Environmental Impacts of the tax package

Overview

3.1 Most submissions relevant to the Committee's terms of reference called for a review of the proposed new tax system with a view to implementing long-term environmental strategies based on ecological sustainability and more efficient use of natural resources. The most significant issue to emerge was the proposed reduction in diesel fuel excise.

3.2 The Committee's terms of reference were comprehensively addressed, with many submitters putting forward recommendations based on either self-funded modelling or detailed analysis. However, at the Canberra hearing the Committee questioned the adequacy of the submission put forward by Environment Australia, which tended to focus on other Government initiatives rather than considering the specific environmental effects of the proposed new tax system. [1]

3.3 Public interest groups, academics, research organisations and government agencies generally addressed the broader impacts of the reduction in diesel fuel excise. Australia's international treaty obligations including the International Framework Convention on Climate Change and `the overseas experience' were also canvassed.

3.4 Greenpeace Australia argued that the proposed new tax system would result in Australia losing a rare opportunity to change the tax system to one that would result in our being more ecologically sustainable. Greenpeace favours a three-tiered approach to tax reform: first, the removal of subsidies promoting the exploitation of fossil fuels, secondly, the application of a genuine polluter pays principle and thirdly, the removal of barriers to renewable energy and the provision of flexible incentives to accelerate the phase-in of sustainable forms of energy generation. [2]

3.5 The Australian Conservation Foundation (ACF) presented a similar view. [3] The ACF believes that the proposed new tax system would encourage pollution, waste and other unsustainable practices including:

• a significant increase in greenhouse gas emissions;
• increases in some major air pollutants, with associated health costs from the damaging particles contained in diesel fumes;
• increased impacts associated with unsustainable mining, forestry and agricultural practices;
• loss of market share for solar energy products and services in favour of unsustainable energy sources;
• increased demand for road freight at the expense of rail freight;
• increased demand for private motor vehicle use at the expense of public transport; and
• an overall increase in the energy and resource intensity of the Australian economy. [4]

3.6 The ACF called for a high level commission of inquiry to examine ecological tax reform elements that could replace or stand parallel to elements of the government's current tax proposals. [5] Other key recommendations included:

• the abolition of the $2.91 billion transport related credits and rebates, or at least strong counter-prevailing measures put in place;
• GST exemption for solar panels and other accredited renewable energy products and environmentally sound technologies;
• GST exemption for public transport fares;
• tax incentives for fuel efficient and low polluting vehicles; and
• removal of tax and tariff advantages for new four-wheel drive vehicles. [6]

3.7 Other evidence fully supported these views, suggesting that the opportunity to implement ecological tax reform should not be lost when such far-reaching new tax proposals were on the national agenda. The ACF and the Nature Conservation Council of NSW referred the Committee to examples of ecological tax reform undertaken in other OECD countries, and to Australia's `spectacular failure to implement ecological tax reform'. [7] The ACF stated that:

This tax reform package is the only example in recent years of an OECD country introducing a net reduction in fuel and energy related taxes and charges. Even the conservative International Energy Agency has urged Australia to increase fuel taxes to curb energy consumption. [8]

3.8 The conclusion reached by the Australia Institute was that the general effect of the tax package would be to lead to an overall increase in greenhouse gas emissions and urban air pollution. The Australia Institute's submission provided a detailed analysis of two major energy sectors:

• stationary energy, which includes electricity, gas and non-transport use of fossil fuels as well as renewable energy and energy efficiency; and
• transport energy, which is divided into freight (road and rail), business transport, private transport and public transport. [9]

3.9 Environment Australia's submission focused on the use of economic instruments designed to assist environmental objectives. [10] Mr Roger Beale, Secretary of the Department of the Environment and Heritage, told the Committee that the proposed new tax system would improve the robustness of economic sectors and so enhance their capacity to manage any economic adjustment in response to environmental policies. Environment Australia's view is that the government's environmental objectives are not changed by the tax reform proposals. [11] Mr Beale said:

In summary, it is unlikely that looking back in five or ten years time we will see any overall net reduction in environmental quality following the introduction of the tax package. Any initial impact will be the result of relative price changes, especially as a result of reduced fuel prices. These, however, are likely to be more than offset by targeted non-tax measures designed to achieve the government's environmental objectives. For example, the national environment protection measure in relation to ambient air quality and growth in the economy resulting from the tax reform package by promoting investment should make it easier to achieve environmental objectives by increasing the rate of turnover of capital stock, enabling new technologies to be brought on board somewhat more rapidly. [12]

3.10 Environment Australia acknowledged the likelihood that reductions in diesel and petrol prices would encourage some increased use of these fuels in the short term. However, it maintained that over the longer term, the influence of measures to achieve greenhouse gas reductions consistent with Australia's Kyoto target would have far greater impacts on fuel use levels and patterns than any changes to fuel prices resulting from tax reform. [13]

3.11 In response to this statement, Dr Hamilton of the Australia Institute said that Environment Australia's submission was a `travesty':

Any economist will acknowledge that, if you are going to concede there will be a short-term impact, then there will almost certainly be a larger longer-term impact. Environment Australia goes on to argue, `Don't worry; we have other measures in place which will offset the negative impacts of the GST tax package and, as a result, we will meet our Kyoto target'. You can immediately see the lack of logic in that.

First of all, the fact is that if you hold the rest of the world constant – which you always do when you are doing this sort of analysis – the GST package on its own will increase pollution. Secondly, if you applied that argument – `Don't worry about the negative impacts; we are going to do things to offset them' – to every upgrading of a coal-fired power station or to every increase in urban air pollution, then of course you would not meet your Kyoto target. So that argument has no credibility at all. [14]

3.12 Dr Hamilton also found it remarkable that an across-the-board change in the tax system could be proposed without any reference to other policy areas such as the environment:

What we find is that, at the end of the process, we have the government saying, `We are serious about reducing greenhouse gas emissions and so, for example, we will introduce a policy that requires an extra two percent of Australia's electricity to be generated from renewable sources by 2010'.

This is a good policy and in fact, in my view, it is the only good policy the government has in climate change. It is estimated that the two per cent renewables policy will reduce greenhouse gas emissions by 5.5 million tonnes of CO2 equivalent by the year 2010. As you know from our analysis, the GST package changes will increase greenhouse gas emissions by five million tonnes. So you have a policy on the one hand, which is going to cut emissions by a certain amount and, a separate policy, which is going to completely offset it. So you are going to be spending money in two different ways, which will just be a waste. It really is quite absurd in my view. If the government put climate change policy, and indeed environment policy, more at the centre of its consciousness, it would recognise the contradictions and not get into them. [15]

3.13 Significantly, in response to questions from members of the Committee, Mr Beale gave no evidence of consultation between Environment Australia and Treasury on the subject of the tax package. It seems extraordinary that proposals with such profound implications for the environment should be developed without reference to the relevant Commonwealth department, and appears to indicate how little consideration was given to environmental concerns.

3.14 The Local Government and Shires Association of NSW asked the Committee to investigate ways to bring about environmental benefits without compromising the other goals of the proposed new tax system. The Association pointed out that councils' opportunities to reward environmentally appropriate behaviour are limited not by will but by their statutory charter, which limits the tools and resources available to them. The Association believes that there is an opportunity for the Commonwealth to use its considerably broader financial powers to provide incentives for the national community, in the same way that councils have pursued this `innovative' approach with their local communities. [16]

Reduction in Diesel Fuel Excise

3.15 Diesel excise is currently set at 43.355 c/L. This excise forms a substantial portion of the cost of diesel fuel, currently around 70 c/L at the retail pump and 60 c/L for large fleet operators.

3.16 Under the Government's proposed tax reforms, fuel would be excise-free for business use, or taxed at a rate of 18 cents per litre of diesel in the case of road and rail transport. [17] This would apply whether the fuel used is petrol, diesel (except for road and rail), or any of the gaseous fuels.

3.17 In several industries, such as the primary industries, diesel fuel has been either completely or virtually excise-free due to the operation of the Commonwealth diesel fuel rebate scheme. However, in a number of other industries such as manufacturing, tourism, buses, taxis, road and rail freight, the full rate of diesel excise has been paid. Thus, to date, in those industries there has been a considerable incentive to substitute tax-free gaseous fuels (mainly LPG but to some extent CNG) for the more highly taxed liquid fuels. [18] Under the proposed new tax system, the price differential between gaseous fuels and conventional fuels would narrow substantially, as can be seen from the following table: [19]

Table III.1

Fuel	Pump Price (c/L)	Effective price (c/Ld)	Effective price with GST (c/Ld)	Effective price after rebates (input credits) (c/Ld)
Diesel – Retail	70	70	70	45
Diesel – Hi Vol.	60	60	60	35
LPG	30	45	49.5	45
CNG	40	40	44	40
Ld adjusts for the energy content of fuels so that the fuel comparison is even.

3.18 The submissions and evidence received by the Committee indicated that the reduction in diesel fuel excise went beyond the economic to include environmental, social and health issues. Private sector organisations and industry groups focused on issues relevant to their own particular industry sectors, including:

• health issues, including increased symptoms of respiratory irritation, lung damage, allergic responses, and an increased risk of lung cancer;
• gaseous fuels;
• road and rail transport;
• public transport;
• renewable energy; and
• oil recycling.

3.19 The common argument which emerged from the inquiry was that a reduction in diesel fuel excise would lead to an increase in the use of environmentally unfriendly and highly polluting fuels (diesel) at the expense of less polluting fuels (NG, LPG). Most of the evidence suggested that this would not only have major economic benefits for the road transport and stationary energy sectors, but would also have a significant detrimental affect on the environment and human health.

3.20 The Australia Institute identified the main price effects in the GST package as:

• the very large cut in the price of diesel for heavy vehicles of around 25 c/L;
• the cut in the price of petrol and diesel for business users;
• the fall in the prices of vehicles, 16.6 per cent for businesses and around 8.3 per cent for private consumers; and
• changes in the relative prices of diesel compared to CNG and LPG.

3.21 Based on the fundamental economic principle that when you change prices in an economy, people's behaviour changes (the law of demand), Dr Clive Hamilton, Executive Director of the Australia Institute, said that the principal effect of these price changes would be fourfold:

• an increase in freight transport and a shift from rail to road transport;
• a general increase in business transport and a shift to diesel within that away from petrol;
• an increased use of private vehicles, partly at the expense of public transport; and
• the probable collapse of the gas-powered vehicle industry in Australia. [20]

3.22 The Institute's submission stated that the decrease in the price of both road and rail freight as a result of the tax package would produce a 2.0 per cent increase in demand for rail and a 7.3 per cent increase in demand for road freight. Bureau of Transport and Communications Economics figures suggest that by 2010, demand for heavy road and rail freight is expected to reach 175 and 137 billion tonne kilometres respectively. The tax package would increase those figures by 12.8 and 2.7 billion tonne kilometres for road and rail respectively.

3.23 Based on these figures, fuel consumption for road freight would increase as a result of the tax package by 430 million litres per annum above expected growth, and rail freight consumption by 20 million litres. [21] In spite of this overall increase in demand, road would take the majority of the contestable freight, causing the complete cessation of some interstate rail freight services. [22]

3.24 Dr Paul Mees, President of the Public Transport Users Association, told the committee that as currently structured, the Government's package:

is going to provide a substantial net further incentive to people to use environmentally polluting modes of transport rather than less environmentally polluting modes of transport. That is the opposite direction from the one in which transport policy should be moving. [23]

3.25 Dr Mees referred to the Royal Commission on Environmental Pollution in Britain which argued that:

the duty on fuel needed to be increased in order to internalise the environmental externalities produced by the transport industry and that the biggest increase ought to apply to diesel fuel because, at least in urban areas, it had the most damaging effect on human health. We are doing precisely the opposite here. We are reducing the price of the one fuel that the scientific consensus in England reckons we should be doing most to discourage the use of. [24]

3.26 There is no doubt that the Government's tax proposals would significantly increase the use of diesel, at the expense of less polluting fuels. Mr Craig Marschall, Managing Director of IMPCO Technologies Pty Ltd, told the Committee that the removal of diesel excise in New Zealand had led to a 130 per cent increase in the use of diesel over ten years. There had been a 66 per cent reduction in gaseous fuel use and the natural gas vehicle fleet had been reduced from 130,000 vehicles to 20,000 vehicles. [25]

3.27 Although the Australia Institute focused on energy used in the transport and stationary sectors, their analysis indicates that the impact of the proposed reduction in diesel fuel excise goes well beyond the economics of these sectors. The Institute estimated that atmospheric emissions in the transport sector would increase, with CO2 up 4.5 per cent by around the year 2010 and particulates, the most damaging form of air pollution, increasing significantly.

Particulates and Health

3.28 Diesel has a high level of sulphur and results in a much higher level of particle emissions than gaseous fuels. The most readily inhalable particles are extremely small and carry toxins deep into the respiratory system. According to National Environment Protection Council estimates, 1,062 people die each year from particulate exposure. [26] The Australia Institute told the Committee that an increase in particulates as a result of the Government's proposed tax package would produce an increased rate of mortality in Australian cities:

We estimate that at least 65 more people will die each year in Australia as a result of the increase in urban air pollution and traffic accidents if the GST package goes ahead as proposed. These will be predominantly young children and the elderly. This is a very conservative estimate; I suggest the true figure will be perhaps four or five times higher than that. These factors are crucial to a proper assessment of the implications of the new tax package. [27]

3.29 Others were also vitally concerned with human health issues. Mr James Whelan, Clean Air Campaigner for the Queensland Conservation Council, gave evidence suggesting that the most important issue was the adverse health effects of particle pollution, with diesel emissions figuring most prominently. [28] The submission of the Catholic Diocesan Centre in Adelaide was one of a number which echoed these concerns, referring in particular to the potential increase in sulphur di- and trioxides. [29]

3.30 A significant factor in the level of particle emissions is the sulphur content of fuels. Mr Whelan told the Committee that:

modern diesel vehicles fitted with catalytic converters operate efficiently using very low sulphur fuel. Once that sulphur level increases, the catalytic converters fail, resulting in much higher particle output. [30]

3.31 Ms Bronwen Machin, Clean Air Campaigner for Environment Victoria, stated that Australia's standard for sulphur is ten times more lenient than the European standard. The European Union has a maximum sulphur content in diesel fuel of 0.05 per cent. In Australia the maximum is 0.5 per cent. [31] Low sulphur fuels are available, and have been legislated in some European countries. However, Australia continues to allow the emission of damaging particles.

3.32 Mr Whelan provided the Committee with research which demonstrated the decreasing level of particle emissions that can be achieved with the use of low sulphur and gaseous fuels, as indicated in the table below: [32]

Table III.2

Bus Fuel Use	PM10 Emissions g/km
Current bus fleet	2.025
0.2% sulphur	0.5
0.05% sulphur	0.2
CNG	0.05
LPG	0.02

3.33 Mr Whelan referred to research undertaken by Dr Lydia Morawska of the Queensland University of Technology, recognised for her work on respirable particles with the World Health Organisation. Mr Whelan said that Dr Morawska's findings suggest that the current levels of particle pollution are responsible for over a thousand premature deaths across Australia each year, and in south-east Queensland the current estimate is 250 premature deaths per annum. [33]

3.34 Mr Whelan also drew the Committee's attention to a study of a major Brisbane traffic corridor, which demonstrated that people living in the densely populated area 150 metres either side of the main road are exposed to levels of particle pollution likely to trigger adverse health effects for the old, the young and any person with existing respiratory or cardiovascular ailments. [34]

3.35 Dr Hamilton of the Australia Institute said that:

It is particularly important to point out here a fact that is rarely recognised; that is, poor families will suffer most from these health impacts because they tend to live in areas where pollution is worst. If you are a wealthy family, you do not live on a busy road. [35]

3.36 Dr Morawska's work suggests that in the case of respirable particles, PM2.5 and PM0.1, the smallest and most dangerous according to the National Environment Protection Council, [36] anyone living within 200 metres of a major roadway is at risk. The Government's proposal to reduce excise and encourage the greater use of diesel in public transport and road haulage is a potential threat to the health of up to twenty per cent of the Australian population. [37]

3.37 Medical evidence linking particulates from diesel engines with conditions like asthma are translating into social costs which some reports rate as high as $2 billion per year. [38] Dr David Brand, President of the Australian Medical Association, has stated that:

Medical evidence is mounting on the dangers of fine particles in diesel exhausts. I am particularly concerned by the evidence that these fine particles may lead to the premature deaths of 1,000 Australians every year. My medical colleagues have linked these particles to increased risk of lung cancer and a variety of respiratory disorders. The Government should take heed of these medical indicators and take steps to reduce, not increase the use of diesel in our cities. [39]

3.38 Victorian Environment Protection Authority figures show that ironically, on the day that the Committee was taking evidence in Melbourne, atmospheric levels of PM10, a known carcinogen, exceeded Victorian standards by 40 per cent. On the previous day, ground level ozone, caused by a combination of sunlight and vehicle emissions, exceeded the World Health Organisation maximum by more than ten per cent. [40]

3.39 Mr David Langsam provided the Committee with details of his research, which included the following report of scientific evidence of links between vehicle emissions and respiratory illness:

Monash University senior lecturer in Epidemiology and Preventive Medicine, Dr Michael Abramson, says that the evidence is building that transport emissions are a significant factor in respiratory illness.

`About 13 per cent of hospital admissions from asthma can be attributed to high ozone levels. Motor vehicles, especially diesels, emit particulates and PM10 and they have been shown to be associated with death and respiratory illness in overseas studies,' Dr Abramson said.

University of New South Wales Professor Adrian Bauman says air quality is a factor in triggering asthma symptoms, but is a more obvious factor in other respiratory illnesses. About 1.4 million Australians have asthma, including one in five children under the age of 12. Asthma killed 825 people 1994. The medical cost of asthma to Australia is about $320 million with a further $400 million lost in work productivity. [41]

3.40 The Committee heard evidence from Environment Victoria that new diesel engines with lower emission levels may not be the answer to particulate pollution:

Following on from what you were asking about whether technology will solve our problems, I do not think it will, because the independent inquiry into urban air pollution which Senator Hill set up and which reported last year identified that the majority of growth in our air pollution comes from the growth in light commercial vehicles. In Melbourne, we have an enormous number of vehicles being driven around; most of them half-full. It is not what fuel you have that drives how many kilometres you drive; it is what your customers demand. With the growth in just-in-time inventory and management, the customer demands that you deliver almost immediately, regardless of whether you have a full load. The competition is so intense that you respond to that customer demand.

So that is a very important aspect of why I do not think putting in brand new engines is going to do anything. By the way, Australia has the oldest light vehicle fleet in the OECD. We are running at an average age of about 10 years. It is the same with our car fleet. [42]

3.41 In other words, any slight improvement in the quality of emissions from newer engines would be more than outweighed by the increasing number of vehicles in urban areas. In addition, the Committee also heard that the reduction in diesel excise would `change the whole market and the whole management of freight and lead to more freight running around,' further increasing particle emissions. [43]

3.42 The Committee found the evidence presented on the health impacts of diesel fuels profoundly disturbing. There is a significant problem to be addressed in relation to the current level of diesel use, let alone the likely further impacts which would follow from a lowering of the diesel excise and the resulting disincentive to explore other fuels. The Government's proposal concentrates on short-term, short-sighted economic outcomes which would have serious long-term social and economic effects.

Gaseous Fuels

3.43 The Australian Gas Association (AGA), the Australasian Natural Gas Vehicles Council (ANGVC) and the Australian Liquefied Petroleum Gas Association (ALPGA) each provided the Committee with individual submissions. At the Committee's Adelaide hearing, however, the three organisations appeared together as an industry group, representing gas suppliers, vehicle suppliers, component manufacturers and refuelling equipment suppliers. [44]

3.44 The industry group argued that the successful development of the gaseous transport fuels industry in Australia – both CNG and LPG – could have a positive effect on our environment, health and economy. Support for this industry in its formative stages would result in Australia:

• achieving cleaner air quality;
• meeting its international emission reduction targets;
• providing choice and efficiency for transport operators;
• maximising the utilisation of existing energy infrastructure; and
• reducing Australia's dependence on imported fuels. [45]

3.45 The industry group acknowledged that the proposed reduction of the diesel fuel excise for commercial vehicles of 3.5 tonnes gross vehicle mass (GVM) and above would reduce costs to operators. However, the group's view is that it would also reverse the trend towards cleaner fuel use in heavy vehicles and work against the Government's stated health and environmental objectives. [46] Adding to this concern was the definition of `heavy vehicles'. For the purposes of the proposed new tax system, the Government has determined that a `heavy vehicle' is one that is more than 3.5 tonnes GVM, i.e. loaded weight:

You have to ask yourselves whether it is going to be easy for people who currently drive or operate vehicles less than 3.5 tonnes gross weight to upgrade and therefore be able to buy diesel 30 per cent cheaper than they could previously, or indeed switch from petrol vehicles to diesel vehicles.

Already, if you look at the four-wheel drive vehicles available on the Australian market, at least four of them are close or exceed 3.5 tonnes gross weight. These are vehicles – Toorak tractors – that you see driving around on the roads today. The Ford Transit Van I think is a diesel vehicle – it probably comes in diesel and petrol – and it is right on 3.5 tonnes gross weight. The Holden Suburban Wagon comes in a diesel model. It is over 3.5 tonnes gross weight. The Toyota Landcruiser Wagon, which also comes in a diesel version, is just under 3.5 tonnes; it would not take much re-engineering to add a few more kilos. [47]

3.46 The industry group's broad proposals seek a commitment from government to maintain current benefits until the industry has overcome impediments to development. The industry seeks to acquire a market share significant enough to compete on a sustainable basis with the long-established petrol/diesel industry. In essence, the industry group is seeking:

• a `clean fuel' incentive to maintain a reasonable pricing differential between gaseous fuels and diesel;
• a grant scheme to cover a percentage of the initial capital outlay required to convert to gas, or the purchase of purpose-built gas vehicles;
• a rolling five-year review to ensure that assistance is limited to the critical development phase of the industry as it moves towards sustainability; and
• a process to provide for appropriate policy consultation arrangements between Government and the industry. [48]

3.47 The following summary table lists industry modelling of the overall cost to Government of implementing the incentive scheme. The summary table lists the cost per year of the Vehicle Grant and the Rebate schemes: [49]

Table III.3

Year	Vehicle Grant	Fuel Rebate	Total
Existing	$ -	$ 2 125 000	$ 2 125 000
1	$ 3 475 000	$ 3 070 000	$ 6 545 000
2	$ 5 635 000	$ 6 670 000	$ 12 305 000
3	$ 7 955 000	$ 11 010 000	$ 18 965 000
4	$ 9 240 000	$ 15 810 000	$ 25 050 000
5	$ 10 935 000	$ 19 165 000	$ 30 100 000

3.48 The industry group believes that the flow-on effects of the diesel excise reduction would be significant. One result would be the demise of the gaseous transport fuels industry and the collapse of the Government's policy to encourage the use of CNG in Sydney and Melbourne. [50] The industry group provided the Committee with the following evidence in support of its view:

• an open letter from International Trucks Australia Pty Ltd stating that the announcement of the Government's policy to reduce the price of diesel fuel has negated the economic advantages of using natural gas. International Trucks will therefore not continue with further CNG developments until there are more favourable economic conditions for CNG use; [51]
• a letter from bus operator TransAdelaide to Boral Energy Pty Ltd, lending its support to the ANGVA in its bid to maintain a viable NGV industry. TransAdelaide currently operates 110 natural gas fuelled buses and have a further 53 on order to be delivered during 1999. TransAdelaide maintains that natural gas has been a very suitable alternative fuel, in relation to operating performance, cost benefit over diesel and environmental benefits – particulates, carbon monoxide and carbon dioxide; [52]
• a position statement from Boral Transport Pty Ltd which states that:
  1. Due to the uncertain potential of CNG to be an economically viable alternate fuel, without other incentives further development and refinement of Boral's prototype alternate fuel vehicle has been suspended.
  2. The economic viability of CNG as an alternate to diesel fuel for heavy transport vehicles is paramount if short and long term emissions are to be realistically reduced; [53]
• a letter from Streamliner Supershuttle Ferries to AGL stating that it would be almost impossible to justify to investors the continuation of development of the CNG fuel system in their high-speed ferries in the face of a cheaper, simpler, but far more polluting alternative:

The technical, environmental and economic advantage our proposal presently enjoys would evaporate in a zero fuel excise environment. Without the local development of this alternative fuel technology, it would be almost impossible to sell natural gas-fuelled ferries overseas. [54]

3.49 Streamliner Ferries is proposing to run a high-speed (commuter and tourist) ferry service between the central coast of NSW and Sydney. After spending three years developing the NG system and gaining regulatory approvals, Streamliner Ferries is concerned that `the rug has been pulled' from under them:

We will be in a situation where running on compressed natural gas will put us behind any other competitor and it will cost us more to do so with the reduction in diesel fuel excise. [55]

3.50 In the long-term, Streamliner Ferries plans to design, build, finance and operate ferry services around the world. They have secured a site in Newcastle from Public Works to build a new shipyard:

In the first phase there will be up to about 250 jobs and then there will be an extension after that. We have three vessels for the Gosford service. We are well down the track with the four-vessel service in Melbourne, again running on natural gas from Geelong to Melbourne and down to the eastern side of Port Phillip Bay. The Victorian Government has been helping us with that one. Also we have Hong Kong investors who are part of the company. They have identified routes in Hong Kong which they wish to open up. [56]

3.51 Quite apart from the environmental benefits of gas powered transport, Streamliner Ferries' plans indicate the benefits that the gaseous fuels industry can deliver to the economy.

3.52 Streamliner Ferries seeks the maintenance of the price differential between NG and diesel and assistance with capital costs. They argue that capital cost is one of the main disincentives for fleet operators to use CNG, whether they are marine or land based. [57]

3.53 Mr Whelan of the Queensland Conservation Council told the Committee that in 1998 Brisbane City Council called for tenders for ultra low emission buses and received tenders from suppliers of CNG and LPG buses. However, the proposed tax package would encourage Brisbane Transport to continue to use its current fleet of ageing and highly polluting diesel buses, saving three to four million dollars annually. [58]

3.54 When it is considered that the tax package would also increase the price differential between the cost of a CNG/LPG bus and the cost of a diesel bus from approximately $40,000 per bus to at least $66,000 per bus, the disincentives to transport operators to switch to cleaner technologies become overwhelming. [59]

3.55 Mr Whelan said that the current instruments for legislative and regulatory pressure on diesel fleet operators, including Commonwealth processes, all avoid pushing them towards cleaner fuels. Further, he noted that Brisbane's bus fleet, one of the largest in Australia, is old, and that Brisbane City Council had decided in 1998 to allow the fleet to age a further three or four years. The current policy is to allow buses to remain in the fleet until they are 27 years old. [60]

3.56 Mr Whelan also told the Committee that Brisbane, and Australia generally, is a dumping ground for old, highly polluting buses. He suggested that such buses can be bought offshore for about $20,000. [61]

3.57 Mr David Parker of the Australian Gas Association referred the Committee to a Western Australian study of possible fuels for Perth's buses, and its conclusion that:

Both TransAdelaide and Benders in Geelong are buying CNG at the lowest prices in Australia and both these operators conceded that the arrival of a GST and a subsequent reduction in the cost of diesel would cause them to review the decision to buy gas buses. [62]

3.58 Mr Parker told the Committee that:

I must say, from my understanding of deliberations of the expert reference group in Perth, that the GST really was a big cloud over the decision of that state government not to elect to proceed down the natural gas bus path. [63]

3.59 The Australian Rail, Tram and Bus Industry Union told the Committee that the State Transit Authority of New South Wales, the largest bus operator in Australia, operated a fleet of 1,200 buses:

The present indications are that if this current package goes ahead, regardless of whether or not the vehicles are manufactured overseas, regardless of whether or not there is increasing engine efficiency because of improvements in technique, they will probably stop their proposal to convert a quarter of their fleet from current diesel to CNG/LPG. [64]

3.60 The Committee also heard that as a result of the tax proposals, and the decision of International Trucks to suspend CNG developments, Unley Council in South Australia had only recently abandoned its plan to introduce eight gas-powered garbage compactors. [65]

3.61 The Committee heard evidence that the weight of CNG cylinders significantly reduces the number of passengers that gas fuelled buses can carry, and that that is a significant commercial barrier to their introduction. [66] However, the Committee was told in later evidence that while this might have been true ten years ago, advances in cylinder design meant that cylinders were now one third of their former weight and that the latest CNG buses weighed no more than equivalent diesel buses and could carry a similar passenger load. [67]

3.62 Mr Whelan provided evidence to the Committee which indicated that on the assumption that each Brisbane bus travelled 50,000 kilometres per annum, the greenhouse emissions from the current fleet of 600 diesel buses would be approximately 56,040 tonnes of CO2, based on 1,868 g/km. A bus fleet of the same size, performing the same task but fuelled by CNG, would generate 40,320 tonnes of CO2, 28 per cent less, and using LPG 39,270 tonnes, 30 per cent less. [68]

3.63 Given the serious health and environmental implications of the continuing use of diesel powered buses and trucks in the major cities, considered above, particularly the use of an ageing and highly polluting vehicle fleet, the Committee found the evidence in relation to gas fuelled buses and trucks very persuasive. There are also compelling economic reasons to continue to support the development of the gaseous fuels industry, and it is clear that the Government's tax proposals would have a serious impact on the industry.

3.64 IMPCO Technologies Pty Ltd, the world's largest supplier of gaseous transport fuel systems, maintained in evidence to the Committee that the reduction in diesel excise would significantly impact on the economic incentive for motorists to switch to LPG. Mr Craig Marschall, IMPCO's Managing Director, identified two clear and separate issues; one is the proposed new tax system, the other is fuel excises.

3.65 Mr Marschall told the Committee that the increased cost of LPG conversion equipment and the increased cost of LPG at the bowser as a result of the imposition of a 10 per cent GST would result in a significant negative impact on the development of the Australian gaseous transport fuels industry. [69]

3.66 IMPCO argued that the development of an alternate, gaseous fuels market is clearly in the national interest as demonstrated by:

• the Government's Inquiry into Urban Air Pollution, November 1997, recommending that:
  1. The use of CNG and LPG in all classes of vehicles should be encouraged through clear policies in the use of gaseous fuels and by increased investment in refuelling infrastructures and vehicles in both the private and public sectors;
• the Government's Kyoto commitment and the objectives of the Federal Greenhouse Office (and Greenhouse Challenge) to reduce greenhouse emissions;
• the Government's 1997 Energy White Paper which recommends energy diversification and increased utilisation of indigenous fuels, in particular gas; and
• the Chartered Institute of Transport in Australia Inc. – 1998 Symposium `Beyond Oil: Transport and fuel for the Future' which identified:

The need for Government to support the introduction of viable alternative fuels, more efficient vehicles and alternative transport systems which are environmentally acceptable and fuel efficient. [70]

3.67 Mr Marschall said that there would be no operating advantage for a gaseous fuels transport operator if the price of diesel were to drop to 35c/L. The $30,000 to $40,000 conversion costs per vehicle was already a disincentive to run on gaseous fuels. [71]

3.68 For light vehicles (family cars etc.), IMPCO proposed a $400 rebate for every conversion to LPG; being made up of a $200 rebate on the conversion cost and a $200 rebate on the fuel component based on four years with an average of 15,000 kilometres per year travelled. For heavy vehicles (freight and public transport etc.) IMPCO's proposal was a rebate of between 65 and 70 per cent on installation costs of CNG, and a rebate of 18 cents a diesel litre equivalent on the fuel component, structured on the emission levels of the vehicle at that particular time. This would give the operators roughly 5 cents per kilometre price advantage running on CNG. [72]

3.69 Advanced Fuels Technology Pty Ltd expressed similar views to IMPCO and other industry participants. Mr Bruce Thompson, Managing Director, stated that:

We all know of the environmental benefits of alternative fuels. It is a local product; it is not imported, so it helps us with our balance of payments. CNG has one of the lowest emissions, with CNG buses meeting Euro 3 levels, which is the year 2000 emissions standard set in Europe. And Caterpillar, with its C12CNG engine, almost meets the 2002 emission levels. They are much better than current Australian standards. We propose some initiatives that will encourage the use of alternative fuels and keep our environment clean and create more jobs. [73]

3.70 In response to Environment Australia's submission, which points out that the Government is actively promoting the use of CNG for vehicles through its $3.8 million program to assist in the development of the basic network, and that there is a commitment to increase this to $7.6 million, [74] Mr Thompson said that:

The net benefit of that money is purely to put in the infrastructure necessary to turn around and support vehicles converted to CNG. It is certainly not going to induce people to convert. All it does is give them a refuelling site; that is all. [75]

3.71 Heavy vehicle manufacturer Caterpillar of Australia Ltd fully supported the gaseous fuels industry. Caterpillar can now manufacture an engine to run either dedicated CNG, or to a high degree of CNG substitution and argued that vehicles which could obtain such benefits are easily available. [76]

3.72 Mr Christopher Greenhill, General manager of the Australian Liquefied Petroleum Gas Association, told the Committee that:

From the point of view of LP gas engines for heavy vehicles, this is an emerging technology and it is only over the last 12 months that we have seen dedicated engines become available for use with LP gas in trucks. While CNG has been involved in developing the technology over many years, the reality from the LP gas point of view for heavy vehicles is only very recent. The technology will grow. [77]

3.73 Caterpillar identified the effects of the proposed new tax system on the gaseous fuels industry:

The major cost to major transport is fuel cost, and the size of the change on diesel pricing makes it extremely difficult for the alternative fuel market. In actual fact, I could say that the alternative fuel market is all but closed up. As an example, we had a Kenworth dual fuel truck operating on demonstration. We wanted to determine whether the savings were what we believed them to be. We have been able to show that, yes indeed they are. Prior to the GST announcement, one company bought a vehicle ready to convert to natural gas but there is no point. With the change to the diesel rebate, the price of natural gas and the price of diesel will be the same to a transport operator. Why would you take on somewhat more complex system for no benefit? [78]

and:

The problem is that it is not worth while to convert a vehicle. So we will not convert vehicles. Economically, the justification does not exist in what is proposed to go to alternative fuel. [79]

3.74 Caterpillar proposes an across the board rebate of 5 c/L for all fuels. Additional rebates would then be available depending on the `cleanliness' of the fuel and the `cleanliness' and `greenness' of the vehicle – bringing a total rebate of 25 to 26 c/L. [80] The company maintains that the result of the proposal would see lowered transport costs with greater benefits for the environment. [81]

3.75 The Committee also heard evidence that Waverley Council in Sydney has two vehicles, made by Caterpillar's competitor International Trucks Pty Ltd, running on CNG:

The installation cost, additional to diesel, is of the order of $20,000 for the engine, plus tankage. That particular vehicle costs in the order of $45,000, in total, over and above the diesel vehicle, but it offers a 20 percent reduction in greenhouse emissions and around 60 percent reduction in knocks and particulates compared with the Australian requirements as far as diesel emissions are concerned. [82]

3.76 At the Committee's Canberra hearing, gas industry representatives specifically focussed on the light vehicle market, where petrol is the main fuel. The industry is concerned that the growth of gaseous fuel use in light vehicles would decline as a result of the reduction in diesel fuel excise. Summarising the extent of the industry, Mr Ian Maloney, Chairman of the Autogas Committee of the Australian Liquefied Petroleum Gas Association, said that:

Ten per cent of petrol use has now been replaced by LPG. We have almost 500,000 vehicles in Australia running now on LPG. Only 16,000 or so of those are taxis – virtually all are not taxis. We have over 3,500 retail outlets spread around Australia in the capital cities and with extensive representation in rural and regional Australia.

We have an extensive supply network. The supply network for automotive LPG is integrated with the supply network for LPG, which is a major rural fuel, as you would appreciate. The total investment in this industry is over $1.5 billion. This has also provided a base for a growing export industry in dispensing and conversion equipment – now over 10 million per annum. [83]

3.77 Mr Maloney said that the industry had achieved this position through bipartisan political support for LPG to remain excise-free and thus provide savings to the user. The industry assessment is that the new tax proposals would mean that the payback distance to recover the additional cost of running a light vehicle on gas as opposed to petrol would increase by about 24 per cent. As a consequence, the expected reduction in the current annual conversion rate of new vehicles from petrol to LPG would be from 60,000 to 40,000. Mr Maloney said that the impact of that reduction would result in about 2,000 job loses:

That loss of jobs would close about 400 of the over 1,000 small businesses that are the backbone of the automotive LPG industry. Our proposed solution to prevent that happening is an environmental grant of $400 for each vehicle converted. [84]

3.78 In summary, gas industry representatives believe that they have become an unintended casualty of the government's broader tax policy, making the industry uncompetitive. [85]

Road and Rail Transport

3.79 The proposed new tax system would see the total excise on diesel fuel used by road hauliers (including vehicles with a gross vehicle mass over 3.5 tonnes) [86] and rail reduced from 43 c/L to 18 c/L – a reduction of 25c/L. The rationale in the case of road hauliers is that the 18 c/L should be regarded as a road user charge. [87] However, the same tax is applied to railways.

3.80 All off-road business use of diesel (including bunker fuel and light fuel oil for marine business use) would qualify for a full credit of excise. [88]

3.81 The Committee heard from a number of witnesses (including the Road Transport Forum) that diesel use in rail transport is at least three times more efficient per tonne kilometre than in road transport. [89] The submissions and evidence received by the Committee suggested that the impact of the proposed new tax system would be likely to foster road freight at the expense of rail. The Road Transport Forum (RTF) was the sole exception to this view. [90]

3.82 Although the rail industry supports the general principle of tax reform, their fundamental concern is that as currently proposed it would create an even more unlevel playing field than currently exists and result in a modal shift from rail to road, contributing significantly to an increase in greenhouse gas emissions:

Road transport requires three times more fuel for the same freight task than rail. Cheaper fuel will benefit road more than rail, because the relative costs of road would be reduced more than those for rail. In other words, efficient users of fuel will be penalised. [91]

3.83 The Australasian Railway Association (ARA), the peak industry body for Australia and New Zealand, argued that the Government's proposals would:

• cause the cessation of some interstate rail services;
• increase fuel usage and greenhouse gas emissions;
• increase heavy vehicle traffic that would increase the potential for truck related crashes;
• increase urban air pollution from increased car use;
• increase urban road congestion; and
• increase urban land use transport requirements because of increased car use. [92]

3.84 The ARA said that there would be a modal shift from rail to road of around one million tonnes of interstate freight annually, approximately ten percent of the total freight task. There would probably be a complete cessation of Adelaide-Melbourne intermodal rail freight services and a significant decline in intermodal rail freight services between Melbourne, Sydney and Brisbane.

In total, modal shift to roads because of the proposed changes to diesel fuel excise will cause an additional 500 to 600 semitrailer movements per day between east coast capital cities. This will increase transport fuel use and greenhouse emissions and will increase pressure for federally funded road improvements. [93]

3.85 Diversion to road would result in at least an additional 200 semitrailers per day between Melbourne and Adelaide:

These trucks will consume some 50,000 litres more fuel than equivalent rail haulage and produce an extra 145 tonnes of greenhouse emissions per day compared with freight rail. This is an additional 53,000 tonnes of greenhouse emissions per year. [94]

3.86 The Road Transport Forum told the Committee that estimates of the shift from rail to road, and the effects on diesel use and greenhouse emissions, were exaggerated. The RTF suggested that even if National Rail lost twenty per cent of its freight to road it would only mean an increase of one per cent in road's share of the total national freight task. [95] The RTF, however, includes freight carried by sea in its figures, and this distorts the road/rail comparison.

3.87 Figures supplied by the RTF itself, and analysis by Professor Philip Laird of the University of Wollongong, clearly demonstrate that a 20 per cent loss of freight from National Rail, approximately three billion tonne kilometres annually, would produce a four per cent increase in the road freight task. The increased use of diesel as a result would be approximately 50 million litres. The additional loss of intra-state freight to road as a result of cheaper diesel would further increase these figures. [96]

3.88 The ARA said that the air pollution, noise, congestion and accident costs of road transport are already around $12 billion per year. This is three per cent of Australia's GDP. [97]

3.89 The Association also told the Committee that over the last twenty years factors such as massive government spending on roads, a relative decline in funding of rail infrastructure, the introduction of increased mass limits for trucks and inappropriately low registration charges had combined to give road an ever increasing advantage over rail on routes under 1,000 kilometres. [98]

3.90 Professor Laird pointed out in his submission that from 1973-74 to 1993-94 federal grants to roads were approximately $31 billion while outlays on intercity rail capital works were under $1 billion, and that the bias towards roads had continued in recent budgets. [99] In supplementary material provided to the Committee, he stated that rail track access fees are `many times more, per gross tonne kilometre, than the charges that heavy truck operators are asked to pay for road access,' and that it was `unjustified to tax diesel fuel for rail at the road rate when so little rail fuel excise is returned to rail track upgrading'. [100]

3.91 Rail 2000 seeks the removal of all diesel fuel excise from both road and rail transport and the introduction of a genuine mass distance charge for the road transport industry. [101] Professor Laird provided an analysis in his submission which suggested that current charges for heavier vehicles were quite inadequate to meet the costs of their impact on the road, and pointed to New Zealand's regime of genuine mass distance charges. [102]

3.92 The National Farmers Federation (NFF) expressed support for the imposition of the GST to replace indirect taxes estimating that this would increase return to farmers of about $900 million per annum. The NFF policy calls for removal of all fuel excises and the introduction of efficient road user charges. [103] The NFF referred to `gross over-recovery of costs from vehicles operating in rural regions' of approximately $1.5 billion. [104]

3.93 Professor Laird, however, argued that National Road Transport Commission charges tend to under-recover road system costs, at the expense of lighter and/or short distance trucks, along with other road users and tax payers, [105] and quoted Professor Fred Hilmer's view that:

The road sector does not fully pay for the road damages and externality costs … and this may affect potential intermodal competition with rail especially. [106]

3.94 Professor Laird argued that the highest level of under-recovery is from B-doubles, which are now the major competitors for rail freight. (B-doubles are articulated trucks with a prime mover and two trailers. A fully laden nine-axle B-double has a gross vehicle mass of 62.5 tonnes.) There was agreement from witnesses that a fully laden B-double causes 20,000 times the road damage of a family car. [107] Professor Laird said that if articulated vehicles were to bear their full costs road transport costs would have to rise and that this could produce a shift from road to rail. [108]

3.95 He suggested that rural Australia might be better served by other measures than a reduction in fuel excise, such as:

• more funds for maintaining non-urban non-National Highway System roads;
• improved rail infrastructure;
• a primary producers and mineral processors scheme for rebating road and rail diesel excise for the direct movement of commodities to ports; and
• better communications infrastructure. [109]

3.96 Mr Fred Affleck, General Manager, Corporate Affairs, of the National Rail Corporation told the Committee that, fuel excise aside, the charges for 1,000 tonnes of freight carried between Melbourne and Sydney by road are approximately $450, consisting largely of registration fees. The charges for access to rail infrastructure to carry the same freight are approximately $5,500. [110]

3.97 In other words, rail is already seriously disadvantaged by poorly maintained infrastructure and significantly higher charges and yet as a result of its greater efficiency is still able to compete with road in some areas. This ability to compete would be seriously undermined by the addition of a further disadvantage in the form of the diesel excise reduction and the imposition of a road user charge of 18 c/L.

3.98 Between the east coast and Perth, where rail already has 70 per cent of the market, there would be very little intermodal shift, because of the greater fuel efficiency of rail. On shorter hauls on the east coast, however, road would have a significant advantage.

If you are shifting just in time overnight freight, which is basically intermodal freight, you are already looking at a time disadvantage by rail compared with road. The only advantage to using rail at the moment is that it is slightly cheaper. If that advantage disappears, there will be no incentive to use rail at all. [111]

3.99 The carriage of fuel itself could be affected by an intermodal shift from rail to road. Professor Laird told the Committee that most of the fuel carried from Sydney to Canberra is currently transported by rail but that `a change like this could tip the balance to road'. [112] The safety implications alone of such a large volume of fuel being carried by road are considerable.

3.100 The rail industry seeks the removal of the 18c/L fuel excise on the basis that it is a road user charge and is therefore inequitable and discriminatory. [113] Mr Max Michell, Vice-Chairman of Rail 2000 told the Committee that:

As well as the track access regimes, rail is currently expected to pay, under the proposed arrangements, the equivalent of 18c per litre road tax on top of having paid for its own rail network, which I am afraid, to my logical mind, does not seem to quite add up to a recommendation for efficiency. [114]

3.101 Rail 2000 [115] does not oppose the concept of tax reform but seeks a thorough investigation into a number of issues surrounding the effects of the proposed new tax system on the environment. Rail 2000 told the Committee that the removal of the excise on diesel fuel would give about a three per cent `free kick' to the road industry relative to rail:

The end result is that the adjustment in freight movement that comes from an adjustment in the relative cost levels of the two industries will result in a greater consumption of diesel fuel, which I would have thought is almost contrary to the concept of greater efficiency. [116]

3.102 National Rail Corporation's (NRC) main business is interstate freight. On the issue of competition with road transport, Mr Fred Affleck, General Manager, Corporate Affairs said:

To summarise broadly, the effect of a reduction for both road and rail to 18 cents would be, according to this independent analysis we have had done, that in a worse case scenario we, National Rail, could expect to lose 850,000 tonnes of freight, concentrated on the Melbourne-Adelaide, Melbourne-Sydney and Sydney-Brisbane corridors primarily. In a best case scenario, we would lose somewhat more than half a million tonnes. Translating that worst case into a loss of revenue, it could amount to as much as $27 million loss of revenue or, in a best case, $16 million in revenue. [117]

3.103 Mr Affleck said that NRC's submission had attempted to translate the shift in freight from rail to road into fuel consumption:

In a worst case scenario, for us anyway, where we are losing, say, 850,000 tonnes across the board, that amounts to approximately 17 million litres more fuel consumed as a result of that going onto road. So the net difference between the fuel that we cease to consume and the new fuel that road adds to its consumption is plus 17 million litres of fuel.

If you translate that into greenhouse gases, in our submission I have listed the quantities of tonnages of various gases – for example, 40,000 additional tonnes of carbon dioxide per annum as a result in that shift from rail to road. [118]

3.104 Professor Laird suggested that in order to compensate for the greenhouse impact of the Government's fuel excise proposals, and still meet Kyoto targets, the following measures, among others, would need to be implemented:

• full implementation of all sixteen recommendations of the 1998 report, Tracking Australia, of the House of Representatives Standing Committee on Communications, Transport and Microeconomic Reform – the Neville Report (listed as Appendix 2);
• not charging rail freight the road user charge of 18 cents per litre;
• introduction of mass-distance charging for the heavier long distance trucks. [119]

3.105 The Road Transport Forum (RTF) suggested that the effective competition between road and rail is mainly medium volume long distance transport and that most independent assessments conclude that in general, this area of genuine competition is relatively small [120] In evidence, Mr Andrew Higginson, Chief Executive, addressed four main issues:

The first is whether diesel excise cuts will increase greenhouse emissions. The answer, in our view, is no. Economic growth will have an impact on the transport task and, from that transport task, we might get some more emissions. On the opposite end, you can reduce emissions by shutting down the economy, and I do not think that is the impact any of us want to have.

The second question is whether diesel excise cuts affect the uptake of alternative fuels. Our view is, again, no. If the right technology is there it will be used by our industry. Our industry is fiercely competitive and any technology available to do the right task in a safe and efficient manner is picked up.

The third question concerns the rail to road issue and whether there will be a skew in the market. We will give you some facts and figures on that but, once again, the answer is no. In our view, there will be little effect on the relative rate of growth of those respective industries from the tax package.

The fourth question concerns road safety, whether the tax package leads to an increase in exposure in the trucking industry. We think that is a bit of a furphy and that history in the last seven years has shown clearly that, despite the growth in the transport task, the fatality rate involving the trucking industry has dropped something like 43 per cent. So the correlation between the road toll and the increase in the freight task does not necessarily flow [121]

3.106 However, the Committee found the evidence to be overwhelming that a significant cut to diesel excise would encourage a greater use of diesel, with a number of associated problems, quite apart from any increase in economic growth. As for other fuels, while it is often true that new technology is adopted as it becomes available, the evidence already cited in this report suggests that the proposed cut in diesel excise would significantly impede the development of such technology and make it more expensive relative to conventional technology, and therefore less attractive. Further, not only the rail industry itself but independent authorities confirm that there would be a significant shift of freight from rail to road.

3.107 Based on Australian Road Research Board estimates, the Australia Institute expects the share of road freight to increase by 2.3 per cent at the expense of rail. [122] Dr Hamilton told the Committee that:

I think there is no doubt that there will be some shift from rail to road – and I have also read the submission of the Australasian Rail Association, which makes pretty alarming reading – and that will undermine the gains that rail has been making and, indeed, will undermine the government's preferred policy of shifting freight from road to rail. The problem with that, of course, is road is significantly more polluting than rail – about five times more in terms of diesel consumed per tonne per kilometre transported. [123]

3.108 Queensland Rail did not offer a view about tax reform and the GST, but were concerned that the impact could have important public policy and environmental implications, including:

• adverse impacts on greenhouse gases;
• urban air pollution;
• urban congestion;
• open highway congestion; and
• reduced road safety. [124]

3.109 In terms of general freight, Mr Robert Scheuber, Deputy Chief Executive of Queensland Rail, told the Committee that there was already a diversion of general freight from rail to road:

Recent Bureau of Transport Economics research has indicated that on current trends road is the long term winner of the interstate non-bulk freight task, increasing market share from 57 per cent to 70 per cent nationally by 2020. The BTE trend analysis does not appear to be taking account of changes in public policy that are likely to exacerbate this trend – mass limits review and tax reform being two. So the trend has been underestimated. [125]

3.110 Queensland Rail had engaged a transport economist to examine the impacts of changes in diesel fuel tax on contestable and marginal rail freight traffics:

This study indicates a loss of between three and ten per cent of the business through fairly narrowly defined first round effects. Every train load of general freight that ceases to operate means between 70 and 150 extra articulated trucks are on the road. [126]

3.111 Queensland Rail suggested that rail could end up in the business of public transport and bulk freight only. If this were to happen in Queensland, they estimate the net social economic cost to be around $50 million per annum after costing the main externalities. [127]

3.112 In an independent assessment of road verses rail, Professor Russell (Sam) Luxton, Professor of Mechanical Engineering at the University of Adelaide, suggested that the changes in diesel fuel excise would make the railways a less attractive option economically:

If diesel is reduced very substantially for all and sundry, because rail is 10 time more efficient per tonne kilometre, therefore its benefit from a reduction in the fuel price is only one tenth the benefit felt by road transport. Therefore, road transport will have a much bigger opportunity to dominate the market. There is the fundamental problem. [128]

3.113 On this basis, Professor Luxton argued that Australia should be concentrating on building up the rail system and bringing in new components:

I believe that Darwin is an ideal port from which to address the Asian markets. Despite the present downturn in those markets, I believe they are a major part of Australia's future economic health. Moving goods and services to Darwin can be done very efficiently by rail or it can be done much less efficiently and with much more risk by road. [129]

3.114 The Institution of Engineers of Australia (IEAust) argued that a range of actions should be taken to improve the efficiency of both rail and intermodal transport options. IEAust suggested that if current directions are allowed to continue unaltered, urban road congestion, air and noise pollution and greenhouse gas emissions will rise to unacceptable levels. IEAust called for changes to the tax structure and financial incentives to effect more sustainable use of energy in transport and reduce other negative environmental impacts of transport. [130]

3.115 The Committee found the evidence in relation to the effect of the proposed change in diesel excise on road and rail transport unequivocal. There would be a very significant increase in road transport at the expense of rail, with serious consequences in a number of areas. The direct result of the Government's proposals would be increasing environmental costs of road transport which Australia cannot afford.

Public Transport

3.116 Public transport operators (buses, trains, and ferries) currently pay the full excise on the fuels they use. However, the vehicles used in public transport are not subject to sales tax, unlike private and commercial motor vehicles. The proposed new tax system would therefore reduce the cost of purchasing a private vehicle relative to a public transport vehicle but would maintain the cost of petrol used in that private vehicle. On the other hand, the public transport system would receive tax credits for all fuel used in their operations but fares would be subject to the GST.

3.117 There was general agreement in evidence to the Committee that the proposed tax changes would have a serious, detrimental effect on public transport and an increase in the use of private motor vehicles. The International Association of Public Transport told the Committee that:

We would argue that all the work that has been put in over the past 10, 15 or 20 years to move people away from the private motor car will be eroded by the imposition of these new taxes. [131]

3.118 The Public Transport Users Association (PTUA) argued that Treasury estimates of price increases for bus and rail passenger transport were too low, and added that since the cost of being a motorist would be reduced by the Government's package the real increase in public transport costs relative to travelling by car would be ten per cent. [132]

3.119 The Australasian Railway Association told the Committee that Australia already has very low public transport patronage, only one third that of European cities and one of the lowest in the OECD. The Association argued that the effect of the proposed tax package would be to increase car use in urban areas at the expense of public transport, stating that:

Policies favouring motor cars over public transport contribute to the significant social and environmental costs of motor cars by increasing road demands, air pollution, greenhouse gas emissions, road accidents, urban congestion and transport land use requirements. Roads and car parks already comprise one third of Australia's cities. [133]

3.120 The Association gave examples of the benefits of public transport, citing the City of Toronto's Go Transit commuter system, which moves approximately 30,000 people per hour into the Toronto CBD, replacing an estimated six six-lane freeways. Closer to home, the double-track railway and double decker trains on Sydney Harbour Bridge have the equivalent capacity per hour of the parallel eight lane road. Similarly, in Perth, the northern suburbs railway, which runs down the centre of the Mitchell Freeway, has the equivalent capacity of that freeway.

So, basically, using urban rail has advantages over providing increased land use for freeways. It removes congestion, saves on land use and is a much safer way of moving people around. [134]

3.121 The Australia Institute argued that increases in public transport fares arising from the GST could reduce demand, especially when coupled with the fall in prices of cars and the fall in the real price of petrol. [135] Reducing the diesel excise would also see significant disincentives to shift to gas-powered buses. The projected increase in private car travel and the shift from gas to diesel buses would increase greenhouse gas emissions by around 190 kilotonnes of CO2 equivalent. Urban air pollution would also worsen. [136]

3.122 With an estimated five per cent shift away from public transport patronage, the Committee heard evidence to suggest that operators might reduce their service levels by five per cent in order to match that reduction, due mainly to a lack of real competition within the sector:

The problem is that all the evidence is that public transport patronage is more sensitive to service levels than it is to fares. So, in addition to the reduction in patronage that would be likely to follow from the price differential established by the GST, you then get the second round effect – a further reduction in patronage caused by the reduction in service that the operator has to make to remain economically viable. If you are not careful, you end up in the sort of vicious circle that all public transport systems in Australian cities were in for many, many years until government subsidies were introduced to stem the tide, which is that fares were increased to cover increased costs. [137]

3.123 The PTUA maintained that the number of people in the community who are dependent on public transport is quite high and expressed concern about the social equity effects of the Government's proposals. Those dependent on public transport are often the most vulnerable members of the community – the `battlers'. In many cases, these people live on the urban fringes and, according to the PTUA, that is precisely where the increase in public transport fares would be greatest. [138]

3.124 With respect to the environment, Dr Paul Mees, President of the PTUA, suggested that, in trying to get bus operators to use LPG instead of diesel, the Government should vary the rate at which things are taxed in order to provide an incentive for people to adopt more environmentally friendly practices:

That means that if I am running around using up a resource that I am not paying for – say, fresh air, by polluting it with particulates from my diesel powered vehicle – then I ought to be made to pay for that and then that will provide me with an incentive not to extravagantly use up the fresh air which is otherwise being provided for me involuntarily for free by my fellow citizens. [139]

3.125 The International Association of Public Transport (Australia/New Zealand) argued that the proposed new tax system strongly favours private car use over public transport, undermining the efforts of State and local governments around Australia to tackle congestion and pollution by reining in growth in urban car travel. The Association believes that cheaper new cars would result in higher rates of ownership and a possible increase in larger cars on the roads. As a consequence, more cars would be available for commuting to work, school and other activities. [140]

3.126 Analysis in the Australia Institute's submission, and evidence given by Dr Mees, supported these conclusions, citing the replacement of the current wholesale sales tax of 22 per cent with a GST of ten per cent, the Treasury estimate that motor vehicle prices would fall by 8.3 per cent and a relative increase in the price of public transport relative to private motor vehicle use of 6-10 per cent. [141]

3.127 The Association referred to recent surveys, which revealed a desire in the community to see public transport expanded, along with other options for moving around our cities. [142] The Association also noted that:

There is not a single city in Europe, North America or elsewhere where public transport is profitable without government support. It is clear, therefore, that without appropriate pricing of car use public transport systems will never be able to compete fully with the car. [143]

3.128 The Australian Rail, Tram and Bus Industry Union argued that the tax reform proposals would result in a decline in bus and rail public transport in major metropolitan cities, leading to an increase in congestion and pollution. [144] The Union recommended that:

• the GST should not apply to public transport, as it is a basic necessity of life;
• measures be put in place to increase the use of public transport;
• the proposed fuel taxes should be hypothecated to railway investment; and
• a carbon tax should be introduced in line with worldwide trends.

3.129 The Committee heard evidence that, on a per capita basis, buses reduce congestion by about 13 times and are about six times more fuel efficient than private cars. [145] Industry views suggest that there is scope in the urban public transport area to redress the imbalance between private motor vehicles and buses and other forms of urban public transport. [146]

3.130 Queensland Rail brought the Committee's attention to the fact that concessional tax treatment of public transport is common public policy in European VAT tax regimes, including Denmark, Belgium, Germany, Spain, France, Greece, Ireland, Austria, Finland, Sweden, Italy and the UK, with the latter two providing GST-free public transport. [147]

3.131 The table opposite provides a comparison of passenger transport and standard GST rates for those European countries where passenger transport is GST-free or subject to a reduced rate.

Table III.4

Country	Standard rate (%)	Rate on passenger transport (%)
Austria	20.0	10.0
Belgium	21.0	6.0
Finland	22.0	8.0
France	20.6	5.5
Germany	16.0	7.0
Greece	18.0	8.0
Italy	20.0	0.0
Netherlands	17.5	6.0
Spain	16.0	7.0
Sweden	25.0	12.0
United Kingdom	17.5	0.0
Average	19.4	6.3

Renewable Energy

3.132 The Committee was told that the sustainable energy industry is a growing and strategically important industry for Australia. Mr Alan Pears, Policy Convenor for the Sustainable Energy Industry Association stated that the industry is essential if Australia is to meet its international greenhouse obligations but that it is struggling to reach its potential in a very distorted and imperfect market:

Indeed, one of the problems we now face is that the proposed GST and tax package, we believe, will further tilt an already steeply sloping playing field against sustainable energy. [148]

3.133 The proposed new tax system would see a 10 per cent GST levied on all goods and services unless GST-free or input taxed. The Australia Institute and others argued that the renewable energy sector would be disadvantaged by the proposed system, with prices rising by six to nine per cent compared to 4.6 per cent for coal-fired electricity. The price of solar hot water systems is expected to rise by around four per cent relative to the prices of similar gas or electricity hot water systems. [149]

3.134 In addition, most sustainable energy systems involve extra up-front purchase costs which are repaid through savings over time. However, consumers tend to discount future savings at a high rate, resisting the extra initial cost despite the prospect of future savings. The imposition of a GST would add to the initial cost and further increase consumer resistance. [150]

3.135 The following graph [151] shows the impacts of a GST-induced change in the price of a sustainable energy system, and the lifecycle savings, when a range of real discount rates are applied. Analysis is based on $1,000 initial investment in a sustainable energy measure which brings $200 annual savings on electricity bills, over a lifecycle of 15 years. GST is assumed to increase the price of the sustainable energy measure by nine per cent, and price of electricity by 4.6 per cent.

3.136 The graph shows that for the typical consumer, who discounts future savings at a rate of 20-50 per cent, the perceived savings of a sustainable energy measure are marginal without a GST and even less attractive when GST is applied.

Figure III.1

3.137 Mr Pears told the Committee that the renewable energy sector competes with `very large, very well-resourced and very smart energy suppliers who have a lot of scope to game the market'. He saw the proposed new tax system as having a twofold detrimental impact:

Because we are competing with the conventional energy sector and the conventional appliance and equipment industries, our products and services have a much higher service component. That means that the incremental impact of the GST is greater. At the same time, a number or our important products are at present exempt from wholesale sales tax and, essentially, lose an advantage when that exemption is neutralised. [152]

3.138 Mr Pears said that the compensation measures in the proposed new tax system would be of no real benefit to the industry:

For example, our experience very much in the housing area is that a home buyer with an extra thousand dollars will spend it on a walk-in wardrobe, an en suite or a carpet before they invest it in insulation and energy efficient design. Likewise, a commercial building developer will spend extra money on a very attractive foyer to attract tenants rather than invest it in cost effective energy efficiency measures. So we do not offer instant gratification, and we believe that when people have money in their hands, they tend to go that way. [153]

3.139 Pacific Solar Pty Ltd sells grid-connected solar photovoltaic (PV) systems. PV systems sit on urban rooftops and are connected to the electrical wiring within a house. If the household uses less electricity than the PV system is producing, the surplus flows back to the grid. If the household uses more, for example, at night, the electricity is provided from the grid. PV systems generate clean, green electricity. There is no pollution, no noise and virtually no maintenance. [154]

3.140 PV systems currently do not attract wholesale sales tax. Pacific Solar expressed concern that under a GST the cost of their systems would rise between eight and nine per cent, whereas the cost of electricity produced by conventional means would rise by approximately 6.6 per cent. There would be a higher up-front capital cost for anyone wishing to install a rooftop PV system.

3.141 Pacific Solar were also concerned at the effect of the proposed new tax system on billing:

By way of example, if a customer buys from a utility, say 100 units of electricity in a given period, that will be subjected to the 10 per cent; 10 per cent will be paid on that. However, during that period the customer may have, for example, exported 30 units of solar electricity back to the grid. Rather than having the GST applied to the 70 units – in other words, the net bought or supplied from the grid – advice from Price Waterhouse is that the GST would apply to the full 100 units bought from the grid. [155]

3.142 The effect of the GST on PV systems would therefore extend the payback period relative to the price of electricity. Solar Pacific suggested that one solution would be to exempt PV systems from the GST and to address the metering anomaly mentioned above. [156]

3.143 The Local Government and Shires Association of NSW asked the Committee to recommend GST-free status for renewable energy technology, such as solar panels, water heaters, wind power, low energy light bulbs, insulation, emission fuels and other `green' materials. [157]

3.144 The renewable energy sector has significant export potential. Mr Peter Lawley, Business Development Manager for Pacific Solar, provided the Committee with a paper demonstrating the world leadership that Australia currently has in PV development, and the potential for the PV industry to generate revenue in excess of $1 billion per year. [158]

3.145 The Committee found evidence in relation to the impact of the tax proposals on the renewable energy sector compelling. The industry is not only of major importance in reducing Australia's greenhouse gas emissions but also has the potential to generate significant export revenue. Any negative effect on the industry relative to conventional energy production must be addressed.

Recycled Oil

3.146 The Committee heard compelling evidence from oil recyclers suggesting that the reduction in diesel fuel excise would bankrupt the sector and completely undermine the positive environmental impacts of the industry.

3.147 Mr Fred Wren, the Managing Director of Wren Oil in Western Australia, told the Committee that approximately 540 million litres of new oil was sold in 1996, of which about 149 million litres, or 28 per cent, was collected for recycling. [159]

3.148 In broad terms, oil recyclers collect waste oil from all sources, clean or re-refine it and then, place the product back into the marketplace. The main product is diesel extender. With excise exemptions, re-refined oil can be sold competitively for blending with diesel to run remote power stations. The removal of diesel excise without compensation for oil recyclers would make new diesel cheaper and the existing market would be lost. [160]

3.149 Mr David Braham, General Manager of Mulhern Waste Oil, told the Committee that his company collects 80-85 per cent of waste oil in the Adelaide area, and a higher proportion of waste oil from outlying areas of South Australia and the Northern territory. [161] He said that with the removal of diesel fuel excise his small family business would be unable to compete with the major petroleum companies:

the cost of production is approximately 25 cents a litre and that will be below the selling price of diesel by the major petroleum companies. They will completely undercut us, so we are dead in the water there – unless the excise is left on diesel after the GST is introduced. [162]

3.150 In Western Australia, Wren Oil collects about 12 million litres of waste oil per annum. Mr Fred Wren, Managing Director, told the Committee that he began collecting sump oil in 1981 and learned about the harmful chemicals it contained:

We collect sump oil from every type of transport – from all mining, shipping, industrial and domestic sources that one can think of. Sump oils contain lead and other heavy metals. Most of the waste oil in Australia is burned untreated as a cheap fuel oil with the emissions going through the air we breathe … The place is still full of waste oil. Where do we put it? [163]

3.151 Mr Braham supplied information to the Committee which indicated that untreated waste sump oils contain about ten per cent of additives, including toxic substances such as zinc, phosphorus, barium, calcium, magnesium, silicon and sulphur. Other hazardous contaminants from engines include heavy metals such as iron, chromiuim, nickel, aluminium, copper, tin, chlorine and lead. Burned untreated the waste oil produces harmful emissions: more than fifty per cent of the lead, cadmium, chromium and zinc is emitted to the air, as well as oxides of sulphur and nitrogen and hydrocarbons. [164]

3.152 Waste oil is not classified as a hazardous liquid but it contains hazardous materials which may be carcinogenic, and which are certainly harmful to the environment when disposed of improperly.

3.153 Mr Wren relayed the events of a 1992 meeting with the Australian Institute of Petroleum where an industry spokesman said that the oil industry's first preference was to dump waste oil in roads for dust control or in pits out in the bush:

I told them at the meeting that Wren Oil recycled small amounts of hydraulic oil. They said, `Keep it small'. They would not like to see recycled lubricants compete with new oil. They viewed all oil as fuel and lubricants as the cream and when finished it should be burnt. The diesel excise exemption works very well at no cost to the expenditure side of the budget: it is just an invisible cost to the revenue side of the budget as foregone excise. The GST tax reforms that remove the diesel excise will kill off this market completely. What do we do with 12 million litres of waste oil? Senators, tell us where to put it. [165]

3.154 Oil recyclers are generally low cost producers. They are able to compete with major petroleum companies, at present, by collecting oil free of charge and re-refining it for between 25 and 40 c/L. Mr Wren said that:

The reason I am here today pleading for help is that the GST reforms threaten us with closure, the loss of 19 jobs and personal bankruptcy. In spite of competitive pressures and practices, we have continued to grow over the past 19 years. It is the excise tax removal that might just put an end to Wren Oil. Senators, I want to stay in business, so please do not drop the diesel excise. [166]

3.155 Mr Braham also said that his business would be bankrupted by the proposed changes to diesel excise and said that more than seventy people would lose their jobs if his business was forced to close. [167]

3.156 Dr Clive Hamilton of the Australia Institute said in evidence that when comparing the cost of buying waste oil to buying new oil the relative price is critical. He said that if the price of the new product is substantially cut, it is going to be much less attractive to recycle and use the waste – it is `simple economics'. [168]

3.157 The Committee was disturbed by the evidence it received in relation to waste oil and believes that there are profound implications for the environment if the tax package is implemented as proposed. Quite apart from the economic effect on oil recycling businesses, and the associated job losses, there would be a massive increase in the volume of waste oil to be disposed of. The Committee considers that waste oil should be regarded as a retrievable energy source and that its processing should attract appropriate government support.

3.158 The evidence also raised serious questions as to what is being done with the 390 million litres of waste oil that is currently not being recycled. Oil that is not recycled appropriately will find its way into the soil, the water table and eventually waterways, damaging terrestrial and marine vegetation and wildlife The long-term cost of our failure to address this issue will be very significant indeed, in both economic and environmental terms; the two cannot be separated.

Overseas Initiatives

3.159 As indicated earlier in this report, the Australian Conservation Foundation, said in evidence that the proposed new tax system is the only example in recent years of an OECD country introducing a net reduction in fuel and energy related taxes and charges. The ACF said that the International Energy Agency has urged Australia to increase fuel taxes to curb energy consumption. The ACF also urged the Committee to examine the California Air Resources Board report on diesel exhaust. [169]

3.160 The ACF summarised the overseas initiatives:

Ecological tax reform is proceeding apace in several OECD countries virtually as we speak. Italy has just introduced ecological tax reform aimed at reducing employment charges. While the cost of most fuels will progressively increase in Italy until 2005, and the money derived therefrom will be used for employment and anti-pollution initiatives, the cost of LPG – one of the fuels used in Italy – will fall.

Germany has embarked on a comprehensive program of ecological tax reform under its new Green-SPD coalition. This tax reform will occur in three consecutive steps, each yielding about 0.8 per cent reduction of labour costs. The reform will be in harmony both with overall state revenue neutrality – which, of course, is pertinent to a federal system like Australia – and with social justice. All these principles have been supported fully by the German environmental movement and progressive companies in Germany, as well as the trade unions in Germany. Even the Clinton administration has announced tax credits for energy saving homes, appliances and vehicles, in an announcement made earlier this year. [170]

3.161 In the early 1980s, the New Zealand Government embarked on a program to introduce gas as an alternative fuel for vehicles. After reaching a level of world's best performance, the sudden removal of the price differential between gas and diesel saw a dramatic reduction in gaseous fuel use (see above, 3.26). The New Zealand Government has since initiated diesel tax increases, although some believe that the industry has still not recovered. [171]

3.162 Recent information received by the Committee indicates that the use of CNG in the heavy vehicle sector is increasingly being adopted. In the past twelve months Dynetek, a Canadian manufacturer of carbon fibre fuel tanks, has secured orders for:

• 293 garbage trucks (freightliners) out of a total of 500 for Mexico City;
• 38 articulated trucks for SAARBRUCKEN in Germany; and
• 40 buses for New Jersey, USA. The Mayor of New Jersey has committed to converting the total fleet of vehicles to CNG.

3.163 In Argentina, Beunos Aires presently has 500 CNG re-fuelling stations and 400,000 vehicles running on natural gas. [172]

Australia's International Treaty Obligations

3.164 Australia is a party to the United Nations Framework Convention on Climate Change (1992). Article 2 of the Convention states that the objective of the Convention is the stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.

3.165 Article 4 requires all parties to take climate change considerations into account, to the extent feasible, in their relevant social, economic and environmental policies and actions, and to commit themselves specifically to identify and review their own policies and practices which encourage activities that lead to greater levels of anthropogenic emissions of greenhouse gases.

3.166 Australia has signed, but not yet ratified, the 1997 Kyoto Protocol to the Framework Convention. Article 2 of the Protocol states that parties will implement and/or further elaborate measures in accordance with its national circumstances, such as the progressive reduction or phasing out of market imperfections, fiscal incentives, tax and duty exemptions and subsidies in all greenhouse gas emitting sectors that run counter to the objective of the Convention, and apply market instruments.

3.167 Many of those making submissions were concerned that Australia's Kyoto obligations would be compromised by the reduction in Australia's fuel costs. Dr Clive Hamilton of the Australia Institute summed up the events in Kyoto:

The issue of Article 2 was a very interesting one in the negotiations. I was present at the negotiations, not at the private negotiations but as an observer at Kyoto and Beunos Aires, and in Bonn prior to Kyoto. Several of the major parties were particularly concerned to insert Article 2 into the protocol. It is known as `policies and measures'. Article 2 does not impose any binding obligations on parties to the protocol to undertake any particular measures. The wording of the articles says that each party shall `implement policies and measures as such', and it goes on to list them, including the phasing out of duty exemptions and subsidies in all greenhouse gas emitting sectors.

A large cut in the price of fuels is clearly contrary to the intent and purpose of that. As I say, there is no legal obligation for Australia to follow those policies and measures, but there is a strong moral obligation. In other words the other parties expect countries broadly to follow those principles. [173]

3.168 Mr Roger Beale, Secretary of the Department of the Environment and Heritage, told the Committee that at no point does Article 2 say that fuel prices may not be reduced or that any measure should be pursued by any party or all parties to the protocol. Mr Beale said that there were long and detailed negotiations on exactly that issue:

Very clearly, while the protocol presented a menu of measures that countries were able to consider, it did not commit parties to implement specific measures. [174]

3.169 While that may be strictly true, the Government's proposed tax reforms run quite counter to the spirit of the Convention and the Protocol, and contradict the Government's own stated policies in a number of areas. The Government does not appear to have taken climate change considerations into account in the proposal of a major new economic policy. The tax package sends a very strong message to the international community that Australia does not consider greenhouse issues to be of central importance to the nation's future or, for that matter, to the world's.

3.170 Dr Hamilton told the Committee, in evidence that Australia has been described as a pariah nation as a result of the strategy it pursued in the lead-up to Kyoto. He said it did itself enormous diplomatic damage, which continued when the Howard government announced that it would not ratify the protocol until after the US did:

The European Union made some very critical comments about Australia. In fact, the Environment Commissioner of the EU, Ms Ritt Bjerregaard, said that she was very alarmed at the Australian government's decision. She said that this decision that the Australian government had made could block ratification of the protocol. So there are some very important issues of Australia's international position that are raised by the proposal to introduce large cuts in petrol prices. [175]

3.171 Dr Hamilton said that the International Energy Agency had specifically urged the Australian government about two years ago to increase the prices of fuels because they were much too low. [176]

3.172 Can Australia deliver on Kyoto? The Government's proposed tax package makes it highly unlikely. Dr Hamilton has serious doubts. [177]

 

Footnotes

[1] Hansard, Canberra, 1 March 1999, pp 337-338.

[2] Mr Ian Higgins, Greenpeace Australia, Hansard, Canberra, 1 March 1999, p 277.

[3] In addition to giving evidence, the ACF provided the Committee with a two-part discussion paper, Ecological Tax Reform in Australia, released in August 1998. This paper contains detailed findings in support of the ACF's evidence.

[4] Mr Michael Krockenberger, Australian Conservation Foundation, Hansard, Melbourne, 23 February 1999, pp 1-2.

[5] Mr Michael Krockenberger, Australian Conservation Foundation, Hansard, Melbourne, 23 February 1999, p 3.

[6] Mr Michael Krockenberger, Australian Conservation Foundation, Hansard, Melbourne, 23 February 1999, p 3.

[7] Mr Michael Krockenberger, Australian Conservation Foundation, Hansard, Melbourne, 23 February 1999, pp 3-4; Mr John Connor, Nature Conservation Council of NSW, Hansard, Sydney, 2 March 1999, p 442.

[8] Mr Michael Krockenberger, Australian Conservation Foundation, Hansard, Melbourne, 23 February 1999, p 2.

[9] Australia Institute, Submission 120, p vi.

[10] Environment Australia, Submission 931.

[11] Hansard, Canberra, 1 March 1999, p 335.

[12] Hansard, Canberra, 1 March 1999, p 337.

[13] Environment Australia, Submission 931, p 3.

[14] Hansard, Canberra, 1 March 1999, p 265.

[15] Hansard, Canberra, 1 March 1999, pp 271-272.

[16] Councillor Peter Woods, New South Wales Local Government Association, Hansard, 3 March 1999, pp 505-506.

[17] This amount is to be regarded as a road user charge rather than as a tax and is based upon various estimates made by the Inter-State Commission and the Overarching Group on Road Cost Recovery, which indicate that 18 cents per litre would be a suitable road user charge. The Government has also applied the same 18 cents per litre charge to railways.

[18] A significant number of private motorists have also converted to LPG, see Australian Petroleum Gas Association, Submission 792, pp 1-3.

[19] Mr Ian Loy (Caterpillar of Australia): Improvement of Heavy-Vehicle Emissions in Conjunction with Reduction in Fuel Excise, A better way to a cleaner future, p 8, paper by tabled in evidence, Melbourne, 23 February 1999.

[20] Hansard, Canberra, 1 March 1999, p 262.

[21] Australia Institute, Submission 120, p 21.

[22] Mr John Kirk, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, p 34.

[23] Hansard, Melbourne, 23 February 1999, p 21.

[24] Hansard, Melbourne, 23 February 1999, p 22. The Royal Commission on Environment Pollution advises on matters, both national and international, concerning the pollution of the environment; on the adequacy of research in this field; and the future possibilities of danger to the environment.

[25] Hansard, Melbourne, 23 February 1999, pp 52-53. Also, letter from Professor Trevor Cairney, Greater Western Sydney Natural Gas Vehicle Task Force, to Senator Meg Lees, 22 October 1998.

[26] Dr Ian Hamilton, Australia Institute, Hansard, Canberra, 1 March 1999, p 264.

[27] Dr Ian Hamilton, Australia Institute, Hansard, Canberra, 1 March 1999, pp 264-265.

[28] Hansard, 3 March 1999, p 541.

[29] Catholic Diocesan Centre, Submission 1024, p 1.

[30] Hansard, Brisbane, 3 March 1999, p 544.

[31] Hansard, Melbourne, 23 February 1999, p 110; Mr David Langsam, supplementary material, 16 March 1999, attachment: The Republican, 11 April 1997, p 7.

[32] Mr James Whelan, Queensland Conservation Council, supplementary information, 17 March 1999, p 1: Transperth, WA, Euro and beyond: Fuel for Transerth's Bus Fleet, December 1998.

[33] Hansard, Brisbane, 3 March 1999, pp 541-542; Dr L Morawska, Dr N Boffinger, Dr Z Ristovski et al, Comprehensive Characterisation of Emissions of Small Particulates from Motor Vehicles, September 1997, prepared for Environment Australia.

[34] Hansard, Brisbane, 3 March 1999, p 551.

[35] Hansard, Canberra, 1 March 1999, pp 266-267.

[36] Dr Clive Hamilton, Australia Institute, Hansard, Canberra, 1 March 1999, p 266.

[37] Mr James Whelan, Queensland Conservation Council, Hansard, Brisbane, 3 March 1999, p 552.

[38] Mr Peter Blackband, AGL Gas Networks, Hansard, Sydney, 2 March 1999, p 431.

[39] Australian Conservation Foundation, Taking your breath away … How the Tax Reform Package affects Air Pollution and Human Health, March 1999.

[40] Mr David Langsam, supplementary material, 16 March 1999, pp 1-2; Environment Protection Authority (Victoria), memorandum, 9 March 1999.

[41] Mr David Langsam, supplementary material, 16 March 1999, attachment: The Republican, 11 April 1997, p 7.

[42] Ms Bronwen Machin, Environment Victoria, Hansard, Melbourne, 23 February 1999, p 111.

[43] Ms Bronwen Machin, Environment Victoria, Hansard, Melbourne, 23 February 1999, p 111. Also, Dr Paul Mees, Public Transport Users Association, Hansard, 23 February 1999, pp 17-18.

[44] Australian Gas Association (AGA), Submission 648; Australian Natural Gas Vehicle Council (ANGVC), Submission 208; Australian Liquefied Petroleum Gas Association (ALPGA), Submission 792; Gaseous Transport Fuels Position Paper, Compressed natural gas and liquefied petroleum gas, combined industry group paper tabled in evidence, Adelaide, 24 February 1999.

[45] Gaseous Transport Fuels Position Paper, Compressed natural gas and liquefied petroleum gas, combined industry group paper tabled in evidence, Adelaide, 24 February 1999, p 1.

[46] Gaseous Transport Fuels Position Paper, Compressed natural gas and liquefied petroleum gas, combined industry group paper tabled in evidence, Adelaide, 24 February 1999, p 1.

[47] Dr Clive Hamilton, Australia Institute, Hansard, Canberra, 1 March 1999, p 264.

[48] Gaseous Transport Fuels Position Paper, Compressed natural gas and liquefied petroleum gas, combined industry group paper tabled in evidence, Adelaide, 24 February 1999, p 2.

[49] Australian Natural Gas Vehicle Council, Submission 208, p 13.

[50] Australian Natural Gas Vehicle Council, Submission 208, p 6.

[51] Mr N. B. Creagh, Manager, Sales Engineering & Special Projects, International Trucks Australia Ltd, 12 February 1999.

[52] Mr George Erdos, Group Manager, Technical Services, TransAdelaide, 24 November 1998.

[53] Mr R.N. Angus, General Manager, Boral Transport Pty Ltd, (undated).

[54] Mr Greg Cox, Naval Architect, Streamliner Supershuttle Ferries, 20 August 1998.

[55] Mr Greg Cox, Streamliner Supershuttle Ferries, Hansard, Sydney, 2 March 1999, p 403.

[56] Mr Greg Cox, Streamliner Supershuttle Ferries, Hansard, Sydney, 2 March 1999, p 409.

[57] Mr Greg Cox, Streamliner Supershuttle Ferries, Hansard, Sydney, 2 March 1999, p 404.

[58] Hansard, Brisbane, 3 March 1999, pp 541-542.

[59] Mr James Whelan, Queensland Conservation Council, Hansard, Brisbane, 3 March 1999, p 543.

[60] Hansard, Brisbane, 3 March 1999, p 547.

[61] Hansard, Brisbane, 3 March 1999, p 547-548.

[62] Hansard, Adelaide, 24 February 1999, p 142.

[63] Hansard, Adelaide, 24 February 1999, p 142.

[64] Mr Roger Jowett, Australian Rail, Tram and Bus Industry Union, Hansard, Sydney, 2 March 1999, p 419.

[65] Mr Oliver Clark, Australian Natural Gas Vehicles Council, Hansard, Adelaide, 24 February 1999, p 143.

[66] Mr William Todd, Bus Industry Confederation, Hansard, Sydney, 2 March 1999, p 421.

[67] Dr Hien Ly, AGL Gas Networks, Hansard, Sydney, 2 March 1999, p 437.

[68] Mr James Whelan, Queensland Conservation Council, supplementary information, 17 March 1999, p 1: Transperth, WA, Euro and beyond: Fuel for Transerth's Bus Fleet, December 1998.

[69] IMPCO Technologies Pty Ltd, Submission 916, p 1.

[70] IMPCO Technologies Pty Ltd, Submission 916, pp 1-2.

[71] Hansard, Melbourne, 23 February 1999, p 49.

[72] IMPCO Technologies Pty Ltd, Submission 916, p 3.

[73] Hansard, Melbourne, 23 February 1999, p 45. Advanced Fuels Technology Pty Ltd's proposal is in line with the proposal put forward by IMPCO.

[74] Environment Australia, Submission 931, p 3.

[75] Hansard, Melbourne, 23 February 1999, p 48.

[76] Mr Ian Loy (Caterpillar of Australia): Improvement of Heavy-Vehicle Emissions in Conjunction with Reduction in Fuel Excise, A better way to a cleaner future, p 3, paper by tabled in evidence, Melbourne, 23 February 1999.

[77] Hansard, Adelaide, 24 February 1999, p 147.

[78] Mr Ian Loy, Hansard, Melbourne, 23 February 1999, p 47.

[79] Mr Ian Loy, Hansard, Melbourne, 23 February 1999, p 48.

[80] Mr Ian Loy (Caterpillar of Australia): Improvement of Heavy-Vehicle Emissions in Conjunction with Reduction in Fuel Excise, A better way to a cleaner future, p 15, paper by tabled in evidence, Melbourne, 23 February 1999.

[81] Mr Ian Loy (Caterpillar of Australia): Improvement of Heavy-Vehicle Emissions in Conjunction with Reduction in Fuel Excise, A better way to a cleaner future, p 3, paper by tabled in evidence, Melbourne, 23 February 1999.

[82] Mr Ian Loy, Caterpillar Australia, Hansard, Melbourne, 23 February 1999, p 47.

[83] Hansard, Canberra, 1 March 1999, pp 325-326.

[84] Hansard, Canberra, 1 March 1999, p 326.

[85] Gaseous Transport Fuels Position Paper, Compressed natural gas and liquefied petroleum gas, combined industry group paper tabled in evidence, Adelaide, 24 February 1999, p 2.

[86] Registered business using vehicles less than 3.5 tonnes gross mass will only have a tax input credit of around 7 c/L – being the GST component, which will be added onto the pump price.

[87] Mr John Kirk, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, p 34.

[88] Tax Reform: not a new tax, a new tax system, p 86.

[89] Mr John Kirk, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, p 34; Mr Mark Carter, Rail 2000 Inc, Hansard, Adelaide, 24 February 1999, p 181. Also, Mr John Apelbaum, Road Transport Forum, Hansard, Canberra, 1 March 1999, p 306.

[90] Mr Andrew Higginson, Hansard, Canberra, 1 March 1999, p 300.

[91] Mr John Kirk, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, p 34.

[92] Mr John Kirk, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, p 34.

[93] Mr John Kirk, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, pp 34-35; Also, Mr Roger Jowett, Australian, Rail, Tram and Bus Industry Union, Hansard, Sydney, 2 March 1999, p 414.

[94] Mr John Kirk, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, pp 34-35.

[95] Mr Michael Apps, Road Transport Forum, Hansard, Canberra, 1 March 1999, p 306.

[96] Mr John Apelbaum, Road Transport Forum, Hansard, Canberra, 1 March 1999, p 301; Professor Philip Laird, University of Wollongong, supplementary material, 12 March 1999, pp 1-2.

[97] Mr John Kirk, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, p 35.

[98] Mr David Hill, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, pp 37-38.

[99] Professor Philip Laird, University of Wollongong, Submission 341, p 4.

[100] Professor Philip Laird, University of Wollongong, supplementary material, 12 March 1999, pp 1-2.

[101] Mr Max Michell, Rail 2000, Hansard, Adelaide, 24 February 1999, p 176.

[102] Professor Philip Laird, University of Wollongong, Submission 341, attachment.

[103] Dr Wendy Craik, National Farmers Federation, Hansard, Canberra, 1 March 1999, pp 369-370.

[104] National Farmers Federation, Submission 98A, p 23.

[105] Professor Philip Laird, University of Wollongong, supplementary material, 12 March 1999, p 2.

[106] Professor Philip Laird, University of Wollongong, Submission 341, attachment, p 8.

[107] Professor Philip Laird, University of Wollongong, Hansard, Sydney, 2 March 1999, p 426; Mr David Hill, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, p 41.

[108] Professor Philip Laird, University of Wollongong, supplementary material, 5 March 1999: Submission to the House of Representatives Standing Committee on Communications, Transport and Microeconomic Reform.

[109] Professor Philip Laird, University of Wollongong, supplementary material, 5 March 1999 p 2.

[110] Hansard, Adelaide, 24 February 1999, p 206. Also, Australasian Railways Association, Submission 83, p 2.

[111] Mr David Hill, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, pp 37-38.

[112] Professor Phillip Laird, University of Wollongong, Hansard, Sydney, 2 March 1999, p 417.

[113] Mr John Kirk, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, p 34.

[114] Hansard, Adelaide, 24 February 1999, p 176.

[115] Community based national rail transport lobby and research organisation.

[116] Mr Max Michell, Hansard, Adelaide, 24 February 1999, p 176.

[117] Hansard, Adelaide, 24 February 1999, p 203.

[118] Hansard, Adelaide, 24 February 1999, p 206-207.

[119] Professor Phillip Laird, University of Wollongong, supplementary material, 5 March 1999, p 2.

[120] Road Transport Forum, Submission 302, p 3.

[121] Hansard, Canberra, 1 March, p 300.

[122] Australia Institute, Submission 120, p 21.

[123] Hansard, Canberra, 1 March 1999, p 267.

[124] Mr Robert Scheuber, Hansard, Brisbane, 3 March 1999, p 554.

[125] Hansard, Brisbane, 3 March 1999, p 555.

[126] Mr Robert Scheuber, Hansard, Brisbane, 3 March 1999, p 555.

[127] Mr Robert Scheuber, Hansard, Brisbane, 3 March 1999, p 555.

[128] Hansard, Adelaide, 24 February 1999, p 170.

[129] Hansard, Adelaide, 24 February 1999, p 167.

[130] Institution of Engineers Australia, Submission 1270, p 6.

[131] Mr Peter Moore, International Association of Public Transport, Hansard, Canberra, 1 March 1999, p 292.

[132] Dr Paul Mees, Public Transport Users Association, Hansard, Melbourne, 23 February 1999, pp 18-19.

[133] Mr John Kirk, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, p 35.

[134] Mr David Hill, Australasian Railway Association, Hansard, Melbourne, 23 February 1999, p 42.

[135] Australia Institute, Submission 120, p vii.

[136] Australia Institute, Submission 120, p 32-33.

[137] Dr Paul Mees, Public Transport Users Association, Hansard, Melbourne, 23 February 1999, p 19.

[138] Dr Paul Mees, Public Transport Users Association, Hansard, Melbourne, 23 February 1999, p 20.

[139] Hansard, Melbourne, 23 February 1999, p 21.

[140] Mr Peter Moore, International Association of Public Transport, Hansard, Canberra, 1 March 1999, p 289.

[141] Australia Institute, Submission 120, pp 26-30; Dr Paul Mees, Public Transport Users Association, Hansard, Melbourne, 23 February 1999, pp 20-21.

[142] Hansard, Canberra, 1 March 1999, p 290.

[143] Mr Peter Moore, International Association of Public Transport, Hansard, Canberra, 1 March 1999, p 291.

[144] Mr Roger Jowett, Hansard, Sydney, 2 March 1999, p 414.

[145] Mr Robert Gunning, Hansard, Sydney, 2 March 1999, p 415.

[146] Mr Robert Gunning, Hansard, Sydney, 2 March 1999, p 416.

[147] Mr Robert Scheuber, Hansard, Brisbane, 3 March 1999, p 555.

[148] Mr Alan Pears, Sustainable Energy Industry Association, Hansard, Canberra, 1 March 1999, p 316.

[149] Submission 120, p vi.; Mr Alan Pears, Sustainable Energy Industry Association, supplementary material, 8 March 1999, p 2.

[150] Mr Alan Pears, Sustainable Energy Industry Association, Hansard, Canberra, 1 March 1999, p 317.

[151] Mr Alan Pears, Sustainable Energy Industry Association, supplementary material, 8 March 1999, p 2.

[152] Hansard, Canberra, 1 March 1999, p 316.

[153] Hansard, Canberra, 1 March 1999, p 316.

[154] Pacific Solar Pty Ltd, Submission 823.

[155] Mr Peter Lawley, Pacific Solar Pty Ltd, Hansard, Sydney, 2 March, 1999, p 396.

[156] Mr Peter Lawley, Pacific Solar Pty Ltd, Hansard, Sydney, 2 March, 1999, p 396.

[157] Hansard, Sydney, 3 March 1999, p 506.

[158] Pacific Solar Pty Ltd, Submission 823, attachment.

[159] Hansard, Perth, 26 February 1999, p 230.

[160] Mr Fred Wren, Wren Oil, Hansard, Perth, 26 February 1999, pp 234, 239.

[161] Hansard, Adelaide, 24 February 1999, p 159.

[162] Hansard, Adelaide, 24 February 1999, p 155.

[163] Hansard, Perth, 26 February 1999, pp 230-231.

[164] Mulhern Waste Oil Pty Ltd, supplementary information, 4 March 1999, p 2.

[165] Hansard, Perth, 26 February 1999, p 231.

[166] Hansard, Perth, 26 February 1999, p 231.

[167] Hansard, Adelaide, 24 February 1999, p 160; Mulhern Waste Oil Removal Pty Ltd, Submission 234, p 3.

[168] Hansard, Canberra, 1 March 1999, p 274.

[169] Mr Michael Krockenberger, Hansard, Melbourne, 23 February 1999, p 2.

[170] Mr Michael Krockenberger, Hansard, Melbourne, 23 February 1999, p 2.

[171] Gaseous Transport Fuels Position Paper, Compressed natural gas and liquefied petroleum gas, combined industry group paper tabled in evidence, Adelaide, 24 February 1999, p 2.

[172] Facsimile forwarded to the Committee Secretariat by Mr Bruce Thompson, Managing Director, Advanced fuels Technology Pt Ltd, 11 March 1999.

[173] Hansard, Canberra, 1 March 1999, p 270.

[174] Hansard, Canberra, 1 March 1999, p 350.

[175] Hansard, Canberra, 1 March 1999, p 271.

[176] Hansard, Canberra, 1 March 1999, p 271.

[177] Hansard, Canberra, 1 March 1999, p 271.