Bill Heffernan (NSW, Liberal Party) Share this | Hansard source

This is what I would call a serious mess. I think that everyone in this parliament ought to be condemned for allowing such an untidy, unstudied, unscrutinised piece of legislation through the parliament. There are lots of bits of this legislation that are good, but there are lots of bits of it that are a voyage into the unknown. I would like to deal with some of the facts. The press have been speculating about whether or not people will cross the floor. I said as a throwaway comment—because it is not going to make any difference—that there is going to be a micky on this at the end of the day, which I think is a shame.

I think we ought to revisit the issue. As we all know, this disallowance motion would disable the legislation if we agree to it. I think we ought to go back and redo the legislation and do something about avoidable deforestation and degradation. This actually penalises people who save forests, which, as Senator Bob Brown said, is just silly. I have to say that I would cross the floor if it would make a difference but it is just an ego tugging or rimming exercise for some. I do not need to tug my ego, but I oppose the legislation, seriously, based on a lot of consequential possibilities.

In regard to the tax side of this, I have heard all the very good and passionate speeches so far and some are saying that the value of the land is tax deductible. That is not my understanding. There is, as I understand it, a barrister’s opinion around—although I would shoot two out of three lawyers if I were in charge—saying that the land is a tax deduction. I am reliably informed by the government and the tax office that the land is not a tax deduction. I am also reliably informed that the lease is not a tax deduction and that the forestry right is not a tax deduction.

Today I have tried to get my head around some of the issues of this. I have to say that there are some great opportunities if we get the legislation right. My view is that the legislation is seriously flawed. I do not think anyone in this chamber or in the parliament, or at least the bulk of people, would have any idea of the technical detail of this. So I will just run through a few things.

I would like to raise the matter of CarbonSMART, which is the landcare farmer based version of a carbon sink company as opposed to someone like the CO2 company which, although they do not like me using the word, are a carpetbagging company who promote carbon sinks. The catchment management authorities—I suppose most people know what they are—are even into this. I have a copy of a letter to the member for Bendigo from Mr Ben Keogh, Managing Director, Australian Carbon Traders, which sets out an example of what the catchment management authorities are doing. This is about knocking off the benefits that would accumulate to farmers. The letter says:

As an example, one landholder who was offered a grant was offered $800 per hectare to revegetate by the CMA, the site will return around 550 tonnes of CO2 over its lifetime. Break that down and the CMA is offering $2.90 a tonne, and they are using government money that was put aside for biodiversity and water quality projects. They could sell those credits … for up to $30.00.

That is a tidy little profit for the catchment management authority. I think the profit ought to be with the landholder.

The CMA is acting in a greedy and irresponsible manner, they do not know what they are doing and in their own interest use federal money to line their own pockets, money that could and should be going to the landholders.

Of biggest concern is that if or when agriculture is covered in 2015 and landholders are required to reduce their emissions—

and bear in mind, at $40 a tonne, 27 per cent of the production costs for beasts will be the carbon tax—

or offset them with forestry the landholders will have lost 50% of their carbon rights … to the CMA.

That letter has provided just one example. The landcare movement has a really good plan. I would also like to get some things on the record in relation to CarbonSMART and to mention a particular gentleman who resides at Merriwagga; Ian Shaw is his name. He has done a deal with the CO2 company for about 30 hectares and has bought a forestry right on the property at Merriwagga. This country, much to the misunderstanding of a lot of people in this debate, was mallee country. It is being returned to mallee country but with a Western Australian version of mallee, which, under the catchment management authority guidelines and under the CarbonSMART guidelines, does not qualify because it is not a local native tree. These are trees that you would not cut down. If you did anything with them in time you would make a few didgeridoos out of them.

In this particular instance we have done the sums and over 30 years, for 600 tonnes at $20 a tonne, that is $12,000, and the landholder gets a once upfront payment of $1,000. So it is not a bad investment. This particular landholder has a plan to do it himself. He is going to tell the CO2 company, as I understand it, to forget about it. He is going to do the rest himself and maximise that profit into his own farm. When his son takes over the farm, his son can be doing the farming and he can be sitting on the verandah collecting the carbon tax over the following years instead of giving it to some sort of a carpetbag operation, which is what everyone is worried about—the accumulation by aggressive companies that have an incentive at the present time, for the first three years left in the system, of an upfront tax deduction. These companies do not need the tax deduction to undertake the scheme; they have told me that. But it is nice work if you can get it, and if we are stupid enough, and if the taxpayers are so generous that they say, ‘Thanks very much. We will take that.’

So the farmer in Merriwagga intends, to his great credit, to do this himself. He intends to run seminars around the district so that other farmers will do it. This is out in mallee country, which is light-red country that blows away like hell in a dry time. He has an 800-acre paddock and has put rows of trees around his fences and will qualify for the carbon tax benefits on all that. He says that his costs are about 63c a tree because he has now bought and accumulated one million seeds through a nursery. He is going to pay the local school kids contract rates to plant the seeds. These are good ideas. It is not all bad. It is just that it is untidy legislation and we need to go back and rethink it.

This is what we ought to be doing rather than this shoddy stuff. Right around the planet, in Brazil and other places, there are companies that are working under the CDMs, the clean development mechanisms, of Kyoto to absolutely dodge farmers out of their money. There is a scheme in England where the farmers are getting 2c in the dollar because of the shoddy bookwork that we have allowed to go through. This is all part of the shoddy bookwork that is in this legislation. I think there is a lot of goodwill behind this legislation; it is just that it is not thought through. It was not paid any scrutiny and it slipped through with another bill. We saw the untidy episode here in the earlier sessions where I think it was tied to a change from one schedule to another.

We all ought to own up that we have made a mistake. We all ought to try and fix it because there are a lot of good things in it—if it is not a tax deduction for the land, if it is not a tax deduction upfront for the lease, if it is not a tax deduction for the forest right and if it is not eligible to be knocked out under the perpetuity laws. No-one has talked about the perpetuity laws with this. The perpetuity laws may need to be invoked to protect these things. I have not heard one person talk about the perpetuity laws. I do not have time to go through the technical detail. Besides that, I probably would not do it really well because I am a wool classer and a welder and not a lawyer. But we have some serious technical problems.

I have some modelling here to give you examples of variations between opportunities. There is a site in Western Australia and, if we take $20 a tonne as the cost, over 100 years that site is going to return $2,458 a hectare. The same cost for a site in Wagga will return $5,289 a hectare. These are interesting figures for people to understand. In Far North Queensland—yes, Senator Joyce—a cane block will return $11,958 a hectare. So there is some variation in what land will do.

Depending on the price of carbon and on the tax deal, obviously if you could buy a sugarcane farm and get the money upfront as a tax deduction, why wouldn’t you go there because you are going to maximise the sinking of the carbon? Bear in mind that the science on the sinking of the carbon by trees, as opposed to perennial grasses, is lining up apples with oranges, because we are lining up inert carbon with active carbon. We are trying to offset inert carbon with active carbon, which does not make a lot of sense to me.

The more I look into this, the more problems I see. For instance, the modelling on how much carbon you sink varies. I will not name the companies, but some companies are telling their investors that their rules for sinking the carbon are different from the government’s rules, with the Department of Climate Change being the final arbiter. The national carbon accreditation system is the one being used by CarbonSMART and Landcare, and I have to say that it is very conservative. But the carbon accreditation being used by some of the lurk people, the potential lurk people that are coming into the system, is two or three times as generous as the national accreditation system. I do not know what the hurdle is for them to jump over the approval by the Department of Climate Change, which has the final say.

This seems to me to be a piece of legislation about which we all ought to say, ‘We have made a mistake.’ While there are some positives in it, there are some potential negatives in it. I have talked to people on both sides of the equation and in the middle. I cannot think of a better body to be advising farmers on how to go about a sensible carbon sink on your property. You might as well get profit for putting trees on your farm, especially out in some of that marginal wheat country. In Western Australia it makes a lot of sense to get rid of some of the reflective heat off country that was cleared in the 1960s and 1970s, country that should never have been cleared, and put some trees back on. That country, as that model demonstrates, is not going to sink a lot of carbon but will do a lot of good in getting rid of the reflective heat off the country and encouraging moisture and higher rainfall. So there are some good things about it. But we are just flying into cloud with this legislation. I have not talked to anyone who fully understands the technical side of it. It is hard to get up here and talk about the technical side because it is hard to follow.

To give you an idea of the good side of this, under the Australian government’s national carbon accounting system, the CarbonSMART mob have 13,000 hectares of land assessed as ‘unsuitable agricultural land to be planted’, including some hobby farms. It is all going to be registered on the title. Landcare are ranked the top forestry offset provider by Choice magazine and the Total Environment Centre, beating the CO2 Group for instance. They are putting all their efforts into maximising the profit for the farmer so that the farmer gets the benefit as the market rises. Under the proposed punter schemes that we are all worried about, the farmer does not get any tax deductions. Only the promoter gets the tax deductions. The farmer gets a few bob upfront and then, when he sells the farm to the next bloke, the next bloke has to wear it. When he asks, ‘What are those trees there?’ the farmer says, ‘Well, they are on the title.’ At least they are registered on the title. We managed to get people to understand that they have to be registered on the title, but there is no benefit. It becomes a discount on the value of the land for some people because of the upfront payment. For instance, in the case out at Merriwagga of $1,000 a hectare, that is a great way to square off the bank as a one-off, and then when you sell the farm to the next bloke—but that bloke out there has woken up and is now going to collect the credit as he goes—there is no benefit and it becomes a discount on the land because it is land that is out of production for which you are not getting any income as the farmer, and some mob on the Gold Coast or on the 25th floor of an office block tower in Melbourne or somewhere else is getting the benefit of it.

The interpretation of the tax side of that is still a vagary. The government have cooperated by giving as much information as they can to us to understand the tax rulings, but then we have other lawyers’ views. It is like competing science; you have competing law. The courts, as you know, are not about the truth generally; they are about the law. God knows what the outcome is. I would have thought that, before we went down that track, we should have tested that at court to see who is telling the truth. I do not know who is telling the truth.

It is regrettable that we find ourselves in this position, because most people in this place on both sides of the chamber and in the middle will tell you that maybe we are making a mistake. Why don’t we have the courage to say, ‘Whoops, let us fix it, let us define all this stuff’? Obviously the food task is going to double in the next 50 years; obviously there is going to be a contest for agricultural land; and obviously if you go about this the right way it will not put pressure on good farming land. As the landcare mob have said, they have assessed a lot of this land as unsuitable for farming. My plea—even though, as I understand it, it is falling on deaf ears—is that we have the courage to fix it.