Lyn Allison (Victoria, Australian Democrats) Share this | Hansard source

Just to reiterate, it is probably useful to come back to the effect of my amendments, because the minister says there is no disadvantage with off road. That will be a great relief to a lot of biodiesel producers and users—and that remains to be seen, because they are certainly not persuaded to that thus far.

I will just explain what the Democrat amendments will do. They will remove the energy grants credits rebate, which applies in ever-decreasing amounts over time. From 1 July it will be 14.8c a litre, then it will decrease to 11c, then to 7c, then 3.7c and then zero. We think a fair thing to do—and this seems to remove the objection that the ALP had to what was called ‘double-dipping’, although it is not clear what ‘double-dipping’ or ‘loopholes’ actually mean; the use of that language has not been helpful—is remove the Energy Grants (Credits) Scheme and replace it with exactly what diesel has. Diesel will be receiving 18c a litre—that is, the 38c a litre excise credit less the road user charge.

So we say: apply the same scheme to both diesel and biodiesel. That seems to us to be the fair thing. That way you have a level playing field. That way the cleaner fuel grant—and I dispute the minister’s claim that this was not intended as a way of assisting the industry to develop, given its fledging status at the present time in comparison with oil companies, which, of course, have had around 100 years to build up their refineries, trucks, systems, markets and so on—will go over time after 2011, as was the proposal in the 2003-04 budget period.

Let us leave the clean fuel grant there. What that does is reduce the gate price. At this stage, biofuels are much more expensive to manufacture than it is to buy and refine oil. At the present time the gate price is about $1.63 and, if you take away the 38c a litre cleaner fuel grant, you get a price which is starting to be comparable with diesel. So let us leave the cleaner fuel grant in place and apply the fuel tax credit as is being applied to diesel. That way we would maintain the relativities.

For instance, where the gate price for diesel is $1.32, and you take off the fuel tax credit, you get $1.13. In the case of biodiesel, under our amendments, if the gate price was $1.25, which at the present time is roughly comparable, then you would get a fuel tax credit of 18c and the final price would be $1.07, thus maintaining the relative price advantage, which I think we would all have to agree is necessary for this fledgling industry. So you would get a final price of $1.07, giving biofuels an advantage of some 6c a litre. It is not a lot, but that 6c a litre is necessary in order to encourage investment in this area. That way we start to displace some of the imported fossil fuel—oil—that comes mostly from offshore producers these days, as we start to build up an industry in this country.

As I said in my speech on the second reading, Germany, which now produces about six million litres of biofuel, did not impose an excise on its biofuels for 20 years. It would be fair to say that our biofuel industry has really only been going for the last five years, if that, and it was only recently that the Prime Minister said we should achieve a target of 350 megalitres. The Prime Minister also put together a package to assist with grants for setting up infrastructure and plants that would produce biodiesel in order to assist this industry to get a foothold.

The Democrat amendments would maintain the status quo, get rid of what might be ‘double-dipping’ or a ‘loophole’ or whatever you might call it, and take away the current 14.8c a litre and give biodiesel the fuel tax credit that is currently going to diesel. It is a simple proposal. As I said, it keeps the current relativities in order. It allows the biofuel industry to grow in the way that was planned only two years ago. I think that what struck the members of the committee was that a lot of decisions about investment were made two years ago, in 2004, when the government put through the legislation. It was certainty for the industry, but suddenly it has been declared that there is this big loophole and we have to give huge excise cuts for diesel, and the next thing we know biodiesel is going out the door.

Minister, I urge you to again consider this. We must do the modelling. We must understand what the impact of this is. You have rejected the idea that biodiesel will lose relativity in terms of a small benefit over time. You have rejected that, but you have not been able to tell us why or how. You have not done the modelling that demonstrates that your position can be relied on. Certainly the industry does not believe it. We do not believe it. I do not believe it. We have listened to the advice, pored over the figures and looked at the legislation. It is complex and difficult to understand. But, at the end of the day, even though this has been around for a while, I think we finally twigged to what the problem is. The problem is the preferential treatment that is being given to diesel. I suggest that the government are going to live to regret it if they do not look seriously at this amendment and at the very least take this legislation back and say: ‘All right, we don’t know what the impact is going to be. We haven’t done the modelling. Let’s have another look at it. Let’s actually consult with the biofuels industry.’

Minister, you said you had consulted, but I am told and we were told at the hearings that the biofuels industry did not get a look-in on this consultation with whoever it was—I do not know. Maybe it was the oil industry rather than the biofuels industry. Maybe you can explain that. But they are not happy. You said yourself that there was not a single submission or letter sent to you saying: ‘We’re delighted with what you’ve done. We really think that the biofuels industry will grow in leaps and bounds and become a viable force in this country.’ You have not been able to demonstrate that. You keep talking about loopholes, but we are not convinced. We think that it is important. If we are going to have a level playing field then let us have one. If we are going to have excise imposed on biofuels—fine. I think the industry has accepted that and they are gearing up towards it. But there is not going to be anybody who is going to take advantage of the situation in 2011, when excise starts to be imposed. They will be gone long ago. They told us that 99 per cent of what they produce will be non-viable under this arrangement. So forget about the excise starting in 2011 and going through to reaching half of that of petrodiesel by 2015. There actually will not be any revenue to be garnered by the government from this proposal.

As I said, the industry was taken aback by the fact that the government decided to impose excise when it did, in 2011. Fortunately, we had that put back three years; otherwise, it would have been next year or the year after that it was being imposed, which would have been far too soon. I think it is pretty clear that the industry needs volume in order to be able to pay excise and still be competitive with diesel. Those volumes are not going to be reached with this legislation. There is going to be a downturn in development. We have had letters from the ANZ bank. In fact, the ANZ bank wrote to the Prime Minister saying: ‘We’re not prepared to back any investment in this industry. It’s got no future. There’s no way we can fund projects which are not going to be viable.’

If you are not listening to that message, Minister, and if the government is not listening to that message then you should withdraw this bill and think about it a bit more so that it is quite clear to everybody what the implications are. Do the modelling and tell us what it means. Tell us what happens with various rates of gate price for diesel and biodiesel. Tell us what happens for farmers. Tell us if it is not now in their interests to start producing biofuel, because that is what the committee was told. They cannot be wrong, Minister, and you have not been able to demonstrate how they are wrong. We have shown you figures and given you tables. You have not been able to demonstrate what is wrong with those tables except to say, ‘We don’t know what’s going to happen in the next few years.’

It is not good enough, because this is an important industry and your government said it was important. You said it was important enough to provide grants. You said it was important enough to encourage organisations and investors into this field. Minister, they are frankly very disappointed with what has happened. You have not been able to demonstrate that their reason for disappointment is ill-founded.