel emissions and are faced with peak oil—for continuing a fuel tax credit act that gives to the mining industry, which had one of the biggest booms of all time in the last decade. In 2007-08 we gave them $1.5 billion as a result of these subsidies. We gave the transport, postal and warehousing sectors $1.2 billion, another 25 per cent. The construction industry received $226 million, and the manufacturing industry received $276 million. The mining industry and the transport, postal and warehousing sectors received 55 per cent of the total. I come back to the fact that a total of 30 per cent went to the mining industry while it was making record profits. It made its record profits, it paid a lower level of company tax and then it had huge amounts sent back to it in fossil fuel subsidies. Under the CPRS it would receive its permits. The coal fired generators would be receiving yet more corporate welfare in one-off payments, and emissions-intensive trade-exposed industries will be getting massive numbers of free permits.

This is precisely why the Greens criticise the government. The government constantly talks about a whole-of-government approach to climate change, yet what we see is an entirely counterproductive, internally inconsistent policy position. It is a silo position. You have the minister for the environment or the minister for climate change saying the government wants to do something on emissions, and you have the minister for resources and the Treasury giving subsidies and undermining anything you might be doing on emissions reduction by saying: ‘Don’t worry about them. Just use more oil—we’ll subsidise it. Build more roads—we’ll subsidise it. Build a bigger coal port—we’ll subsidise it. Get those emissions out there. Get them flowing faster.’ It is internally contradictory. It is counterproductive, and I am very keen for Minister Sherry to inform the Senate, from the government’s perspective, how the tax office and the Treasury are facilitating a reduction in greenhouse gas emissions and energy security for Australia, particularly in terms of transport fuels. Explain to me how this initiative helps on the greenhouse challenge that we face and how it helps on the energy security challenge that we face. Minister Sherry, I look forward to some creativity in your answer.