Gary Gray (Brand, Australian Labor Party, Shadow Minister for Resources) Share this | Hansard source

The Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015 reforms the taxation treatment of the biofuels ethanol and biodiesel. It has profound implications for this industry. This is a good industry and it is an industry which has grown rapidly in the course of the past 20 years. It is an industry that has deep roots in regional Australia. And it is an industry that will sigh a sigh of relief with the passage of this legislation, bringing forth, as it will, a further amendment from the government to phase in, over a period of 15 years, a range of changes that will further create certainty for, specifically, the biodiesel industry. As part of this reform, the Energy Grants and Other Legislation Amendment (Ethanol and Biodiesel) Bill 2015 will abolish the Cleaner Fuels Grants Scheme. Labor supports these bills and their intent to create a sustainable taxation framework for biofuels.

Biofuels play an important part in our economy, and we expect in the context of transport fuels that the role played by biofuels will increase. We see that as being a good thing for our regional economy in that it adds value to feedstock for the biofuels process. That feedstock can originate in abattoirs; it can originate in communities by way of hydrocarbon-based products that are gathered in networks and delivered to these biodiesel facilities. It will bring on an industry that will add just a little more security to our transport fuel sector. It will also add a little cleaner feedstock for our transport fuel sector and it will create an economic value for the feedstock that is provided for biodiesel and, of course, in the ethanol process too. Adding that economic value is important, because that allows, in and of itself, the construction of markets and supply chains to bring feedstock into our biofuel processing facilities around the country.

Some 95 per cent of all energy consumed for transport in Australia was crude-oil-derived liquid fuels in 2011 and 2012. Our transport fuel sector is absolutely dominated by crude-oil-derived liquid fuels. Despite the dominance of petrol and diesel, alternative fuels have an important role to play. 'Alternative fuels', including biofuels, refers to fuels other than petrol and diesel that can be used in internal combustion engines. The product of biodiesel plants and of ethanol plants provides—when blended with petrol feedstock—a blend which has a substantial place in the Australian transport fuels marketplace.

As I said, 'alternative fuels'—of course, including biofuels—refers to fuels other than petrol and diesel that can be used in internal combustion engines. This also includes other fuels like compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, methanol and biogas. We are at the point where we are now seeing in our transport logistics industry a substantial amount of research and investment taking place in alternative transport fuels. This is important for the future development of our technology base and the future development of our logistics base. We are seeing it in extractive industries—in hard rock mining and iron ore mining in particular—with the development of gas-based truck propulsion systems and gas-based static power generation systems. This is all part of the very healthy movement that we are seeing throughout our economy and throughout the logistics of transport and energy generation—moves to other, more appropriate, better-priced and environmentally-better fuels that, on occasion, bring with them a range of ancillary benefits, such as those I referred to earlier that have helped develop a good economic base in the regional centres that supply the feedstocks for our biofuels industry.

Apart from the energy diversification benefits that can be gained from alternative fuels, there are environmental benefits from the renewable nature of biofuels. These benefits should not be missed; they should not be overstated, but they should not be missed. Biodiesel can be produced from renewable biological sources, such as vegetable oils, animal fats and recycled greases—such as cooking oil—and there is potential for other feedstocks, such as algae. It is in this area of 'other feedstocks' that substantial research is occurring both in Australia and throughout the world, looking at those carbon-based biological feedstocks that can add material to produce liquid fuels which fit current logistics capabilities and current transport technologies and which behave in a way that is identical to or even better than existing diesel and petrol-based transportation fuels.

What I mean by that is we can see the development of these alternative technologies bringing with them a very substantial benefit to a country such as ours, which relies to such a great extent on the integrity of its transportation systems—and therefore on the integrity of its fuel management and delivery systems, and the security of those systems. So: in addition to being able to provide the motive of energy, in addition to being able to provide a substantial regional economic benefit and in addition to being able to provide some renewable benefit into this transport sector, we see this cycle being developed around biofuels and ethanol that is wholly good for our Australian industry, for our regional economies and, in particular, for our farming communities that substantially provide the feedstocks for these biofuels. Ethanol, of course, can be produced from biomass, normally via a fermentation process from the waste products of cane sugar, from grains such as wheat or sorghum and from forest products.

Domestically produced and imported biodiesel and ethanol are currently subject to the same rate of excise as petrol and diesel. However, producers and importers are able to access a grant for the full amount of duty paid. The Cleaner Fuel Grants Scheme refunds excise and excise equivalent customs duty paid on both imported and domestically produced biodiesel. The legislation we are debating today will end that scheme.

Similarly, the Ethanol Production Grants Scheme, which refunds excise paid on ethanol to domestic producers, will close at the end of this month. In place of the Cleaner Fuel Grants Scheme and the Ethanol Production Grants Scheme, the excise payable on the domestic production of biodiesel and ethanol will be reduced to zero and will then gradually increase to a reduced rate. The new excise rate for biodiesel will reach 50 per cent of the full rate of excise that applies to petrol and diesel, and the new rate for fuel ethanol will reach approximately 33 per cent of that rate.

It is important to note that imported biodiesel and ethanol will be subject to the full fuel duty rate. This will give a comparative advantage to our local industries. This bill, and the amendments that will follow, is supported by the Australian biofuels industry because it does create a better competitive environment and a greater level of certainty for Australian producers. That goes to the point of the comparative advantage that that particular mechanism, which I have just mentioned, delivers.

The government will be introducing an amendment to this legislation, which will see a longer transition process for the biodiesel industry. I thank the Minister for Industry and Science, and his office, for working to ensure that the biodiesel industry will be given enough time to adjust to this new taxation framework. The discussions that we have had office to office have been both productive and frank. And they have allowed us to arrive at a minor improvement, at minimal cost, that will create a greater level of certainty that will allow us, amongst other things, to pass this legislation by 30 June, which is a critical part of both creating the certainty and meeting the legislative deadline which the government has been operating to.

Biodiesel does make an important, albeit small, contribution to our liquid fuels mix. It is understandable that it will be a small contribution at the moment, given the nature of the refining industry, the certainty that has to flow back into the sector and the impact in recent times on crude oil based transportation fuel production, which has seen—over the course of the last eight or nine months—a substantial drop in global oil prices, which is reflected in diesel prices delivered to the bowser in Australia and to the industries which are such large users of diesel fuel: our off-road sector, agriculture, fishing and mining.

With that reduction in global hydrocarbons prices, we have seen a particularly tough competitive environment being delivered at the bowser in which biodiesel and ethanol have had to compete. But we are now seeing some return to buoyancy in global oil prices and that is being returned at the petrol pump with increased prices for transportation fuels in Australia. In that cycle we will see, we believe, the genuine impact of these fuels adding to that mix.

In the West Australian context, I had the great pleasure, just two years ago, of visiting the biodiesel plant at Picton near Bunbury where it is hoped that a biodiesel feedstock can be provided to the BP refinery at Kwinana to add a biodiesel component to diesel produced from the Kwinana refinery. This would add to that virtuous cycle of an economic value being delivered to farmers and feedstock providers at Bunbury and Picton. The generation of a very good biofuel through that facility at Bunbury and Picton, delivered to the diesel refinery at Kwinana and then delivered for use in transport fuels to the greater Perth community is a good example of how this industry can grow and work to the benefit of all Australians and to the great benefit of our industrial and transportation users.

The share of domestically produced biodiesel had been declining at the expense of imported fuel while imported fuels prices had been falling. That has been a significant challenge for the industry and it is hoped that the comparative advantage through the reduced excise rate, as well as the longer transition path to reach that rate, will protect our local industry as well as adding some buoyancy to global hydrocarbons markets.

The opposition will continue to engage with the industry and to monitor the pathway to the 50 per cent excise rate to ensure that the needs of the industry and the government's budgetary position are taken into consideration while, at the same time, we see a growth in this industry and certainty being restored to both biodiesel producers and producers of the feedstock that is so important to this industry.

Throughout Australia, we see biodiesel production facilities in regional Australia. It is a particular regional Australian benefit that occurs from this industry. Deloitte Access Economics reported in February of last year that the domestic biodiesel industry has made a total contribution to the Australian economy of $64 million and has supported in excess of 400 full-time equivalent jobs net of all subsidies. Significantly, almost all of those jobs are in regional Australia.

I have mentioned the importance of Picton in Western Australia. I have not mentioned Barnawartha in Victoria, Largs Bay in South Australia and Rutherford in New South Wales. Eco Tech Biodiesel has a plant at Narangba in Queensland and we also have a biofuels non-operational plant in the Northern Territory. The extent of this footprint of biodiesel and the importance of the ethanol industry in regional New South Wales should not be missed on members of this parliament. The value of this industry in producing an alternative transportation fuel stock and feedstock that can add value to regional agricultural production and biofeedstock for our regional biodiesel production facilities should be greatly supported and is something that we should look forward to as the impact of this bill and the longer transitionary period work their way through. We should be conscious at all times that from time to time Australian governments do need to change legislative frameworks to fit the budget requirements of the day and of the moment. I deeply respect the government's work to attend to those issues through this bill and of course accept that a future government may also need to make such decisions. I commend this bill to the House.

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