Monday, 20 June 2011
Taxation of Alternative Fuels Legislation Amendment Bill 2011, Excise Tariff Amendment (Taxation of Alternative Fuels) Bill 2011, Customs Tariff Amendment (Taxation of Alternative Fuels) Bill 2011, Energy Grants (Cleaner Fuels) Scheme Amendment Bill 2011; Second Reading
Debate resumed on the motion:
That these bills be now read a second time.
I rise to speak on the Taxation of Alternative Fuels Legislation Amendment Bill 2011, the Excise Tariff Amendment (Taxation of Alternative Fuels) Bill 2011, the Customs Tariff Amendment (Taxation of Alternative Fuels) Bill 2011 and the Energy Grants (Cleaner Fuels) Scheme Amendment Bill 2011.
What we are seeing from the Gillard government with this set of bills is yet another attack on the cost of living of all Australian families. The first three bills deal with the taxation of gaseous fuels for motor vehicles. They will apply a tax to LNG, CNG and LPG. They will apply a tax to the taxi fleet. They will apply a tax to the public transport systems, particularly those in cities such as Sydney, Perth and Brisbane whose buses use compressed natural gas not only to lower emissions but also to lower pollution. These buses burn cleaner and provide Australia with an opportunity to use some of the overwhelmingly ample resources that we have in natural gas.
Australia is a very lucky country. We are self-sufficient in energy. We are in fact one of the few OECD countries that export energy. That energy comes from a number of sources. It comes from coal, and we are the biggest exporter in the world of both coking coal for the manufacture of steel and steaming coal for the production of electricity. That energy comes also from LNG, of which similarly we are a very significant exporter. We have a supply of gas in Australia that will probably last a couple of hundred years at a bare minimum based on current reserves. It makes sense to use that resource here in Australia in transportation fuels, which is the one area in which we are deficient. We import almost 50 per cent of the petrol, diesel and crude oil that we use in our transport fleet. Finally, the energy comes from LPG, of which we are also net exporters and, while many of us in this place know LPG as the thing that runs our barbecues and in some cases our hot-water systems and stoves, LPG's main use is in transportation fuels. It makes no sense to apply a tax to those fuels.
On top of the increases to electricity prices and the cost of living expenses that will occur as a result of the carbon tax, families and businesses now face yet further pressure on the cost of fuel because of the Gillard government's policies. Where will it end? Perhaps at the next election.
As we see from these bills, the intention of the government is to raise by 20 per cent the cost of those fuels to those families using LPG in their vehicles. This is not a small increase; this is a major hit on the family budget, an attack by the Gillard government on the purse strings of everyday Australian families already struggling under massive increases in electricity prices, gas prices, water charges and other living costs. These increases are soon to be made even more massive by an ill-conceived carbon tax which will add yet further costs, including in the area of transport, to all Australians.
Applying an excise of 12½ per cent per litre on LPG makes no sense at all. This government runs a program to encourage families through a financial incentive to convert their vehicles to LPG by offsetting some of the cost of conversion. Yet with all that encouragement, the government is really just setting a honey trap: 'We'll get these vehicles onto LPG,' they think, 'and then we'll increase the cost of LPG by 20 per cent. We'll increase the tax to make sure that these families can no longer cope with the pressures of the cost of living.' That is the Labor Party's way of deceiving the public and the way they think about increasing the pressures on Australian households.
Currently, 283,000 vehicles have been converted to LPG under this government scheme. Every single one of those vehicles is owned by a family. This scheme is not open to commercial vehicles. It is not open to fleet vehicles and it is not open to business vehicles. It is only open to family-owned vehicles. As I said, there are 283,000 vehicles owned by 283,000 Australian families who, if the first of these three bills passes, will wake up to higher fuel costs courtesy of the Rudd-Gillard Labor government.
There is absolutely no justification for this. Why is the government doing it? It needs the money. Why does it need the money? It wasted so much money. This is an old-style spend, waste and tax government of the kind that we always see from Labor. It spends money and wastes money until it has no option but to increase the taxes on ordinary Australian families. Shame on you.
This tax on Australian families is intolerable and the opposition, we hope with the support of Independents, will do everything we can to defeat these first three bills. Along with those 283,000 vehicles of which I have spoken, there are another 400,000-plus vehicles that have already been converted to gas, and a majority of those vehicles would be owned by families. Some of these families would have bought them second-hand from a car yard in the expectation that they would be able to continue to use the vehicles to lower the cost of living, to lower the cost of taking their kids to school every morning and to lower the cost of running a family in Australia under a government that is so out of touch. Costs rise every day. Soon, with a carbon tax, those costs will rise even more steeply. What we see in these first three bills is a government so desperate for money to fill the enormous black holes it created by wasting money that it has decided to cast the burden on the shoulders of working families, with whose support it was elected in 2007 and whom, through its own mismanagement, it is now betraying.
I would like to give the government the benefit of the doubt that they are not trying to destroy family budgets with this tax but that the money will actually be needed because they are incompetent money managers and wasteful with spending. I would like to think that was the reason, but sometimes it is hard to accept that it is the only reason. It appears to me that this is more about them being completely out of touch and completely lacking in compassion for and understanding of the way in which families in Australia are currently struggling under cost-of-living pressures generated in part by the Labor government.
The fourth of these bills, the Energy Grants (Cleaner Fuels) Scheme Amendment Bill 2011, is one which the coalition will support. It is a bill to extend the grants scheme to biodiesel and renewable diesel. In Australia we face a challenge in supplying enough transport fuel. We are trying to build a biofuels industry in Australia. The coalition support the measures that were taken previously by the Howard government and continued by the Rudd and Gillard governments to provide grants to the ethanol, biodiesel and renewable diesel industries to offset the excise which is applied to those fuels at the full rate of 38.143c per litre. The coalition will support the Energy Grants (Cleaner Fuels) Scheme Amendment Bill because it maintains the grants for the biodiesel and renewable diesel industry. This is an industry that is doing it tough. The industry has faced unfair dumping from overseas suppliers. I commend the government for continuing what we started. With that certainty, at least until 2020, I hope that the biodiesel industry, truly supported and protected from dumping actions by the anti-dumping legislation, will be able to resume some economic growth and help us to supply the burgeoning demand for diesel fuel in Australia.
Let us look at the trend in the motor industry in this country. Much of the romance goes to hybrid vehicles—and we are producing hybrid vehicles here in Australia, including, for example, the Camry, which is based on Toyota's Prius technology. There are a number of other vehicles around now that run on hybrid technology. If you want a Porsche, you can buy one that uses hybrid technology. But, if you want to drive the most efficient vehicle in the world as measured by litres consumed per 100 kilometres, you will buy a diesel vehicle. If the opportunity is there for Australia to increase its self-sufficiency by using the most efficient of fuels, diesel, through the production of renewable diesel or biodiesel, then we need to ensure that those incentives continue. That is what the fourth bill does: it provides the incentive for diesel production.
We then move to compressed natural gas. It is a cumbersome fuel but one which has a place in the Australian urban environment, particularly for delivery vehicles or buses that return to a depot and can carry this bulky fuel. It is not liquefied; it is compressed, which is why it is called compressed natural gas. It takes up a lot of room and the fuel tanks weigh a lot, but it has a very significant role to play in public transport. This is a fuel that we are trying to get into our bus fleets. Might I pause to commend my friend and colleague Mrs Jane Prentice, the member for Ryan, who is the chair of the Brisbane City Council's transport department and who pioneered the introduction of such buses in my city. Perth has about 300 such buses, Sydney has around the same number and growing and, as I said a moment ago, Brisbane has made an investment in these buses. The buses do not leave particulates in the air, they burn cleaner, they provide an opportunity to reduce emissions and they will increase the efficient transport of people through the public transport system.
So what does the government do to those buses? It taxes them. What is the result of the tax? Those buses will no longer be bought, because the economics of running a compressed natural gas bus simply will not be there. We will stop using a fuel that we are abundant in—so abundant that we export tens of millions of tonnes and perhaps soon 50 million times per year in the form of LNG. This government will tax it to the point where it is not economical to run those buses and so they will go back to using diesel. Then there are all the issues associated with that in terms of the balance of payments. Shame on you. Further, those 900 buses already in use would face a fuel price increase of at least 20 per cent in the case of CNG. That means that bus fares will go up. Here we have a government that claims it is all about reducing emissions and introducing efficiencies and all about trying to get people to use public transport, but it is so desperate for money it has to present these bills to the parliament, with the effect that I have indicated. This government reaches out to every part of sensible living and taxes it. We have a tax on family cars, a tax on compressed natural gas buses and we also have a tax on taxis. The 19,000 taxis in Australia are going to see a 20 per cent rise in their fuel cost. That means higher taxi fares in Australia, because the Gillard government just cannot manage money. They are so desperate to get money into their coffers that they will literally tax anything that moves.
This is bad legislation. It is not about improving efficiencies in this country. It is not about ensuring that Australia is a better place to live. It is legislation about taxing a fuel source which we have in abundance. It is legislation about taxing a fuel source that is efficient. It is legislation about taxing a fuel source that is a low emitter. It is legislation about taxing the livelihoods of Australians. It is legislation about increasing the cost-of-living pressures on families. Shame on you.
The opposition will oppose the first three bills. I flag that we will move an amendment to the fourth bill. This is necessary because the government has incorporated a suicide clause. If each of these bills is not passed, none of them will receive royal assent. The government is prepared to say to the biodiesel industry: 'If the opposition knocks over these bad bills on LPG, we are going to tax you at 38.143c.' Our amendment will break the nexus between these bills. It will ensure that if the first three bills are defeated, which they should be, and the fourth bill is passed, which it should be, then we do not have to rely on all four bills being passed to get royal assent.
Our amendment will make the fourth bill, the Energy Grants (Cleaner Fuels) Scheme Amendment Bill 2011, effective from 1 July 2011. There should be no other way. You cannot leave the biodiesel and renewable diesel industries swinging in the breeze while the government plays games with their livelihood. As I said, the biodiesel industry has been through enough already. We need to give that industry certainty and, as usual, it is the coalition that will do that. That is the reason that the Howard government never proceeded with this. We never presented legislation in this House when families were in financial crisis, because we knew, we were in touch and we understood. We believed in ensuring that these pressures were not put on families by a new tax. This government is oblivious to that fact. It knows, or it should know, that families are under pressure now, just as we knew when we were in government, which is why we never proceeded with these bills, but this government, in its ignorance, callousness and obliviousness to the concerns of everyday Australians, proceeds with this bad legislation in any event.
I just note, Senator Brandis, that in May 2003 the then Treasurer, Peter Costello, announced the alternative fuel tax arrangements as long-term important reforms. He said at the time that Australia must have a more consistent and sustainable fuel tax regime. In December 2003, when Senator Brandis was in the Senate, the then Prime Minister, John Howard, said the reforms would result in a more consistent neutral tax regime for fuels used in vehicles, and the Deputy Prime Minister at that time, John Anderson, emphasised the importance of investment, certainty, and so on and so forth. So let's have less of the hypocrisy. The hypocrisy here is coming from the coalition, because, indeed, these reforms were announced by the coalition in the 2003-04 budget when they were in government.
I want to address my remarks today first of all on the importance of finally getting to a proper fuel excise arrangement. This is something I have been arguing since I have been in the Senate. It is time, if we are considering that we need to move to a low-carbon economy, that we had an internally consistent set of policies that mean that we encourage people to drive less, and when they do drive they should drive more efficiently.
At the same time we need to look at what is happening globally in terms of transport. What we are seeing is the rapid electrification of the transport fleet. You only have to see what is happening in countries like China, where they are rolling out something like 10 million charging stations for electric vehicles and massive investment, even when there are popular driving and car shows saying that this is the end of motoring as we know it. There is such a revolution going on in cars and a whole range of different kinds of engines in cars, but essentially it is all about fuel efficiency.
If we go to the notion that we want people to drive less and have more public transport, better designed cities and so on, and that people should drive more efficiently, one way to ensure that is to make sure we have mandatory vehicle fuel efficiency standards that are futuristic, not backward as those announced by the government during the recent election campaign. Not only do we need high mandatory vehicle fuel efficiency standards; we also need to make sure we have a fuel excise system that genuinely reflects the energy content of the fuel. Whilst we now have essentially three broad categories of fuel excise, we think we need to have a proper review of fuel excise and we should charge for the level of energy content in the fuel, phased in over time, so that people know when they are buying a vehicle now that in three or four years hence there will be an excise regime which will reflect absolutely the energy content of the fuel. If you want to buy a car that is powered by a fuel with a high energy content, you will know the running costs of that car are going to be considerably more than if you bought an electric vehicle, a fully electric plug-in, which you power from your own sources, if it is renewable. Then you will have a situation where you end up with no fuel excise in the long run. That is why I have talked endlessly about shifting to this kind of system. At the same time you would need to phase in a road user charge, because with electrification of the transport fleet and renewable energy there will come a point when people are not paying fuel excise but using the road system. You will have to have a system which reflects that. You are going to have to have a system which reflects that. This is particularly in the context of bringing in carbon pricing.
We need to have an understanding of how carbon pricing relates to fuel excise and how fuel excise is about shifting the effort onto less emissions-intensive fuels. Or are people intending to run two regimes: a carbon pricing regime on the one hand and a fuel excise on the other? It makes no sense. Over time, we need to get rid of the fuel excise as it currently is, shift it to a fuel excise system based on the energy intensity of the fuel and at the same time phase in road user charges that reflect the transition to fully electric vehicles, which is where the world is going.
I think that is where we need a lot more consistency and thought. In terms of the Australian car industry, it is complete madness to keep on subsidising a car industry which is not making top-of-the-range vehicles in fuel efficiency. Otherwise, you end up with an export market for the old six-cylinder or eight-cylinder vehicles that go to the Saudi Arabian market et cetera. We want to do, in fact, as China did: set the highest mandatory vehicle fuel efficiency standards, create the technology to meet them and then build themselves a competitive position. In reality, if you want to keep building cars that have poor standards you are going to end up with no market and you will be uncompetitive and totally dependent on being subsidised—on having a market with government car fleets and so on. That is not the way to build long-term job security or competitiveness in a car-manufacturing market.
To get to the point of the legislation: I think everybody recognises that liquefied petroleum gas is a fossil fuel. There seems to be some sort of perception that it is vastly superior to petrol and diesel, and that on that basis it should continue to be given a free ride with respect to taxation. In fact, gas is not substantially more efficient than petrol and diesel. It is only about 13 per cent more efficient. That is the mythology around LPG. It is certainly more efficient, but not so significantly that you would say that it ought not to fit into an excise regime. If you had a regime such as that that I am proposing then it would find its natural place in the excise and you would charge with the highest levels of excise for the largest energy content right down to the lowest fuel excise for that with the lowest energy content.
We need to grapple with the reality that we are in a climate change emergency. I am fully aware that there are many people in this chamber who do not believe that. But we do need to move as rapidly as we can to a zero-emission energy sector, and that includes transport. It means we need to switch to those ultraefficient vehicles, including the plug-in hybrids like the Chevrolet Volt or the Audi A1 e-tron—even over conventional engine vehicles like the Fiat 500 Twin Air—over the next few years. If gas powered vehicles can compete with this new technology, well and good, but we think that subsidising LPG and other gaseous fuels in a way that reduces the competitiveness of this new technology is not exactly a very good thing to do. Fundamentally, we have the view that there should be a level playing field and that the LPG industry, in particular, ought to fit in on that line on the level of emissions, as I said.
I have had a lot of representations from the LPG industry in Tasmania, I have to say. They are very concerned that they will be particularly adversely impacted by this bill because of the additional cost of transporting LPG to Tasmania. I have raised these concerns with the minister, and I just reiterate a bit further that Tasmania does rely on LPG auto gas with domestic, commercial and industrial customers. The federal government has yet to bring out its energy White Paper. It has no alternative fuels policy in place generally, and we know that Tasmanians suffer because of the freight impost. The taxi industry in Tasmania is arguing that it will suffer more so than the rest because of that. Of course, the taxi industry across Australia is arguing that there will be a greater impost and higher fares.
The cost of shipping to Tasmania is approximately 12.5 cents per litre. The question here becomes: will the adverse impact that the industry anticipates actually put it out of business? It is a question of critical mass for Tasmania, and it is true that it has taken the industry a long time to get a number of outlets around the state so that it is actually competitive to use this in Tasmania. Up until a while ago there were areas of Tasmania where you just could not get LPG. It was difficult for people with hire cars and all the rest of it. Now that has changed; there is a network throughout Tasmania. But the issue here is: if the price goes up, and with the additional costs of the transport of fuel, the freight, are they going to have a significant adverse impact?
As I indicated, I have raised that with the minister. The government believes that these concerns are unfounded, but nevertheless what the minister has undertaken to me is that they will monitor the industry in Tasmania closely and if a problem arises then steps will be taken to rectify the situation. I do not know what those steps might be, but they may well be that the government would have to look at the additional freight arrangements into Tasmania. I just want to put on the record that I am aware of the effort that has gone into Tasmania to build the network in recent times. I will be coming back to the government on this issue if, indeed, the combined freight and extra costs have the adverse impacts that people are saying they may at this point.
As to the taxi industry: I know that I have seen quite a few of the articles around Australia about that. I am yet to be convinced that there will be a significant increase in taxi fares as a result of this. I am pleased to see that wherever I go now the taxi fleets are starting to employ a lot more hybrid vehicles and recognising the value of getting highly efficient cars into the taxi fleet. That is one of the advantages, of course, of having more hybrids in Australia: they are getting into the second-hand and taxi markets.
We have also received representations from manufacturers and LPG system installers, and we have listened to their concerns. But we also note that these changes to—
Sitting suspended from 18:30 to 19:30
Before the dinner break I was pointing out that the Greens support this legislation, recognising that the LPG, LNG and CNG industries are right to be concerned that we do not have a systematic fuel excise system in Australia that recognises the energy content of fuel and charges in an appropriate and systematic manner. That is something I will be working for in this period of government. I have been campaigning for that, together with higher vehicle fuel efficiency standards, for a long time and will continue to do so.
The bills also deal with biofuels, and this is a particularly complex and vexed issue. When biofuels were first talked about there was huge excitement about the possibility of replacing the oil based industry with a biofuel industry to drive and meet the transport task. It caused massive distortion in the market, and when the Europeans brought in a law that required 10 per cent of all fuels to come from biofuel it created a disaster around the world. The European insistence on this 10 per cent figure resulted in massive conversion of tropical forests, particularly in Indonesia. But we are also seeing massive conversion of tropical forests around the world as a result of this.
We have also seen massive displacement of food production by biofuel production, with a significant impact on food prices, which in turn has impacted on the poor around the world. You have only to look at what happened in Brazil, with a massive changeover to biofuels, and in the United States, with a big push for energy security. They have a real concern about being so dependent on foreign oil and so they have moved massively to biofuels, which have displaced food production. All this has combined to drive food inflation and appalling problems of food scarcity.
We are facing a climate crisis, a water crisis, a fuel crisis and a fibre crisis all at once. Agricultural land is now subject to competition between those who want the land to grow biofuels, those who want it to grow food and those who want it to grow fibre crops. As we move away from petrochemicals, because we have reached peak oil, there is a recognition that you can grow for biodiesel and you can use agricultural waste for ethanol and the like, which is happening in some places, but the real problem we have is the question of sustainability. I have argued endlessly that, where you have a conflict for agricultural land, you will get perverse outcomes if you put incentives in the system for one use of agricultural land versus the rest.
That is exactly what has occurred with biofuels, which is why the Greens have taken a policy position that we should be supporting only second- and third-generation biofuels and the use of wastes for biofuels, not growing primary crops for the purpose of biofuels. We are told that ethanol produced in New South Wales is produced using food-grade starch. No doubt there will be others who deny that is the case; nevertheless, that is the information that has come to us.
I have spoken to the minister about this issue of sustainability and the use of biofuels into the future. To the minister's credit he has considered the position that I put to him in pointing out the perverse outcomes. This was particularly highlighted in the recent Productivity Commission report looking at the competitiveness of Australian industry and the impacts of a carbon price. It too points out that there is now real concern around the world about subsidies that drive biofuels to the detriment of food production and about a failure to consider, with ethanol and biodiesel production, that you need a full life-cycle analysis of the real carbon cost of growing these fuels. You cannot just test the final product; you have to look at everything from the growing of the crop, through the harvesting and transport, to the processing and so on. With biofuels you need a full life-cycle analysis to make sure you are getting an accurate reflection of the carbon cycle.
At the G20 leaders' summit in November 2010 they asked the International Monetary Fund, the OECD, the World Bank, the WTO and other international organisations to develop options for G20 consideration on how better to mitigate and manage the risks associated with the price volatility of food and other agricultural commodities, which is largely the result of the disproportionate influence in the market of biofuels and the impact on global food security.
To the minister's credit he has taken on board what I raised with him and has indicated that Australia will be moving to some kind of certification. I note that it is likely to be a voluntary or self-managed regulatory approach. I doubt that works on most occasions; nevertheless, we are recognising that you need to have sustainability criteria, that you need accreditation and that dealing with biofuels in the absence of other issues around food security gives you perverse outcomes. This is particularly so with the carbon farming initiative as well. That is another reason why I am grateful to the minister for recognising we actually have to move on the sustainability issues of biofuels. I put on the record that I am pleased that we are going to move to some system of accreditation in this regard and start getting the issue of sustainability onto the agenda.
Many years ago when I did the Senate inquiry into alternative fuels to get us off petrochemical fertilisers, there were young people working on all kinds of quite exciting technologies. There are risks and opportunities associated with biofuels, especially second and third generation. I hope that, as we move to a more logical fuel excise system that actually charges for the embodied energy in that fuel, we will start to get some incentives in place to see some of this brilliant innovation by young people come to market.
(New South Wales—) (): The incorporated speech read as follows—
Mr President, the government has introduced four bills to the senate regarding changes to the taxation arrangements of LPG, LNG and CNG. They also clarify how biofuels — ethanol, biodiesel and methanol are treated regarding the tax arrangements.
While I don't support the changes to apply a tax to LPG, CNG and LNG, I am very supportive of the legislation as it relates to ethanol and biodiesel.
Mr President, I have been a strong supporter of biofuels, in particular ethanol, for over a decade. Indeed, in a preselection speech I gave in 2001, I said:
"One issue that I believe we should seriously look at is the use of ethanol as an alternative fuel. The creation of an ethanol industry would be an enormous boost for regional Australia, and would create thousands of jobs in those areas. It has environmental benefits, and has the potential to underpin commodity prices."
In my maiden speech in this place in 2005 I said:
"As a champion of the bush I will always seek to find ways to improve the viability of our rural communities. One such way is the development of a sustainable domestic biofuels industry. For many years I have been, and I will continue to be, a passionate advocate for a domestic ethanol industry. There is no doubt that the development of an ethanol industry would create jobs and opportunities in our regions. I will do all I can to support industries that will deliver real benefits to rural and regional Australia. An ethanol industry would provide significant environmental and health benefits and would reduce our reliance on fossil fuel. It would give grain and sugar farmers another market, and it would develop business opportunities in our regions.
The government currently has in place a policy target of 350 million litres of biofuel production by 2010. The effect of vehicle emissions, particularly in our cities, cannot be ignored. Given that the introduction of ethanol into our fuel mix would lower vehicle emission pollutants, it stands to reason that it Is simply commonsense that, for the improved health of Australians, we as legislators support the development of an ethanol industry in this nation. Indeed, the AMA recently put forward their view to the Prime Minister's Biofuels Taskforce that they strongly support the use of ethanol in our fuel mix as part of the solution to improving the health outcomes of Australians.
Many countries around the world pursue the use of ethanol—indeed, they not only use it but actively embrace it. In the United States alone, last year 13 billion litres of ethanol was used. The list of countries using ethanol is ever growing, including the US, Brazil, Thailand, the Philippines, India, China, Japan, Colombia and the EU. Governments in all of those nations have recognised the importance of this industry. Australia is lagging behind, and it is not good enough."
The government's measure to extend the domestic production subsidy for 10 years is a very welcome one. The industry needs the extension of the subsidy to ensure a sustainable industry in the future.
It was hoped that the industry would be delivering a much greater volume into the market by this time. Indeed, in 2001 the Coalition had a policy objective of 350 million litres of ethanol and biodiesel contributing to the total fuel supply by 2010.
However, we are nowhere near that level as yet. That is in large part due to the fact that In the early 2000's a huge scare campaign was run against the use of ethanol, by the Labor Party. How ironic that they have finally seen the light! That scare campaign put the industry back years, and I have to congratulate the ethanol industry for having the strength to continue on a path that they could see would have significant benefits for the nation, in the face of such adversity.
Many people recognised the benefits of a domestic ethanol industry in the early days, including the Hon Ian Armstrong AM OBE, who was a strong advocate of the industry. Indeed, his input was significant, and I remember him convening a Bio-technology Conference in Cootamundra as early as July 2003 on alternative fuels.
The extension of the domestic production subsidy on ethanol is welcome, and in spite of the fact the government appears to have done a total backflip with regard to this industry over the last 10 years, this is a measure that will provide certainty and a sustainable future for the biofuels industry.
However, the introduction of excise on LPG, LNG and CNG shows a complete lack of foresight by this Government, and a complete lack of understanding of the impact this will have on people and families already struggling with the rising cost of living.
LPG is going to have a new tax, rising to 12.5% over the next 5 years.
It's a decision taken by this government that simply doesn't make sense.
This fuels is environmentally friendly, and why on earth would the government make it more expensive, and less attractive, for people to use? The fact that there are incentives that have been put in place to increase the use of LPG as a transport fuel - indeed, as at April 2011 283,512 grants had been paid - the fact that this Labor government would then place a tax on LPG to make it more expensive to use is simply beyond comprehension.
This again shows Labor's complete inability to recognise the very real difficulties that people are facing with the rising cost of living. This Labor government, through these measures, is going to make that worse.
They have also hit public transport, a sector we should be encouraging to grow, not punishing. 90 million taxi customers will be paying more, fuel prices will increase for the taxi industry. There are 900 buses running on CNG - how can this measure not lead to an increase in the price of bus tickets.
These measures are a tax grab. This Labor government is a government that is addicted to taxing.
Mr President, while I certainly do not agree with the changes that have been made to LPG, CNG and LNG, I wholeheartedly approve of the 10 year extension to the current taxation arrangements for the biofuels industry, and look forward to seeing a strong and sustainable biofuels industry in the future.
Today we are debating a package of four bills that deal with content based taxation to certain alternative fuels: the Taxation of Alternative Fuels Legislation Amendment Bill 2011, the Excise Tariff Amendment (Taxation of Alternative Fuels) Bill 2011, the Customs Tariff Amendment (Taxation of Alternative Fuels) Bill 2011 and the Energy Grants (Cleaner Fuels) Scheme Amendment Bill 2011. The bills seek to extend the grant given to biodiesel, renewable diesel and ethanol, which is 38.143c per litre. This grant is due to expire on 30 June 2011—that's right, next week. At the same time, the bills phase in a fuel excise on LPG, LNG and CNG from 1 December 2011, with stated increases through to 2015.
Recently I visited a biodiesel plant in my home state of Victoria to see firsthand how the industry operates. I heard how important this grant is to the industry and how, without it, the whole biodiesel industry could be wiped out. That is not something that I want to see, especially given that the biodiesel industry is on the verge of finding even more efficiencies through its independent research. Alternative fuels such as biodiesel, renewable diesel and ethanol are worthy of support, and I am critically aware that to delay passage of this legislation would seriously jeopardise these industries. The grant is due to expire, as I said, on 30 June 2011, so there is urgency to pass this package of bills.
The decision by the government to introduce an excise on LPG is certainly not something I would advocate as it would impact on motorists who have converted their cars to LPG and the taxi industry. Successive governments from both sides have encouraged families to convert their vehicles to LPG while at the same time indicating they would impose an excise. Unfortunately, families are not aware that this has been a move by both sides of parliament. Nevertheless, it is important not to ignore the other components of this package of bills. Given that it is critical that the alternative fuels grant continue beyond 30 June 2011, I have no choice but to support the package of bills.
I would like to thank all the senators who participated in this debate. The bills debated this evening will bring liquefied petroleum gas, liquefied natural gas and compressed natural gas used for transport purposes into Australia's fuel taxation regime so that excise duty or excise equivalent customs duty will apply.
The tax rates for these fuels are based on the energy content of the fuels. However, the tax rates are discounted by 50 per cent in recognition of the potential environmental, regional development and fuel security benefits of their use. This policy was announced by the previous Liberal government. Yes, the previous Liberal government—Mr Costello, our then Treasurer—announced this one. It has been in the public domain since 2003, when it was put into the forward estimates by the former Liberal-National Party government. Importantly, the changes are phased in over a transition period of five years to allow affected parties time to adjust to the changes.
The bills provide certainty concerning the taxation arrangements for alternative fuels. They deliver investment certainty to allow industry to finally make decisions in the knowledge that the final legislation is in place. They also ensure that the overtaxation of the biofuels that would result from 1 July 2011 under the legislation put in place by the Howard government does not occur.
I will briefly outline the key elements of each bill in this legislative package. The Taxation of Alternative Fuels Legislation Amendment Bill 2011 deals with the taxation of LPG, CNG and LNG when used for transport purposes. It establishes simplified reporting and excise licensing requirements for industry to make the transition to the excise system as smoothly as possible.
The Excise Tariff Amendment (Taxation of Alternative Fuels) Bill 2011 amends the Excise Tariff Act 1921 to set the excise rates applying to alternative fuels from 1 December 2011 and to calculate the duty payable on blended goods. The Customs Tariff Amendment (Taxation of Alternative Fuels) Bill 2011 amends the Customs Tariff Act 1995 to set the excise equivalent customs duty rates applying to alternative fuels from 1 December 2011. The Energy Grants (Cleaner Fuels) Scheme Amendment Bill 2011 extends the operation of the existing provisions of the Energy Grants (Cleaner Fuels) Scheme Act 2004.
The key objectives of this policy are the same as they were in 2003, when the Howard government put it in the forward estimates—that is, certainty for industry, greater consistency in the taxation of fuels used for transport purposes and phasing in the new fuel tax arrangements while providing support to the alternative fuels industry in recognition of the potential environmental, fuel security and regional development benefits that these industries can generate. As industry has pointed out, LPG has the potential to deliver up to 13 per cent less emissions than regular unleaded petrol. These bills, however, deliver a full 50 per cent tax discount in recognition of the potential environmental and other benefits that LPG and other gaseous fuels can deliver.
While the government has not made any final decisions about the treatment of fuel in the carbon price arrangements, a principle of carbon pricing is to apply a price that reflects the emissions of different activities. The government is committed to addressing the relative emissions generated by fuels as part of its consideration of arrangements for fuel under the carbon price. The bills also represent a move towards a more sustainable taxation system. As market share forecasts provided by industry show, the share of alternative fuels in the transport fuels mix is expected to continue to grow, even with the new tax arrangements. To continue to exempt these fuels from fuel taxation does not provide for a sustainable fuel tax system. This was acknowledged by the former Howard government by the former Treasurer, Mr Peter Costello, and by Mr John Anderson, a former leader of the National Party. It is also acknowledged internationally.
Australia has not gone it alone in proposing to tax LPG autogas. Most countries in the OECD already apply fuel tax to LPG autogas. Even with the new tax arrangements, Australian LPG autogas prices will be amongst the lowest in the OECD. The bills reflect the results of widespread consultation and negotiation with crossbench members and industry. Reflecting these discussions, the bills also extend current taxation and grant arrangements for 10 years for ethanol, biodiesel, renewable diesel and methanol. After 30 June 2021, the taxation and grants settings of these fuels will be reviewed.
These arrangements deliver long-term policy certainty for biofuels and will encourage a growing and sustainable Australian biofuels industry into the future. On this point I would like to acknowledge the contribution of the Australian Greens, particularly Senator Milne. I can say that the government will work with the Biofuels Association of Australia to introduce self-regulatory sustainability criteria. This will ensure that the production of biofuels in Australia will have no direct impact on food supply or food prices.
In addition, government will work actively along with the Biofuels Association of Australia and with the International Standards Organisation to develop internationally agreed sustainability criteria that can be applied to industry. This action will ensure that support for biofuels does not compromise sustainable production practices but will provide greater impetus for initiatives such as second generation biofuels.
In the course of the debate on these bills, a number of issues have been raised that require further comment. The opposition have claimed that these bills will be the death knell of the LPG industry and the taxi industry. However, it needs to be placed on the record that LPG will continue to exhibit a significant price advantage over regular unleaded petrol going forward.
The effect on taxi fares of including LPG in the excise system depends on decisions made by state and territory regulators. If the excise is passed on in full, the 2.5c per litre excise that applies from 1 December 2011 could add approximately 3.5c to the average metro taxi trip fare. Even when fully phased in, the final excise of 12.5c per litre from 1 July 2015 would mean approximately 19c for the average metro taxi trip fare, if passed on in full.
It should also be recognised that the cost of LPG, including the excise that will apply, can be claimed as an income tax deduction by taxi operators and other business operators. This reduces the impact of the new excise arrangements for LPG.
More generally, LPG is cheaper and more cost-effective than petrol, with an average saving of around 37 per cent, or $7.44, per 100 kilometres driven. On 1 December 2011, when excise is introduced, LPG will still have savings of around 35 per cent, or $6.94, per 100 kilometres. In July 2015, when fully phased in at 12.5c per litre, LPG will still retain an average 25 per cent cost advantage over unleaded petrol.
Notwithstanding this, the government acknowledges that state and territory regulators across Australia are grappling with other issues impacting upon the taxi industry, particularly in terms of driver safety. The government has received representations from Senator Xenophon about driver safety in his state. We will further explore these issues with Senator Xenophon, including whether the Commonwealth can play a role.
The government has received representations from several members of parliament and senators on behalf of the LPG excise in Tasmania, given claims by the LPG industry about the developing nature of the industry in that state, my home state. The government will closely monitor any impact of the excise arrangements on the LPG industry in Tasmania and will consider any measures that would be required should such claims prove correct.
The government has also received representations from producers of CNG and LNG on the impact of excise on these fuels. The government will consider the impact of these excise arrangements on CNG and LNG once the excise arrangements have applied for 12 months in order to ensure there are no unintended consequences from its implementation. This is in addition to the formal review that will occur after 1 July 2015, once the tax has been fully implemented, which will consider the impact of the tax on LPG, CNG and LNG and its interaction with the carbon price and market demand for these fuels.
The bills provide for greater consistency in the taxation of fuels but acknowledge that uniformity in taxation would not be appropriate and a balance must be struck between policy goals. The bills recognise that it is appropriate that there be some contribution from gaseous fuel users towards the maintenance and construction of our road system. It is not sustainable that users of petrol and diesel are the only contributors through the fuel tax system to the cost of the road system.
However, the bills also recognise that alternative fuels are potentially more environmentally attractive, have regional development benefits and improve Australia's fuel security. These bills get the balance right for Australia and I commend them to the Senate.
Ordered that the resumption of the debate be made an order of the day for a later hour.