Monday, 16 November 2009
Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2009 [No. 2]
Consideration in Detail
Bill—by leave—taken as a whole.
by leave—I move the amendment circulating in my name:
Schedule 1, item 159, page 36, after subsection (2A) (after line 27) add:
(2B) The regulations must not declare that emissions of greenhouse gas emitted in connection with the production of food are covered by the carbon pollution reduction scheme.
The amendment I am moving today relates to whether or not food commodities from agricultural products should be included in the emissions trading scheme. The reason for bringing this amendment forward is that I am very concerned that if food is included in a global emissions trading scheme—and I know this is the Australian version of a global emissions trading scheme—in fact we will have enormous competitive forces coming into play in terms of land use.
There is an assumption being made around the world that the farm sector will always grow food irrespective of other markets. What the current emissions trading scheme is proposing is that a new market mechanism, that of carbon trading, be brought into play in Australia and around the world. That will add another market mechanism that will compete for land that in many cases is being used for food. We also have another market which embraces renewable energy. If we get into a competitive arrangement that promotes the carbon market in front of the renewable energy and food markets, and in fact we see the food market coming third, we will potentially see an enormous transition of land use from food into more profitable uses. I have used the example of the cotton growers in my electorate and further west. They do not necessarily grow cotton or fibre because they dislike food; they grow it because they are making more money from that form of land-use. The Malaysian palm oil renewable fuel producer does not necessarily not like food, but it is more profitable to grow a renewable energy on his land than to grow food.
If we create a market mechanism, an emissions trading scheme, that starts to penalise food globally, we will potentially see, as I have said, a massive shift in land use. When you see the negatives that start to accrue to food production in the use of land—nitrous oxide for protein in grain, for instance, or carbon in terms of the starch in grain that is being transported around the world—it is not hard to envisage an arrangement where the farm sector actually makes choices away from food towards other land uses. In fact, the current bills before the parliament encourage the planting of trees for carbon purposes, which is an encouragement to shift from food production to another form of land use for carbon purposes. The current arrangements—and if they are carried forward into the Copenhagen arrangements—would in fact create an incentive for those around the globe to use their land for purposes other than food. We saw an example of that with the US biofuel arrangements that were put in place by the previous President, George W. Bush. As a farmer, I do not disagree with that. But if we believe we have refugee issues now, if we start to transfer the use of land away from food, or price food production above the capacity of people to pay in some of the less developed countries, then we will create a circumstance that we could be very severely penalised for at a future date.
The minister in the chair, Minister Combet, whom I spoke to by phone this morning, and the minister in the Senate have in the last couple of days mentioned that they are prepared to exempt agriculture from a future scheme. There is no mention of agriculture in this current scheme. The government says currently that it will reconsider agriculture in 2015. A lot of land use decisions will be made in the intervening time. I was pleased to hear both ministers saying that they are prepared to exempt the agricultural emissions from an emissions trading scheme. 44That is not currently in this bill, and that is why I opposed the bill at the second reading stage. The amendment that I have moved allows for the food component, the thing that keeps people alive across the world, to be removed. (Extension of time granted) It allows the food component of agriculture to be exempted from the bill or, in other words, not to be included in the bill at a future stage. That produces a lot of certainty for the agricultural sector in this country.
If we apply that same logic to a global emissions trading scheme and exempt agriculture, or the production of food from agriculture, from an emissions trading scheme we preserve those lands which are currently being used for food production for a hungry world. We have parallel debates going on. We have a debate that is concerned about greenhouse gases and we have a debate that is concerned about the long-term food security of the globe. There is a collision point between the three market mechanisms, in my view. The mechanisms are: the traditional food economy, which is a poverty economy for developed farmers anyway; the use of land for emerging biofuels or alternative or renewable energy; and now, potentially, a carbon economy, which could become a competitor for the use of land for carbon sequestration through trees or vegetation.
I made the point to the minister this morning that I am opposing this legislation. I opposed it previously when it came before the House. I think what the minister in this House and the minister in the Senate, Minister Wong, are doing by offering the olive branch in relation to agriculture being exempted from future schemes is an enormous opportunity that should not be bypassed by the farm sector. I have issues with this bill, such as the five per cent target, but, as I said to you this morning, Minister Combet, I am prepared to support this legislation if agriculture—or food production, more particularly—is excluded from the remit of the scheme. If my amendment is supported in this chamber, I will be supporting the bill. If it is not, I will not be supporting the bill. But on its return from the Senate, where, hopefully, agricultural food will be excluded, I will support the bill.
I urge those who have been out there in the farm sector suggesting that there are going to be enormous taxation arrangements imposed on that sector to look very closely at this. What we have in that offer from the government is both the Liberal Party and the Labor Party, the two majority parties in the building, agreeing that agriculture should be excluded. That is something that I believe overcomes a lot of the inherent flaws that are in the current legislation. As I said, I will support the legislation if agriculture or food derived from agricultural commodities is exempted from it when we vote now, or in some sort of an arrangement when it comes back from the Senate. Thank you.
I wish to disagree with the logic of the member for New England. The reality is that you cannot exempt farmers and the agricultural sector from costs, whether they are included in the emissions trading scheme or not, because nobody is speaking here about removing the fuel refiners or the electricity generators or all the other people whose costs will inevitably flow down to the rural sector, where there is nowhere to go.
I would refer the member for New England to the Farm Weekly, the Rural Press publication in Western Australia, which reported on my speech to a couple of hundred farmers the other day. It included my reference to a cream cake, and they have actually published a picture of a cake in the article, asking: how many times will the emissions trading scheme taxes impact on a cream cake? The member for New England is well experienced in how many times the product of farming goes back on the road. For example, nobody milks a cow these days without using some energy; the old hand-milking went out a long time ago.
It does not matter where you look; this is a system whereby the government sells the right to pollute. And anybody who pays for that right will wherever possible pass it on to the consumers below them. As I have said time and again, if you are one of those who feel passionately about saving the planet and you say, ‘Yes, I will pay more for my electricity to save the planet,’ under this scheme you will actually be paying more for your electricity so that your electricity supplier can pay the price for polluting. There is no reduction in pollution—unless the electricity supplier sees the cost of these certificates get up to about 50 or 60 bucks a tonne of CO2 emissions, at which point in time there is a benefit. But where does the cost go, as it climbs to that figure? It is going to end up with the farm, irrespective of whether agriculture is in or out of this scheme.
I recognise that the member for New England is deeply concerned, and he is right to be concerned, about the production of food. He is right, because when there is more profit, at $40 a tonne, in planting trees over our great agricultural areas, as happened with the managed investment schemes, the price will go up and of course farmers will say, ‘I’ve been struggling with drought and everything else; I’m going to take the money.’ I once said, when we were having the GM debate, that it was about time we were all inoculated with the koala gene so we can live on gum leaves, because that is all that will be left. That is the reality. But we have got to look at the fact that there is only one question in this issue: is an emissions trading scheme a solution to the problem? I say it is not. It is just a means of increasing costs in the hope of solving the problem.
As I have informed this House time and again, the Europeans are contemplating a major investment in solar generation in the Sahara desert, 3,000 kilometres away from where they want to consume the energy. They have done their homework. The technology exists through high-voltage DC transmission to get 90 per cent of the energy generated over that journey. If they used the established AC technology, 55 per cent would get to the other end of the pipe. Why isn’t our government investing in those sorts of interconnections between our great gas fields and our tidal fields—and our deserts? Deserts are the best place for solar energy. If they invested in the transmission system and they doubled the amount of electricity that gets to the end of the pipe, that is as good as 100 per cent renewable power. Of course, I have a private member’s bill in this place to enable DC to qualify for renewable energy certificates.
I say to the member for New England: I am sorry; I understand and I agree with his concerns, but it is a fact of life that farmers cannot escape these costs, nor can any other consumer within Australia.
I certainly agree that agriculture should be exempt from the Carbon Pollution Reduction Scheme. Agriculture should be exempt in its entirety, not just crops that are grown for food. Indeed, let me pose a very practical problem: when my brother plants his crops, he generally does not know whether the end crop is going to be used for food, for animal feed or for some other purpose. So the division that the member for New England seeks to create in this regard would, I think, be very difficult to deliver in practice. But his proposal and his objective to exempt agriculture from the CPRS are meritorious.
The government announced just yesterday that they were proposing to exempt agriculture, although few details have been provided. However, it is important to make the point that the honourable member for O’Connor has just made—that that does not mean that farmers will not pay significant costs associated with the ETS. They will still have to pay higher costs for their electricity, their fertiliser, their chemicals, their machinery. Virtually all of their inputs will be more expensive. There is no emissions trading scheme planned anywhere in the world that includes agriculture. No-one is proposing to include agriculture. Therefore, if these taxes were imposed on agriculture, it would further disadvantage Australian farmers.
We have a lot of cheap food flooding into Australia at present. None of the farmers who are supplying that food to Australia are paying any emissions trading taxes, nor will they. There is no likelihood of such costs being imposed in China, India and South-East Asian and other countries that are increasingly exporting food to Australia. So the flood of foreign food into Australia is going to grow under Labor’s CPRS. In addition, there will be jobs lost in the Australian food processing sector, because the government is not proposing to exempt the food processing sector, apparently, under its latest concessions. So there will be more jobs lost in food processing, there will be more foreign food coming into Australia and Australian farmers will find it increasingly difficult to compete with farmers around the world who do not have to pay these higher taxes.
In addition to that, the government has made no firm commitment to allow farmers to claim credits for the carbon sequestration and carbon abatement activities that they undertake. Again, Australian farmers are the only ones in the world who effectively cannot get credits for the carbon sequestration activities that they undertake. The US bill proposes to give farmers credits for the abatement work that they do and, of course, the countries in Asia can claim credits under the Kyoto rules. Because Australia signed the Kyoto accord, Australian farmers cannot get credits for the carbon abatement activities that they undertake. If a Chinese farmer does the same thing he gets a credit, and an Australian industry can buy that credit, but an Australian farmer cannot get a credit for doing it. This is the nonsense of Labor’s CPRS and the serious way it is going to affect agriculture. So agriculture needs to be exempted from the impact of the CPRS costs, but farmers also need to be able to be rewarded and encouraged to play the role that they can meaningfully adopt in reducing Australia’s CO2 emissions. Farmers can do a great deal to reduce emissions.
You may be interested to know, Mr Deputy Speaker, that farm emissions have already fallen by 40 per cent over the Kyoto reporting period. A lot of that is because of the reductions in the size of our herds and flocks, but also farmers have borne almost the entire burden associated with tree-clearing laws for which they have received no compensation and no credits. The reality is that the farm sector is already undertaking a very significant role in this regard, and that needs to be recognised.
The final point I would like to make is slightly critical of the member for New England because he has some form on this issue. He is the man who brought a private member’s bill into this House that proposed reductions of 80 per cent, and there was nothing in that bill about leaving out agriculture. He had an opportunity at that time, when he was putting in his own bill, to do some constructive things as far as that is concerned and he did not. In fact, agriculture makes up 16 per cent or thereabouts of emissions, we are told, so if he takes reductions of 80 per cent, and farmers are allowed to keep their 16, in practice there will be nothing left for anybody else at all. I think he is adopting two standards. (Extension of time granted) The member for New England is proposing an amendment which improves the bill, but I do not think it goes as far as it ought to in relation to agriculture. He has also been somewhat inconsistent because his own private member’s bill would simply devastate agriculture, and not just agriculture but every other industry in his and other electorates—unless, of course, he is volunteering to put a nuclear power plant in his electorate. I do not think he is, because the press release he put out at the time said he was not keen on nuclear power stations. But unless he is going to find some way to generate electricity in significant quantities and if he is going to have an 80 per cent reduction in CO2 emissions, he has some sums there that simply do not add up. The member for New England is right to seek to exempt agriculture. In fact, I think it should be all of agriculture; not just food, but the food-processing sector as well. But all of that will not fit within the constraints of his private member’s bill, which presumably may have lapsed now but, nonetheless, was sponsored with enthusiasm by him about a year or so ago.
There has been some progress on the issue and a recognition by the government at long last that Australia’s CPRS should not be the only emissions trading scheme in the world which proposed to include agriculture. Why the government took so long to get to this position remains to be seen. They know that their legislation is defective in a whole score of areas. They know it has got drafting errors and yet they have not fixed them. They are asking the House of Representatives to vote for bills that they know are technically defective. They also know that they are proposing a scheme that no-one else in the world will ever follow. In fact, the Prime Minister has just come back from a meeting in Singapore with world leaders who all agreed to ditch the Copenhagen treaty. They are not going to have any treaty anymore; they are just going to have a political statement coming out of Copenhagen. So it is absolutely clear that no country in the world is going to go to Copenhagen with a legislated CPRS, and no country in the world is expected to. They are just expected to have targets. And we agreed on those targets ages ago.
So the PM has everything he needs, when he goes off to Copenhagen on this trip, in relation to targets to meet the obligations that the United Nations is seeking from countries. What he ought to be doing is withdrawing this bill altogether, fixing the problems and starting to draft something that looks like what is going to happen in the rest of the world, so that Australian industry and farmers will not be disadvantaged but can participate in a genuine global response to climate change issues, so that Australians can take advantage of trading in carbon credits that might be available through various mechanisms and so that Australian farmers are not the only ones in the world who effectively will be unable to claim credits for the carbon sequestration and carbon abatement activities that they undertake.
What an extraordinary agreement Kyoto was. It actually prevents Australia from undertaking activities that are good for the environment. It prevents us from getting credits for carbon abatement activities, yet the Americans, who have not signed Kyoto, can do that and they are doing it now. They have a voluntary carbon trading scheme in the United States so US farmers can get the benefits of the good things they are doing. An Australian farmer can do exactly the same thing and get no credits whatsoever—only the taxes, only all the bad news out of Labor’s CPRS and none of the good news. With those comments, let me say that I think the member for New England’s amendments are defective and a bit confused but they are an improvement and, for that reason, are worthy of some degree of support.
Message from the Governor-General recommending appropriation announced.
I would just like to reflect on a few of the comments made by the Leader of the National Party, and I thank him for his support. I presume that the private member’s bill he was referring to was in fact the private member’s bill relating to climate protection. It was quite different to the sort of legislation we are talking about today. Just for the record, what it included were a number of initiatives that could protect the climate if, in fact, the emissions trading arrangements did not take place.
That private member’s bill included a range of activities that could have a positive effect on the eventual aim of emissions reduction. Some of the renewable energies that the member for O’Connor spoke about were included: solar, wind et cetera. Another activity was soil sequestration, which the leader of the National Party made a glancing reference to as an activity that farmers could undertake to protect their local climates, in a very parochial sense, by drought-proofing their land through improved grazing and farming technologies. The leader of the National Party is quite wrong to suggest that the bill was a piece of emissions trading legislation. It was about climate protection. It was about recognising that if the climate scientists are right the Murray-Darling system will be adversely affected. In fact, the bill looked at the way in which you could protect that catchment.
I am not a climate change sceptic. I believe we should be doing something. I believe there are flaws in the CPRS legislation. I believe that if we include agriculture, and particularly the food that people eat globally, the scheme will bomb politically—and it is a nonsense to say that hay and grass in an animal are not food. I agree with the leader of the National Party on that point—it will bomb out politically. No-one will accept a higher price for food resulting from the competition for land use that the carbon economy and the renewable energy economy would cause.
I listened intently to what the member for O’Connor had to say. I think that in relation to the good things that he believes can happen he has been ignored. I agree with him on some of those things. The particular arrangement that I believe Senator Wong and the Liberal Party are talking about is a coming together where agriculture emissions are excluded from the scheme and offsets are recognised. The member for O’Connor may not be involved with this; maybe he should be. In that sense there are an enormous number of opportunities for agriculture to be a positive player rather than a negative player, as it keeps being painted. If soil carbon becomes part of the offsets, if some of the holistic pasture technologies become part of the offsets, and if some of the vegetation management proposals and stewardship arrangements become part of the offsets, they will more than offset any marginal increase in terms of the cost of production that a five per cent emissions target produces. That is one of the reasons I have been opposed to this legislation. To impose a market mechanism with a five per cent target is almost a nonsense.
As I have said, I am prepared to support the bill when it comes back from the Senate, if this amendment is supported by the government and the opposition. I think that the exemption of agriculture would be a big step forward because at some stage there will be an emissions trading arrangement put in place. The suggestion of the member for O’Connor and the leader of the National Party that you are better to have all the negatives and none of the positives is, I think, selling the farm sector and country Australia short.
I thank the member for New England for the amendment and will make some commentary about that in a moment. I also acknowledge the contributions by the member for O’Connor and the member for Wide Bay. The member for Wide Bay made one observation, that no other scheme internationally includes agriculture. It is worth correcting the record: New Zealand has legislated an emissions trading scheme that does include agriculture, which is of course a very important sector of the New Zealand economy.
I note the important comments of the member for New England on the Carbon Pollution Reduction Scheme legislation in the event that agriculture is excluded and there is an offsetting credits arrangement put in place. I acknowledge the importance of those observations because they also acknowledge the significance of the announcement the government has made in the last day or two. The proposed amendment from the member for New England would have the effect, as we comprehend, of preventing regulations under the CPRS from declaring that greenhouse gas emitted in connection with the production of agricultural food commodities are covered by the CPRS. In effect, this would remove CPRS liability from all activities leading to the production of food. Removing any emissions associated with food production from the CPRS would mean that emissions reductions would need to be made in other sectors of the economy, self-evidently, and would increase costs across the economy. That is something that the government has been very cautious in approaching. In relation to the issue generally, as has been adverted to by a number of contributions, the government has already addressed the impact of the CPRS on food production through a range of measures. I recognise that they are not universally accepted; however it is worth identifying them.
Firstly, in the legislation before the House agriculture is excluded from the CPRS and it is in the context of a policy position that it was noted by the member for New England that the government was intending, or had the intention, that by the year 2013 a decision would be made following consultation with peak organisations and members of the agriculture community in this country to consider its inclusion in the scheme from 2015. But it is not contained in the sense of agricultural emissions within the bills that are before the House at the moment. Furthermore, in the context of negotiations with the opposition over the legislation the government has now indicated—and I think this is probably one of the earliest occasions that the government has had the opportunity to put this on the record in either place in the parliament—that we will agree to exclude agricultural emissions from coverage under the CPRS indefinitely in the context of a package negotiated with the opposition that secures passage of the legislation.
Furthermore on this issue generally, food processing firms may be able to apply for funding for abatement activities under the Climate Change Action Fund. That is also a policy position that the government has on the record. And also, in relation to this issue, the CPRS fuel tax offsets will help protect the agriculture and fishing industries and the general community from the impact of fuel prices for the first three years of the scheme. The Treasury modelling demonstrates that the price impact of the CPRS is small, that the impact on farm production costs will be modest with expected increases of between 0.5 and 1.3 per cent for most farms between 2011 and 2015, and it is expected to raise household prices generally by only 0.4 per cent in 2011-12 and 0.7 per cent in 2012-13. So we are providing household compensation to help assist with these modest cost rises. For all of these reasons, plus the fact that we believe the amendment put forward by the member for New England would be extremely difficult to implement and administer, the amendment is not supported by the government. On that note, Mr Deputy Speaker Sidebottom, I think the question is that the amendment be agreed to and I move:
That the question be now put.
Question agreed to.
That the amendment (Mr Windsor’s) be agreed to.
That the bill be agreed to.