Chapter 12
IMPACT
ON THE ENVIRONMENT12.1 The Senate Environment, Communications, Information
Technology and the Arts References Committee took evidence on the impact of the
Government's proposed GST package on the Environment. This section represents
an edited extract from the References Committee Report. The findings of the References
Committee are set out in Chapter 1. 12.2 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. 12.3
Submissions from 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. 12.4 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. [1] 12.5
The Australian Conservation Foundation (ACF) presented a similar view. [2]
The ACF believes that the proposed new tax system would encourage pollution, waste
and other unsustainable practices. 12.6 Other evidence 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 Reference Committee
to examples of ecological tax reform undertaken in other OECD countries, and to
Australia's `spectacular failure to implement ecological tax reform'. [3]
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. [4]
12.7 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.
[5] 12.8 The Local Government and Shires Association
of NSW asked the References 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.
[6] Reduction in Diesel Fuel Excise12.9
Diesel excise is currently set at 43.355 c/L. This excise forms a substantial
portion of the costs of diesel fuel, currently around 70 c/L at the retail pump
and 60 c/L for large fleet operators. 12.10 Under the Government's proposed
tax package 10 percent GST is to be imposed from 1 July 2000 on all fuel sales
whether the fuel has previously been subject to excise (e.g. petrol, diesel) or
is not subject to excise (e.g. LPG). At the same time the GST is introduced, the
government proposes to “reduce excises on petrol and diesel so that the pump
price of these commodities for consumers need not rise [7]
12.11 All GST registered businesses will then effectively pay less for
petrol and diesel because they will be able to claim input tax credits for the
GST payable on fuel used for business purposes. Some GST registered businesses
will receive further rebates of diesel excise they have paid through a new diesel
fuel credit scheme which is to be “delivered through the GST system”
[8] 12.12 This new diesel credit scheme will
reduce the effective rate of tax on diesel fuel used in `heavy transport' (defined
as vehicles with a gross vehicle mass over 3.5 tonnes) and rail to 18 cents per
litre. [9] GST registered businesses which purchase
diesel and like fuels for off-road business use (including light fuel oil for
marine business use, and bunker fuel) will qualify for a full rebate of all the
excise paid [10] 12.13 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. [11] Under the proposed
new tax system, the price differential between gaseous fuels and conventional
fuels would narrow substantially. 12.14 The submissions and evidence received
by the References Committee indicated that the reduction in diesel fuel 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.
12.15
The common argument which emerged from the inquiry was that the proposed effective
reductions in the taxation of diesel fuel 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. 12.16 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.
[12] 12.17 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. 12.18 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. [13] 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. [14]
12.19 Dr Paul Mees, President of the Public Transport Users Association,
told the References 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. [15] 12.20
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 References 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. [16] 12.21 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 Health12.22
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. [17] The Australia Institute told the References
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. [18]
12.23 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. [19]
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. [20] 12.24 A significant
factor in the level of particle emissions is the sulphur content of fuels. Mr
Whelan told the References 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. [21] 12.25 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. [22] Low
sulphur fuels are available, and have been legislated in some European countries.
However, Australia continues to allow the emission of damaging particles. 12.26
Mr Whelan provided the References Committee with research which demonstrated the
decreasing level of particle emissions that can be achieved with the use of low
sulphur and gaseous fuels. 12.27 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. [23] 12.28 Mr Whelan also drew the References
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. [24] 12.29 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. [25]
12.30 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, [26] 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.
[27] 12.31 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. [28]
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. [29]
12.32 Mr David Langsam provided the References 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. 12.33 `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. 12.34 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. [30]
12.35 The References References 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 Fuels12.36
The Australian Gas Association (AGA), the Australasian Natural Gas Vehicles Council
(ANGVC) and the Australian Liquefied Petroleum Gas Association (ALPGA) each provided
the References Committee with individual submissions. At the References 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. [31] 12.37
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. [32] 12.38 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. [33] The industry group provided the References
Committee with a number of pieces of evidence in support of its view. 12.39
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' out 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. [34] 12.40 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. [35]
12.41 Mr Whelan of the Queensland Conservation Council told the References
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 encourgae Brisbane Transport to continue to use
its current fleet of ageing and highly polluting diesel buses, saving three to
four million dollars annually. [36] 12.42 The
References Committee heard similar evidence regarding the situation in other parts
of Australia. 12.43 The Australian Rail, Tram and Bus Industry Union told
the References Committee that the State Transit Authority of New South Wales,
the largest bus operator in Australia, operates 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. [37] 12.44 The References
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.
[38] 12.45 The References 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. [39] However, the References
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. [40]
12.46 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 References
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 that industry. 12.47 At the
References 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 References 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.
12.48 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. [41]
12.49 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. [42]
12.50 In summary, gas industry representatives believe that they have become
an unintended casualty of the government's broader tax policy, making the industry
uncompetitive. [43] Road and Rail Transport
12.51 The References 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. [44]
The submissions and evidence received by the References 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. [45] 12.52 The rail industry's
fundamental concern is that the Government's proposed tax package 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. [46]
12.53 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. [47]
12.54 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.
[48] 12.55 The ARA said that the air pollution,
noise, congestion and accident costs of road transport are already around $12
billion per year. [49] 12.56 The Association
also told the References 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. [50] 12.57
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. [51]
The NFF referred to `gross over-recovery of costs from vehicles operating in rural
regions' of approximately $1.5 billion. [52] 12.58
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, [53]
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. [54]
12.59 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 trailors. 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.
[55] 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. [56]
12.60 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. [57] 12.61
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. 12.62 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. [58] 12.63 The References
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. 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 12.64 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. 12.65 There was general agreement
in evidence to the References 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 References 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. [59]
12.66 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. [60] 12.67 The Australasian
Railway Association told the References 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. [61] 12.68
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. 12.69
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. [62] 12.70 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. [63] 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. [64]
12.71 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.
[65] 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. 12.72 The References 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. [66]
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. [67] Renewable Energy12.73
The References 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. [68] 12.74 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. [69]
12.75 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. [70]
12.76 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.
[71] 12.77 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. 12.78 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 exclude PV systems from
the GST and to address the metering anomaly that (gross amount rather than the
net amount) of electricity drawn from the grid would be subject to GST [72]
12.79 The Local Government and Shires Association of NSW asked the References
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. [73] 12.80
The renewable energy sector has significant export potential. Mr Peter Lawley,
Business Development Manager for Pacific Solar, provided the References 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. [74] 12.81 The
References 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 Oil12.82
The References 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. 12.83 Mr
Fred Wren, the Managing Director of Wren Oil in Western Australia, told the References
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. [75]
12.84 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 current excise arrangements, 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. [76]
12.85 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. Overseas Initiatives12.86
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 References
Committee to examine the California Air Resources Board report on diesel exhaust.
[77] 12.87 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. 12.88 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. [78] 12.89 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. The New Zealand Government has since initiated diesel tax
increases, although some believe that the gaseous fuel industry has still not
recovered. [79] Australia's International Treaty
Obligations12.90 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. 12.91 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. 12.92 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. 12.93 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 Buenos 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. 12.94 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. [80]
Footnotes[1] Mr Ian Higgins, Greenpeace
Australia, Hansard, Canberra, 1 March 1999, p 277. [2]
In addition to giving evidence, the ACF provided the References 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. [3] 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. [4] Mr Michael Krockenberger,
Australian Conservation Foundation, Hansard, Melbourne, 23 February 1999,
p 2. [5] Australia Institute, Submission 120,
p vi. [6] Councillor Peter Woods, New South Wales
Local Government Association, Hansard, 3 March 1999, pp 505-506. [7]
ANTS p. 86. [8] ANTS p. 86 [9]
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. [10] ANTS p. 86 [11]
A significant number of private motorists have also converted to LPG, see Australian
Petroleum Gas Association, Submission 792, pp 1-3. [12]
Hansard, Canberra, 1 March 1999, p 262. [13]
Australia Institute, Submission 120, p 21. [14]
Mr John Kirk, Australasian Railway Association, Hansard, Melbourne, 23
February 1999, p 34. [15] Hansard, Melbourne,
23 February 1999, p 21. [16] 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. [17] Dr Ian Hamilton, Australia
Institute, Hansard, Canberra, 1 March 1999, p 264. [18]
Dr Ian Hamilton, Australia Institute, Hansard, Canberra, 1 March 1999,
pp 264-265. [19] Hansard, 3 March 1999,
p 541. [20] Catholic Diocesan Centre, Submission
1024, p 1. [21] Hansard, Brisbane, 3 March
1999, p 544. [22] Hansard, Melbourne,
23 February 1999, p 110; Mr David Langsam, supplementary material, 16 March 1999,
attachment: The Republican, 11 April 1997, p 7. [23]
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. [24] Hansard, Brisbane, 3 March
1999, p 551. [25] Hansard, Canberra, 1
March 1999, pp 266-267. [26] Dr Clive Hamilton,
Australia Institute, Hansard, Canberra, 1 March 1999, p 266. [27]
Mr James Whelan, Queensland Conservation Council, Hansard, Brisbane, 3
March 1999, p 552. [28] Mr Peter Blackband, AGL
Gas Networks, Hansard, Sydney, 2 March 1999, p 431. [29]
Australian Conservation Foundation, Taking your breath away … How
the Tax Reform Package affects Air Pollution and Human Health, March 1999.
[30] Mr David Langsam, supplementary material,
16 March 1999, attachment: The Republican, 11 April 1997, p 7. [31]
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. [32]
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. [33] Australian Natural
Gas Vehicle Council, Submission 208, p 6. [34]
Mr Greg Cox, Steamliner Supershuttle Ferries, Hansard, Sydney 2 March 1999 p.
403 [35] Mr Greg Cox, Streamliner Supershuttle
Ferries, Hansard, Sydney, 2 March 1999, p 404. [36]
Hansard, Brisbane 3 March 1999, pp541-542 [37]
Mr Roger Jowett, Australian Rail, Tram and Bus Industry Union, Hansard,
Sydney, 2 March 1999, p 419. [38] Mr Oliver
Clark, Australian Natural Gas Vehicles Council, Hansard, Adelaide, 24 February
1999, p 143. [39] Mr William Todd, Bus Industry
Confederation, Hansard, Sydney, 2 March 1999, p 421. [40]
Dr Hien Ly, AGL Gas Networks, Hansard, Sydney, 2 March 1999, p 437. [41]
Hansard, Canberra, 1 March 1999, pp 325-326. [42]
Hansard, Canberra, 1 March 1999, p 326. [43]
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. [44] 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. [45] Mr Andrew Higginson, Hansard,
Canberra, 1 March 1999, p 300. [46] Mr John Kirk,
Australasian Railway Association, Hansard, Melbourne, 23 February 1999,
p 34. [47] Mr John Kirk, Australasian Railway
Association, Hansard, Melbourne, 23 February 1999, p 34. [48]
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. [49]
Mr John Kirk, Australasian Railway Association, Hansard, Melbourne, 23
February 1999, p 35. [50] Mr David Hill, Australasian
Railway Association, Hansard, Melbourne, 23 February 1999, pp 37-38. [51]
Dr Wendy Craik, National Farmers Federation, Hansard, Canberra, 1 March
1999, pp 369-370. [52] National Farmers Federation,
Submission 98A, p 23. [53] Professor Philip Laird,
University of Wollongong, supplementary material, 12 March 1999, p 2. [54]
Professor Philip Laird, University of Wollongong, Submission 341, attachment,
p 8. [55] Professor Hi\\Philip Laird, Handsard
Sydney 2 March 1999, p 426; Mr David Hill, Australasian Railway Association, Hansard,
Melbourne, 23 February 1999,p 41. [56] Professor
Laird, University of Wollongong, supplementary material, 5 March 1999: submission
to the House of Representatives Standing Committee on Communications, Transport
and Microeconomic Reform. [57] Hansard,
Adelaide, 24 February 1999, p 203. [58] Hansard,
Adelaide, 24 February 1999, p 206-207. [59] Mr
Peter Moore, International Association of Public Transport, Hansard, Canberra,
1 March 1999, p 292. [60] Dr Paul Mees,
Public Transport Users Association, Hansard, Melbourne, 23 February 1999,
pp 18-19. [61] Mr John Kirk, Australasian Railway
Association, Hansard, Melbourne, 23 February 1999, p 35. [62]
Mr David Hill, Australasian Railway Association, Hansard, Melbourne, 23
February 1999, p 42. [63] Australia Institute,
Submission 120, p vii. [64] Australia Institute,
Submission 120, p 32-33. [65] Mr Roger Jowett,
Hansard, Sydney, 2 March 1999, p 414. [66]
Mr Robert Gunning, Hansard, Sydney, 2 March 1999, p 415. [67]
Mr Robert Gunning, Hansard, Sydney, 2 March 1999, p 416. [68]
Mr Alan Pears, Sustainable Energy Industry Association, Hansard, Canberra,
1 March 1999, p 316. [69] Submission 120, p vi.;
Mr Alan Pears, Sustainable Energy Industry Association, supplementary material,
8 March 1999, p 2. [70] Mr Alan Pears, Sustainable
Energy Industry Association, Hansard, Canberra, 1 March 1999, p 317. [71]
Pacific Solar Pty Ltd, Submission 823. [72] Mr
Peter Lawley, Pacific Solar Pty Ltd, Hansard, Sydney, 2 March, 1999, p
396. [73] Hansard, Sydney, 3 March 1999,
p 506. [74] Pacific Solar Pty Ltd, Submission
823, attachment. [75] Hansard, Perth,
26 February 1999, p 230. [76] Mr Fred Wren, Wren
Oil, Hansard, Perth, 26 February 1999, pp 234, 239. [77]
Mr Michael Krockenberger, Hansard, Melbourne, 23 February 1999, p 2. [78]
Mr Michael Krockenberger, Hansard, Melbourne, 23 February 1999, p 2. [79]
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. [80] Hansard, Canberra,
1 March 1999, p 270.
Top
|