Glenn Sterle (WA, Australian Labor Party) Share this | Hansard source

I present the report of the Senate Standing Committee on Rural and Regional Affairs and Transport on the implementation, operation and administration of the legislation underpinning carbon sink forests, together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

by leave—I move:

That the Senate take note of the report.

On 26 June 2008, the Senate referred the implementation, operation and administration of the legislation underpinning carbon sink forests and any related matters to the Senate Standing Committee on Rural and Regional Affairs and Transport. The committee called for submissions and, based on these, held three public hearings—in Canberra on 27 July 2008, in Brisbane on 18 August 2008 and in Canberra again on 11 September 2008. In all, 60 written submissions were received by the committee. They were made by individuals and representatives from industry organisations, horticultural and grower groups, peak bodies and government departments and agencies.

A number of broad issues relating to the impact of taxation incentives for the establishment of carbon sink forests were examined during the committee’s consideration of this legislation. These included the impact on prime agricultural land, the impact on rural communities and industries, enforceability of carbon sequestration property rights over consecutive landowners, the permanency of new plantings, the requirement that plantings be contiguous, incentives for biodiverse planting, the potential for undesirable taxation outcomes, the need for the tax incentives, managed investment schemes and recognition of other forms of carbon stores.

The committee questioned the extent to which prime agricultural land will be threatened by the establishment of carbon sink forests and also notes that carbon sink forests do not appear to be activities that offer high returns over a short period of time. The committee notes the concerns expressed in relation to carbon sink projects in rural communities and industries. It also recognises that the development of carbon sinks will provide benefits to many rural communities, including investments and job opportunities. The committee notes that, if the relative returns from land given over to carbon sink forests are relatively low, as has been suggested in evidence, the disruption to rural communities will be minimised.

Concerns were expressed in relation to the permanency of the new plantations and whether the carbon is sequestered permanently and also that the proposed arrangements would not allow a landholder to make a claim on the capital expenditure on non-contiguous plantings. The committee also raised concerns that the legislation does not require that plantations be biodiverse, as opposed to single-species forests. Some submissions also argued that there is a lack of incentives for environmental planting.

The committee notes that the guidelines reinforce that carbon sink forests are to be established in a manner that is consistent with existing good practice frameworks for environmental and natural resource management. The committee also notes that, while the tax deduction is for the primary purpose of carbon sequestration, this does not prevent the taxpayer from having a secondary purpose in planting of trees, such as improving the biodiversity of the property in question. The committee raised the issue of why it was necessary to provide tax deductions, given that the government has included plantation establishments under the Carbon Pollution Reduction Scheme.

A number of submissions drew upon the negative impact of managed investment schemes, or MISs, in diverting significant areas of agricultural land into forestry, arguing that similar impacts may occur under the tax concessions for carbon sink forests. The Treefarm Investment Managers Association, however, refuted these assertions, noting that MIS forestry is specifically excluded from the scope of the legislation. The committee notes that, under the legislation, in order to claim a tax deduction for costs associated with establishing a carbon sink forest, taxpayers must meet certain conditions, including that they did not incur the expenditure under an MIS or a forestry managed investment scheme.

The committee notes that soil carbon is not currently recognised in the Kyoto protocol arrangements for carbon sinks. However, the committee notes that soil carbon may be recognised in future treaties. Therefore, improving soil carbon through the establishment of perennial pasture is a no regrets policy, particularly given its potential to improve soil productivity in the face of climate change and more extreme drought. The adoption of such management practices now will improve Australia’s readiness for future agreements.

I take this opportunity to thank all those who participated in this inquiry and made submissions and presentations to the committee and of course the very hardworking staff of the secretariat. In conclusion, Madam Acting Deputy President Troeth, in approximately four days time—I being a mad Geelong supporter and you a very keen Hawthorn supporter—one of us is going to be in tears, and I really hope it is not me.