Wednesday, 7 February 2007
Rural and Regional Affairs and Transport Committee; Report
I present the final report of the Rural and Regional Affairs and Transport Committee on Australia’s future oil supply and alternative transport fuels, together with the Hansard record of proceedings and documents presented to the committee.
Ordered that the report be printed.
That the Senate take note of the report.
In tabling this report I would like to make a few quick observations, because it is a unanimous report and there are various members of the committee who want to make an important contribution. The report represents the views of all the parties represented on the committee. Putting together a set of views that we could all agree on has required compromise and some restraint. I think that it is a balanced and sensible committee report.
This inquiry started out focused on the idea of peak oil, which is the notion that global conventional oil production will reach a peak and then start to decline irreversibly. Some think this might happen soon enough to be of concern, but there are a range of views about timing—probably some time from 20 to 45 years is the variation in the timing. One thing we can be certain of though is that the oil supply will not last forever. We need to start working on this now, because putting replacement technologies in place will take a lot of careful planning over many years. There are certainly no easy solutions and there will be shared pain in the process.
Several technologies are highlighted in this valuable report and I sincerely thank everyone that made a contribution. These technologies are available for producing transport fuels from alternative sources. Some of these are renewable, like ethanol, which I am sure Senator Nash will be keen to have a few words on later. One which both this committee and the PM’s biofuels task force thought shows promise is lignocellulose ethanol production, and we recommend in the report that the government look more closely at research funding in this area. In discussing alternative fuels the committee has tried to present a balanced view of the prospects of various technologies. I would like to thank the committee. It has done a great job. We have come up with a unanimous report and I think that everyone made a valuable and important contribution.
I want to concur with Senator Heffernan’s remarks about this report’s production. It was produced in a cooperative atmosphere. Indeed, the committee agreed to extend the reporting date to allow for consideration of amendment proposals from a number of senators to the chairman’s original draft. Because of what was taking place at the end of last year there was inadequate time to do it then and so there was cooperation from the government members of the committee which led to the postponement of the completion of the report. The report, in fact, was concluded at a meeting in this building during January.
Frankly, that is a mark of the sort of cooperation that I can commend to other Senate committees. But it is at complete odds with the way that government members on the economics committee dealt with its report into petrol prices in Australia and I feel that it is important to point to the vast difference in approach. There were three deliberative meetings and an extension of the reporting date for this very important report produced by this cooperative committee. But in relation to the economics committee’s consideration of the petrol prices report—another important subject and related in many ways to other inquiries—there was one deliberative meeting, which lasted a very short time, at which the government members rammed through the committee report.
It was such shameful behaviour that the Labor senators lodged a dissenting report which essentially pointed to the truncation of the consideration process and the inadequate way in which the report dealt with matters. Senator Murray put in a dissenting report which said that basically he had had the report for 21 hours before it was considered—and that was the same for everybody else of course—and that he had not had an opportunity to even read the report before it was rammed through the committee. I know that Senator Barnaby Joyce, who also dissented, indicated that he had not had a chance to read the report before it was rammed through the committee. Here we have a contrast between proper procedure and cooperation leading to our unanimous report, and a report which has no standing—because clearly it is the view of a part of the committee—and which has been rammed through on the government vote.
As Senator Heffernan said, it is important that it is understood that the report of the Rural and Regional Affairs Transport Committee was produced in a spirit of cooperation and compromise. Indeed, throughout the report there is an element of common view in the way in which the language has been presented, and I think members of the committee of all persuasions have a comfort about the findings of the report, although I am sure that some would have liked some points to have been sharper on a particular subject. Senator Nash may have preferred that the report said something slightly different in relation to mandating of ethanol, but it does not. I and certainly other senators would have much preferred that the report talked about a national responsibility for funding public transport options, but that was not the view of the majority of the committee. This report has within it the element of compromise that is necessary in the process if committees are going to work together. On the other hand, contrast that with what is, frankly, a worthless report into the pricing of petrol by the Economics Committee because of the way it was handled.
I think recommendation 6 of the report should be highlighted:
The committee recommends that the Government, in consultation with the car industry, investigate and report on trends in the fuel efficiency of the light vehicle fleet and progress towards the 2010 target for the fuel efficiency of new passenger cars. If progress under the present voluntary code seems unlikely to meet the target, other measures should be considered, including incentives to favour more fuel efficient cars; or a mandatory code.
Frankly, as we can see from the sorts of vehicles being produced in Australia, there are differing trends by manufacturers in relation to the fuel efficiency of their vehicles. There has been a bit of debate about vehicles produced by General Motors and Ford. Other than the Elgas conversions by General Motors and the factory floor gas-powered model by Ford, the fuel efficiency of the large sedans does not seem to be moving in the right direction. Contrast that with the latest vehicle produced by Toyota, who claim that the fuel efficiency of their six-cylinder vehicle, the Orion, is equivalent to the fuel efficiency of their four-cylinder vehicle, the Camry. That is the sort of direction in which Australian manufacturing needs to be going in an environment where, as evidenced by the statistics, Australia’s motor vehicle fleet is seeing an increase in the number of small cars—which we do not make in this country—and therefore in the number of imports, with the resultant effect on Australian jobs and our balance of payments. With vehicles like the Orion, people can purchase a family-size sedan without making the sort of sacrifice that one would make compared with the fuel efficiency of other vehicles. Obviously other vehicles are very good, but the issue of fuel efficiency is driving motorists and families away from the purchase of those sedans. We are seeing from the statistics that, of cars being purchased in the general groups, there is an increasing volume in the very small vehicles and the more fuel efficient vehicles and a decreasing volume in the larger family sedan.
The other matter that I want to talk about relates to the work that the government needs to do in relation to research. There are a number of areas in the report that dealt with this. Recommendation 5 reads:
The committee recommends that the Government commission a research group within the Department of the Treasury to identify options for addressing the financial risks faced by prospective investments in alternative fuels projects that are currently preventing such projects from proceeding. This group should determine how these risks might be best addressed in order to create a favourable investment climate for the timely development of alternative fuel industries, consistent with the principles of sustainability and security of supply.
Frankly, that seems to be a very self-evident proposition, one which I would suggest the committee should not have had to make. The government should have acted before this time on this matter. It has been clear that take-up of ethanol production opportunities has not been as great as it could have been—far from it. The need for investment in alternative fuels has been evident for some time, yet we have a very small number of projects that actually look like getting off the ground. A coal to liquids process in Victoria may well proceed to the point of coming into effect by 2016. That is a very long time away. We do need to look at the reasons that these projects have taken such a long time to get on the drawing board and at why there are not as many as there should be, which leaves us in a position of not being able to properly respond to the fuel challenges that this report outlines. I am happy to sit down now. I hope that, at the end of the 30 minutes available to address this matter, it is kept on the Notice Paper so that others can speak to it.
I will speak for a short time on the report by the Senate Standing Committee on Rural and Regional Affairs and Transport on Australia’s future oil supply; my colleague Senator Milne will speak more extensively. I feel this report is extremely important. It is quite obvious from evidence to the committee that peak oil is a reality. There is a slight disagreement over the timing, but there is no doubt that peak oil is real and that Australia needs to be dealing with oil vulnerability. One of the key learnings, of course, is that we need to start to plan for that. In fact, we should have been planning for it a while ago, but it is urgent that we start planning for it now. Because of the issues around climate change, we need to be adopting strategies to deal with peak oil that also address climate change. It is absolutely senseless if we do not meet these two challenges.
What also became obvious during the hearings is that no planning is going on within government agencies; that our most important economics agency, ABARE, has not been addressing the issue of peak oil, and that it needs to be. More importantly, agencies are not being asked the important questions by government, and that needs to be urgently addressed.
What also became clear during the hearings is that there is no single answer to this issue; that we need to be adopting a multipronged approach with a variety of options, including issues around energy efficiency, alternative fuels and, very importantly, public transport. I am disappointed that we did not really address public transport as significantly in the report as I thought we should have. It has also become obvious that some cities around Australia are doing better than others with their public transport, but basically that all cities need to be addressing that issue more significantly.
Many industries are going to be affected by issues around peak oil, but agriculture is going to be significantly affected. Agriculture is going to be affected, but I think it is also going to provide some of the answers, a great many of them in biofuels. But there is no one magic bullet to fix this. We need to be planning carefully for it and adopting a multipronged approach. I will leave the rest of the comments on this report to my colleague Senator Milne.
When I initiated this inquiry into Australia’s future oil supply by proposing it to the Senate last year, it was because I had very real concerns about the fact that people in Australia were not focusing on the fact that we are facing an oil supply crisis—in fact, the whole world is facing that crisis—with the approach of peak oil. Peak oil is not something that has been discussed in Australian parliaments to any great extent, and I think that is what makes this report highly significant.
The committee worked very hard. We got a lot of submissions from around the country, we had a lot of hearings and I think that senators who participated are now a lot better informed about the issues pertaining to future oil supplies and also the issues around what we are going to do to develop some kind of strategy to get ready for a significant reduction in oil supplies. What we learnt is that Australia’s net self-sufficiency in oil is expected to decline significantly, as future discoveries are not expected to make up for the growth in demand and the decline in reserves as oil is produced.
Only this week, there are several reports out suggesting that we have already hit peak oil. Australia does not have a strategy to oil-proof itself, to make the transition to a low carbon economy and to get off its dependence on oil. I hope this report, because it goes into a number of these issues in detail, will go some way to starting people thinking about the need to do that. In last year’s budget, the Treasurer did not mention the need to oil-proof Australia; he did not mention climate change either. It was clear to me that Australia could not afford to be giving away its surplus in tax cuts when it should have been using that to create and implement a strategic plan to deal with peak oil and climate change.
I think the specific recommendations of the report go a long way to addressing a number of problems that the country is facing. The recommendations basically require Geoscience Australia and ABARE to reassess the official estimates of future oil supply and the early peak arguments and report to the government on probabilities and risks, particularly in the light of climate change. And that is the other significance of this report. It says quite clearly that it has been informed by the need to respond to reduced oil supply, to oil depletion, in the light of climate change. You cannot come up with policies that give you an alternative transport fuel if they increase greenhouse gas emissions. There is quite considerable analysis of coal to oil, which is being touted by ABARE, but it is very clear that that is going to be a major greenhouse gas emitter and so it is not the response that Australia needs.
It is very clear there is a huge opportunity in Australia to make much more of alternative fuels. They will provide jobs in rural and regional Australia, they deserve to be promoted and they deserve consideration. Of course there has to be an analysis of the amount of carbon embedded in all the alternative fuels and of course they have to be ecologically sustainable. We were all excited when we heard about what is going on in Western Australia with their lignocellulose research, and the committee recommended that more government effort should go into supporting that research.
The committee also recognised the need to get cities off oil dependence. That would be better for public health and for the amenity of living in the cities, and that means addressing fuel efficiency in vehicles and looking at strategic planning in cities. We recognise the need to get better mass transit systems in Australian cities. We need to review our transport corridors strategies to make sure that they are sustainable and that they recognise this issue of oil depletion, climate change and the need to plan our transport future in a more substantial way.
Some of the other recommendations ask the government to look at investigating the advantages and disadvantages of congestion charges. In fact in London, where they introduced congestion charges, the money was hypothecated to public transport improvements, making a substantial difference to the provision of public transport in London, to air quality and to fuel use. That is something the committee thought the government should investigate. We also thought that the Commonwealth should support the TravelSmart projects and maintain them beyond their planned termination dates. We wanted more use of rail for long-distance freight. We wanted to make sure that the fringe benefits tax on employer provided cars is examined, because we now have a perverse incentive that sees people driving additional kilometres for the sole purpose of reaching a kilometerage level, which wastes fuel and increases greenhouse gas emissions. It is a quite ridiculous situation.
Essentially, what we have said as a committee—which worked very hard and listened to a lot of people—is that we accept that peak oil is coming. We have different views about when it is coming. I would argue that we have reached peak oil, but others would say that it is coming sometime in the future. But there was agreement that this country needs to start planning for reduced oil dependence and for the development of alternative fuels in a sustainable way, because we do not want to facilitate the conflict between fuel crops and food crops into the future; nor do we want to see the production of palm oil if it means the conversion of old-growth forests, as is occurring in the tropics. We want to make sure that any fuel crop is produced sustainably, and that is a key finding.
It is a leap forward in Australia that we can all agree that energy policy needs to be consistent with environmental goals, particularly the need to do more to reduce fossil fuel carbon dioxide emissions. The committee was also prepared to recognise the recommendations of the 2006 World Energy Outlook, which says quite specifically that current trends in energy consumption are neither secure nor sustainable and that energy policy needs to be consistent with those environmental goals, particularly the need to do more to reduce fossil fuel carbon dioxide emissions.
I think this report makes a significant contribution to the debate in Australia, and now hopefully we are not just going to see knee-jerk reactions when petrol prices go up. We need to recognise that oil is going to become more expensive into the future as it becomes much scarcer, and when that happens we have to have a policy framework to get ourselves away from dependence on oil and to not have people clamouring to reduce the price of petrol. That is not a sustainable thing to try to achieve in the long term. The greatest contribution we can make to this country is to give ourselves a strategy to reduce our dependence on oil, not only because that is good for the environment but because in the future we are going to see appalling current account figures because we will be importing oil. I think that $15 billion by about 2015—or something to that effect—is the figure that has been projected, but a huge amount of money is going to be required from the Australian taxpayer and it will cause enormous dislocation.
So if we know that it is coming, why not plan now to get away from the use of oil and build ourselves a competitive advantage in a carbon-constrained economy by building fuel-efficient vehicles, investing in public transport, getting people healthier and getting people moving more with bicycle lanes and the capacity to walk more safely through cities? Why don’t we get ourselves involved in investment in mass transit, investment in alternative fuels and investment in fuel efficiency, and build up rural and regional Australia and jobs at the same time? In my view it is a win-win strategy. Not to do so is simply going to bandaid the current problems we have and, within a decade, we will face the most appalling costs due to the failure of leadership and foresight at this particular time in dealing with the very real concept and outcomes of peak oil. The whole world is going to face a huge change in the way we currently do business in manufacturing and trade. No-one is starting to project what it means for trade when aviation fuels are so expensive; no-one is looking at what it is going to mean for shipping. We really need to look at what peak oil means for Australia. This report is a significant contribution. I really enjoyed working on this Senate committee, with colleagues from all sides of the parliament involved. I would like to thank all of the people who made submissions. (Time expired)
I rise to make just a few brief comments on the report. I echo some of the comments from my colleagues about this being a unanimous report. It was a very wide-ranging report. We covered a lot of areas. There was certainly some thought amongst colleagues that perhaps we could have gone further in some areas, as has been said, but I think we all recognise the importance of having a unanimous report. This is probably one of the most important issues that are going to face this nation over the coming decades. One of the things that we all agreed on in the committee was the importance of reducing our reliance on fossil fuels. No matter which way you look at it—and we talk about peak oil—fossil fuels are finite. So we now need to start looking at alternative fuels: where we are going to be in the future and how we are going to deliver fuel security to the nation.
Part of that of course—and this is an issue I have spoken about in this chamber a number of times—is renewable fuels, in particular ethanol. I noted with interest that US President George Bush, in his State of the Union address, put forward their target of 35 billion gallons of renewable and alternative fuels by 2017. That is five times their current target. In this nation at the moment, our target is 350 million litres by 2010. You just cannot compare that. The only thing I can compare is the dedication and importance that the President of the United States applies to ethanol and how important that is to their nation. Indeed, it does not seem that there is the same level of confidence and dedication in this nation regarding the contribution that biofuels—in particular, ethanol—can make. It is interesting. Obviously the US has a much greater population than we have—and I take into account the fact that the targets I have mentioned are 2017 for the US and 2010 for us—but the US target is around 447 litres per person and the Australian target is around 16 litres per person. To me, that is just not good enough. We had very intensive committee hearings and the report that we put forward really showed how important it is that we get alternative fuels right.
As has been said, it is a unanimous report, though there were some areas where senators would have liked to have gone further. I am certainly in that category. I have said in this place before that the annual biofuel targets are put in place for the fuel companies to meet so that Australia can meet its target of 350 million litres by 2010. I have very strongly held the view—and I will continue to pursue it; I will not step away from this—that, if the fuel companies do not meet those annual targets, then those annual targets should be mandated. The government has a requirement and an expectation that those oil companies will improve their practice in the area of ethanol. If they do not meet those targets, this government has a responsibility to this nation to find a way to ensure they do. If we do not, we are abrogating our responsibility. It has become all the more clear since the Senate committee brought down this report that we must embrace alternative fuels. We have this alternative fuel right here in front of us—ethanol—and we are not doing enough. We need to do much more to encourage the take-up of this alternative fuel.
As my colleague Senator Milne so rightly said, this is not only about the benefits of using an alternative fuel but also about benefits for rural and regional areas, jobs and opportunities, and health benefits right around the nation, not to mention the fact that it is a cheaper fuel. People right around the country can have the benefit of using a cheaper fuel. Yet here we are with a target of 16 litres per person by 2010.
I just wanted to make those few comments. As I have said, it is very important that it was a unanimous report, because this is one of the biggest issues that this nation is going to face. Having said that, I want to place on record my very strong belief that it is the government’s responsibility to ensure that we do better in utilising ethanol for the benefit of people right around Australia.
I also rise in general agreement with this report, but I emphasise the issue outlined on page 131:
7.59 The committee does not consider that there is any point at this time in mandating a minimum percentage of ethanol in petrol.
I want to emphasise this. It was stated by the Prime Minister of this nation at the East Asia Summit, along with the other nations at the conference, that ethanol is not the panacea but a large part of the path forward in the non-fossil fuel world. And it has to be grasped with both hands. There were endorsements by China, India, Japan, Thailand, Australia and Indonesia. They all agreed in unison. It was one of the only things they actually got out of that conference. They all agreed that it is something that they should all move forward with. A lot of those countries are going to have to import ethanol, so there is no vested interest on their behalf. We also heard from Senator Nash that the President of the United States, in his State of the Union address, announced a biorenewable target of 132 billion litres.
In this nation about 60 per cent of our trade deficit is due to the importation of fuel. You just cannot do that. You cannot put on the credit card a fundamental of day-to-day life. It is costing us about $1 billion a month. You just cannot progress down that path. We have to be more decisive in how we move forward in rolling out ethanol. Or we can throw up our hands and say that we are completely and utterly unique in the world. We are the only part of the world that does not think it is important. It would be peculiar, since we could be one of the greatest beneficiaries of it.
What stands between the Australian citizen, the Australian farmer and Australian regional areas and the wealth that can be generated by a biorenewable fuel industry? Unfortunately, it is one thing: the major oil companies. The major oil companies are running the agenda. The agenda should be taken off them and put back in the hands of the Australian people. I make that statement quite clearly, because on their own targets, as pitiful as they are—350 million litres by 2010, or 0.7 per cent as opposed to 20 per cent in the United States—the oil companies have fallen tragically short. In fact, I think they have only achieved about half of what they should have.
So they are pulling our chain. We have got to wake up to this and send a clear signal that, if they want to do business in our nation, there are some requirements that they must meet. We have tried the voluntary ‘Let’s all have a love-in and agree on something’ approach and it has not worked. Now is the time to move forward with a mandate. A mandate on ethanol is a statement about the authority of this government and its ability to have its word listened to; a mandate on ethanol represents a target that is not the panacea but is part of a suite of measures that take us into this new territory of post peak oil production; a mandate is something that actually delivers wealth back to regional areas—and that is so vitally important.
There is nothing sadder than seeing people who took government grants to produce ethanol plants now handing them back—not because the product is unviable but because no-one will buy it. And who is the no-one? The oil companies. Why? There is an inherent oligopoly in the market and they are exercising their power, discriminating against not just farmers but Australian citizens in general.
I hope that this report is endorsed. It is great to see that within this chamber all senators can come to a common viewpoint, whether from the Greens, the Liberal Party, the Labor Party, the Democrats or the National Party. There is a point of agreement. Now that we have a point of agreement—a belief and an ethos—let us pursue that ethos. That ethos must include ethanol. It is the canary in the coalmine. If you cannot get anywhere with ethanol, do not get your hopes up for any other sort of renewable fuel. I seek leave to continue my remarks later.
Leave granted; debate adjourned.