Glenn Sterle (WA, Australian Labor Party) Share this | Link to 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.

Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

Thank you for warning me in advance; however, I hope the reverse is true.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I rise today to take note of the report of the Senate Standing Committee on Rural and Regional Affairs and Transport on carbon sink forests. I say at the outset that the rural and regional affairs and transport committee works very hard to get consensus reports and tries to address matters on the merits of the argument. We try not to engage issues along party political lines and have been pretty successful in upholding the concerns of rural and regional Australia in the best way we can within that context. So I am extremely disappointed that we have had to dissent from this report. I note that the dissenting report comes from the Australian Greens, the National Party and the Liberal Party of Australia. I think that says something about the extent of dissent there is about this.

Nobody would doubt my commitment to reducing greenhouse gas emissions and to getting Australia on the right track in dealing with climate change. If I seriously believed this carbon sink forest legislation was going to do anything to reduce greenhouse gas emissions in a reasonable way, I certainly would be supporting it, but this legislation is a disaster. It was thought up by the tax department and came into the parliament purely because of former Treasurer Costello, who wanted to introduce a tax break for people planting trees to keep them as carbon stores to match the tax break for people to put in trees to cut them down under the MIS schemes. So this is just an MIS scheme by another name. Its implementation is meant to be governed by environmental guidelines, but of course those guidelines are so weak you could drive a truck through them.

The issue we have before us is the loss of prime agricultural land around Australia, as it will be swallowed up by plantations. It seems that nobody is particularly concerned about food security, but I can tell you that this committee and the dissenting senators are very concerned about food security and ask the question: where will the food come from in the future? The only joy that the government could give us on reasoning why prime agricultural land would not go to these tree plantations was to say, ‘It will depend on the price of carbon, and the price of carbon is going to be so low there will be no competition and therefore food will be grown.’ So I asked that, if that were the case, why were MISs so successful. I will be seeking leave at the end of my presentation to table a report on a case study in Tasmania, called The Preolenna and Meunna story: where will the food come from? All that is left of that rural community is a plaque, which says:

THIS PLAQUE MARKS THE SITE OF THE MEUNNA YOUTH CENTRE OPENED BY THE HON. ERIC REECE, PREMIER IN MAY 1965. THE BUILDING WAS DEMOLISHED IN 1997 AND THE SITE PLANTED BY NORTH FORESTS BURNIE AND SET ASIDE AS A MEMORIAL TO THE SOLDIER SETTLERS WHO FIRST FARMED THIS LAND IN 1955.

There is nothing left but this plaque. In fact, the Australian Council of National Trusts put it on their endangered place list in 2000 because of the genuine threat rampant plantation establishment was having on the culturally significant rural landscape. At this point, for the benefit of the Senate, I seek leave to table the report, The Preolenna and Meunna story: where will the food come from?

Leave granted.

The point I make here is that this legislation will not prevent prime agricultural land being planted as carbon sinks displacing food crops. I have zero confidence in ABARE’s predictions of what the carbon price will do. Furthermore, it will lead to the perverse outcome of clearance of native vegetation, particularly the brigalow and the savannas across northern Australia, and that will be a disaster for carbon. So anyone who tries to tell me that this is about carbon is getting it completely wrong, because the perverse incentive will be there to convert native vegetation to plantations. The fact is that the best land with the best rainfall grows the best trees, so why wouldn’t you put it on prime agricultural land if you were intent on going out there and maximising your profits from carbon? As I indicated, there will be an incentive to clear the native vegetation, because it operates under the Kyoto rules, and under the Kyoto rules the savanna and the brigalow do not constitute forests being on the land at 1990.

There is no requirement for hydrological studies to be done in any catchment where you are going to plant these carbon sink forests. What we know from the MIS is that they have destroyed water flows in many creeks and rivers around Australia, and we still do not have proper interception legislation. So here we have a government going out and giving a tax deduction to plant yet more plantations in catchments without hydrological analysis and without interception requirements, and that can only be a horror for rural and regional Australia. Look at what has happened to the Murray-Darling. Apparently we have learnt nothing—saying that this will somehow be governed by the National Water Initiative, which the states have to comply with and have to have something in place by 2011. Thousands of hectares will be planted by 2011 and it will all be too late at that time.

The Department of Climate Change, we are assured, are going to check to make certain that carbon sink forests will meet natural resource guidelines and not interfere with existing patterns of water use. I ask: how are they going to do that? How are they going to check compliance with any of this? Of course they cannot. They are just saying that it is a guideline, that it is flexible, that it is not mandatory and that it has to comply with state legislation. But, if there is no state legislation, then you are deemed to have complied by virtue of the fact that there is no regulation to comply with. That is certainly the case in Tasmania and in the Northern Territory, both of which have extremely weak land clearance controls and legislation. I do not think that there is any proof at all that this legislation represents a valuable policy addition that will promote greenhouse gas reductions. As I said, it is likely to lead to greater emissions from conversion of native vegetation but also it makes no claims about the volume of CO2 that is suggested will be sequestered or the hectares that are due to be planted.

So there is nothing to say that the government’s plan is that there will be X hectares or X volume of carbon. There is nothing like that. It is just purely a tax bill. They thought it up as a tax bill under pressure from the MISs and the forest industry wanting the same tax breaks for trees to stay as there are for trees to go. Treasury thought it was a good idea; Environment was consulted as an afterthought. Even the biodiversity unit of the environment department was not consulted, so all these claims about the benefits that it is going to bring simply are not there. There are questions such as: why can’t you make it biodiverse plantings? Why can’t you require it to be in the ground for 100 years? Why can’t it be registered on the title? There is no permanence, even, with this proposal. You do not even have to put on the title of a property that there has been a tax deduction made for an area of carbon sink forests which cannot be cut down. There should be a covenant on the title. It is easy to do and it should be there. That is what the Liberals, the Nationals and the Greens are saying in the dissenting report. We are saying that the guidelines should be mandatory regulations and that these regulations should be in place and adhered to—namely, that no native vegetation can be cleared for or converted to carbon sink forests; that carbon sink forests should be biodiverse and cannot be harvested or cleared; that no carbon sink forests can be established in the absence of a hydrological analysis, including groundwater and interception in the area proposed to be planted; and that, finally, to avoid the destruction of rural communities and the displacement of food crops, prime agricultural land must be excluded from carbon sink plantings.

I think that it is more than reasonable that we get mandatory regulations to give us that effect. If we do not, we will have MISs on steroids, and the fate of the communities of Meuna and Preolenna in Tasmania—and we heard evidence from Queensland, from the Tully sugar communities, and from dairy communities elsewhere—will be the case right across Australia. That area in north-west Tasmania, which was an important rural community—in fact it was the birthplace of the rural youth movement—is now under a sea of plantations. There is nothing left. There is no infrastructure left except a plaque in the middle of plantation forests saying that it was once a rural community and that it was the site of the youth club and the hall in that community. That is the reality of MISs. It was a bad policy then, it is a bad policy now, and compounding it with this makes it even worse. I give notice that I intend to move for the disallowance of the regulations so that we can have these matters attended to, because they are critical for the sustainability of rural communities and the environment. (Time expired)

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

It is an interesting day when people such as Senator McGauran, Senator Heffernan, Senator Boswell, Senator Nash, Senator Williams, Senator Milne and Senator Bob Brown start agreeing on something. There was an agreement today that this legislation, as it stands, and more importantly the regulatory guidelines, as they stand, are a very bad outcome. I want to concentrate on one area—that is, the effect on regional communities. What these regulations allow, as they stand, is for the wholesale change of the economic conditions of certain regional towns and communities to be foisted on them by reason of a tax break given by the government. Let us start with market principles. If you believe that these forests should follow market principles then why give them an advantage? Why give this carbon sink an advantage which the cane farmer, the horticulturalist or the cattle grazier do not get? Why do we concentrate on this form of outcome?

We have to look at the ramifications of this, to show the Australian people a clear example. In an area such as Tully or one of the other areas where there are sugar mills, the sugar mills require a certain quantity of cane to turn up to them for the mill to remain viable. When you start giving an impetus for the cane land to be removed and turned into so-called carbon sinks, then the mills will go below critical capacity. They need a certain tonnage. Once a mill goes below a certain tonnage, the whole mill has to be closed down. Once the mill is closed down, that means not half the people lose their job; it means everybody loses their job and the houses surrounding the mill are affected. It means you lose the doctor and the nurse and the whole structure of the community starts to be affected because of the undue impost created by a piece of government legislation.

The other day I was in Bundaberg talking to some very successful horticulturalists at their diamond jubilee. These people buy and sell on the world stage. They are very astute business people and they find this anachronistic. They have had problems with similar areas where there has been an overproduction of avocados and other fruits by MISs, fruit which has come into their market and caused all sorts of turmoil. There is one thing that is worse than that and that is the production of trees for no real purpose whatsoever. People might say, ‘It’s to sequester carbon.’ If we want to be completely honest, we have found out through such people as Dr Christine Jones that we will sequester more carbon through summer perennial grasses than through dry sclerophyll forests. This evidence was delivered to the Senate inquiry. Dr Christine Jones is not a fool. She is at the top of her field. She is saying that summer perennial grasses with deep root systems—such as Flinders grass, buffel grass or cane—have the capacity to put into the ground far more carbon because 90 per cent of the vegetable matter is below the ground and 10 per cent above, as opposed to dry sclerophyll forests, where 90 per cent is above the ground and 10 per cent is below. If your object is to put carbon back into the ground, grasses will do a far better job than carbon sink forests.

So on a scientific premise, this legislation is also flawed or not encompassing for the outcome you wish to achieve. We have a whole range of premises coming on board here. Why are we so specific when we talk about carbon sink forests? Where did the word ‘forests’ come from? Why are we being so specific? If there is a potential income stream, as there will be from the sequestration of carbon by the sale of carbon credits, that means it is there for potential future revenue, so let it stand alone. If people want to put carbon sink forests in and collect an income stream, let them do it, but why should the government be giving an upfront capital expenditure deduction which the farmer over the next fence cannot get? These are the sorts of things which not only cause dysfunctionality in the economy—because of the undue concentration and impetus on a certain outcome that is not given to another, which does not reflect the economic dynamics of the area—but also cause a great sense of aggravation between people as they feel isolated from a certain process.

A lot of discussion has been going on since this issue was initially raised by such people as Senator Heffernan, Senator Boswell, Senator Nash and Senator Milne. We are calling on the government to have another think about this, to put their obstinacy behind them and look at the recommendations of changing the guidelines. If you want to go forward with what I think is a pretty ridiculous piece of legislation, so be it, but for goodness sake do it in such a way that we do not create this unreasonable outcome. If we do not preclude prime agricultural land, that is where carbon forests will go. The name of the game will be to have an auditable amount of carbon, which is obviously auditable from what you can see, as fast as you can possibly get it there. So you would be looking at areas with high rainfall and great soil types with the propensity to grow a heavy-forming timber. What becomes peculiar about this idea is that no-one has any intention of ever harvesting the timber. So you are not supporting a future timber mill. You are just supporting the demise of the area. These are the sorts of things which bring the issue together.

We look forward to the government, in all reasonableness, going forward over the next period of time. I hear Senator Milne is moving the disallowance. I imagine we have a period of time of 10 to 15 parliamentary sitting days—that will take us out to the end of November, early December. We want them to show that they have the capacity to respect the Senate on this one, to go away and say, ‘We are really in, on this issue, for a flogging to nothing, so why don’t we just do the reasonable thing and start amending some of these guidelines.’ It is the Labor Party that have always had the mantra ‘respect for the Senate’, even though we know that if any of them ever break ranks in the Labor Party, they are immediately expelled. But then they say that it refers to them as a group. I put it back to them as a group, and I think I might have some of the Independents, who are also going to support us on this. So it is looking like you are there, as a group and all by yourself on this one, to read the tea leaves and to respect the process of this chamber and to say: ‘Let’s look at these guidelines. They are causing problems. We do have the capacity to fix them.’ Then they can go forward and make some structured decisions that look at such things as whether there has been a history of a commercially successful crop grown on the area. If there is a history of a commercially successful crop, look at the wider socioeconomic dynamics of the income stream of the area and accept that there are other people this affects apart from the people whose land it is on. It is in the whole community where this area derives from that this has to be dealt with.

If they are honest, if they truly respect the Senate, then they will go back and they will start to write some changes down and say, ‘Look, we’ve got something here for you, have a look at this,’ and we will see what we can do. But at this point in time all we have is this objectionable obstinacy: ‘We’re not going to change because we are the Labor Party and we refuse to listen to people and this is all about the Labor Party showing everybody how big our muscles are on this one.’ There is something that can be done. There are other issues that I note Senator Heffernan has brought up, and I am sure he will speak to them and I am sure Senator Nash and Senator Boswell will speak to them as well. But my appeal is really one of a collegiate sense of bipartisanship: please look at these regulations that you have put forward, think of the impacts on regional towns and change them.

Fiona Nash (NSW, National Party, Shadow Parliamentary Secretary for Water Resources and Conservation) Share this | Link to this | Hansard source

I rise to make a few remarks on the report of the Senate Standing Committee on Rural and Regional Affairs and Transport Implementation, operation and administration of the legislation underpinning carbon sink forests. It is a bit of a mouthful, but it is a very significant report. To start with, I want to echo Senator Milne’s comments that she made at the outset. This committee does, by and large, act as a bipartisan committee. We work very hard on the committee to make sure that we work to achieve the best outcomes that we can collectively for rural and regional communities—but, unfortunately, not on this issue. On many occasions we have spent time trying to see if we could find a common position, but with this one it was completely impossible due to the nature of the report. There were so many areas that we—the Greens, the Nats, Senator Heffernan—disagreed with that it was impossible to come to a collective viewpoint and, hence, we see the dissenting report.

The impact of this legislation is potentially highly significant for rural and regional communities. This legislation is under the cover of regulatory guidelines that you could drive a truck through. They are loose, there is nothing specific at all about them that would give us any comfort in believing that the issues that we have will be addressed—certainly that issue of prime land. We do not have an issue with using prime agricultural land for carbon sink forests. What we have the issue with is having specific legislation that is providing a tax deduction to put those carbon forests on that prime agricultural land. One of the issues surrounding this, and which we are discussing at length these days—not just in this country but around the world—is that of food security. Our government, and governments around the world, need to be extremely careful about the policy decisions that we make that are going to impact on food security, and my good colleague Senator Heffernan is continually referring to the increase in the world’s population and the pressure that is going to be placed on the provision of food to people right around the world. We cannot understate how important this is, that the government gets it right.

As my colleague Senator Joyce said, we are appealing to the government to be sensible and practical and open-minded about reviewing how they have written the guidelines for this piece of legislation. It is not incredibly onerous on them to make the changes we are suggesting. What they will provide is good outcomes for regional communities. The report says:

The committee further notes that carbon sink forests do not appear to be activities that offer high returns over a short period of time. The committee therefore believes that it is unlikely that the availability of a tax deduction for a limited range of expenses would be sufficient incentive to cause the large scale planting of these forests.

It is ‘unlikely’. We cannot give any certainty with the guidelines at the moment that we will not see carbon forests appear on prime agricultural land. So what we are saying is we need to exclude that land. It is quite appropriate that they may be placed on marginal land, but not prime agricultural land that should be used for the purposes of food security and for the provision of food—not only to this nation but right around the world.

I would also like to raise the issue that there is no requirement that a hydrological study, including interception, be taken. This very same committee is doing a lot of work at the moment on water and the Murray-Darling Basin—the impact of the lack of water right throughout the basin and the causes and effects of that lack of water. What we see here is absolutely no requirement for a hydrological report to be done. There is no requirement to study the effects and the impacts of the planting of those forests on the water and on the environment. There is compliance with the NWI that water plans need to be in place by 2011. We had evidence from witnesses that, even if we get to that point, which may well be after plantings have been done, there are virtually no penalties that could be put in place. We are appealing to the government to consider what we are putting forward. We have a very collective view on this. These are very serious matters that need to be addressed, and the government should certainly be considering these with an open mind and doing the right thing by rural and regional communities.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

I have no time now, so I seek leave to continue my remarks later.

Leave granted; debate adjourned.