Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

The committee is considering amendments (1) to (4) on sheet 7129 revised, moved by Senator Xenophon and the opposition.

Simon Birmingham (SA, Liberal Party, Shadow Parliamentary Secretary for the Murray Darling Basin) Share this | Link to this | Hansard source

Obviously these were amendments under debate immediately prior to question time and we heard from the minister immediately prior to question time. Unfortunately what we heard from Minister Ludwig was one of those wonderful contri­butions that goes something along the lines of, 'Trust us, we will work it out a little bit later.' This was basically his contribution in a nutshell: 'Yes, we are having discussions. We acknowledge there is a problem that needs to be addressed. We are working to find a way to address it'—the minister suggested it might take about a month to come up with that solution—'but we would be most appreciative if you would pass the bill in the meantime.' Unfortunately the 'Trust us, we'll fix it later' approach to government is something that we have come to be extraordinarily wary of when it comes to this government. We do not think that they can be trusted to sort things out later. Senator Xenophon and the coalition have worked together to put forward amendments to deal with issues particularly faced by the landfill gas sector because we want to know that there is going to be a solution. We also want to know that that solution will be in cast iron terms and acceptable, to make sure that we do not have the type of perverse outcomes that we have talked about previously.

As I highlighted with a prior amendment, this amendment is one that particularly relates to the flow-on effects of the cessation of operation of the New South Wales Greenhouse Gas Abatement Scheme and how the Carbon Farming Initiative provides a capacity to pick up from there when that scheme ceases operation. The GGAS has driven landfill gas collection and CO2 abate­ment from the waste sector quite effectively. The electricity generation projects built under that scheme, as well as under the Commonwealth's Greenhouse Friendly scheme, have been reliant upon income from offset credits. GGAS will cease at the point of a carbon price coming in and we are advised that without that type of credit support a number of these projects have the potential to become quite unviable. That is why we think that it is so important that we make sure that the viability of these projects is guaranteed and that they are secured for the future, wherever they are.

The Carbon Farming Initiative, as proposed by the government, could be a possible solution to this but unfortunately it is currently not. It does not do enough to ensure that those who went in early and did their best to capture emissions and do something constructive with them by generating electricity are not disadvantaged. We do not want to end up with the perverse outcome of having a government implement­ing a scheme that is designed and intended to ensure that we get a growth in emission abatement activities, but instead we risk seeing the possibility that the early mover advantage is lost and they cease those abatement activities. The Carbon Farming Initiative offset credits could and should be used in lieu of the credits that these schemes have previously relied upon. That is what we would hope to achieve out of the amend­ments that Senator Xenophon and the coalition have pursued. GGAS landfill projects are not, of course, specifically identified on the positive list, and a number of them are required to collect some gas, under their EPA licences, for odour control and safety. Under the bill as it is proposed, projects must be on the positive list, or not be required by law, and may have a baseline applied. Industry is concerned that this creates uncertainty, given questions as to how much gas must be collected by law, about whether they may in fact be excluded from the CFI and, if not, what the accepted baseline is that will be applied. We have attempted to address those issues in the amendments that have been put forward. To resolve this, it has been suggested that these landfill gas projects be added, with a standardised baseline to cover off these issues, so that they can continue with some certainty and continue to operate commercially and effectively.

The landfill gas industry is important and it is significant. In 2009, waste in landfills generated total emissions of 15½ million-plus tonnes of CO2 equivalent, of which around 4½ million were recovered. That is a good, positive effect and it shows a baseline around 29 per cent. However, industry is concerned about whether that is a fair or effective indication of common practice, especially because a large proportion of the abatement was due to GGAS and GHF landfill gas projects. Those GGAS landfill gas projects, I am advised, accounted for abatement of around 3.3 million tonnes of CO2 equivalent, or more than 20 per cent of landfill emissions in 2009. It has been estimated that GHF, Greenhouse Friendly, landfill gas projects accounted for abatement of around 700,000 tonnes of CO2 equivalent. So when you take out the GGAS and GHF, Greenhouse Friendly, projects the raw baseline number of existing activity is reduced to below five per cent, on these sums.

The industry concede they do not see that as a realistic baseline and acknowledge that some abatement that would have occurred from these other incentive schemes would have occurred in any event for other reasons. They argue that a 10 per cent national baseline for GGAS landfill projects would be realistic. We have set out some figures in these amendments that set dual standards dealing with the different schemes that have been in operation to date. Given the proven nature of the technology involved here and the activities that are underway, and given of course the reliability of the existing schemes and the manner in which they have been built up—they have been voluntarily entered into and have had significant investments made in them; not unreasonably, as a result of the incentives that were there—it is important to make sure that they are accommodated under the Carbon Farming Initiative. I know the minister gave some assurances that they would be but, as I said before, assurances, promises and 'she'll be right, mate' type commitments do not quite cut it anymore. We want to know that there is an agreement in place that provides certainty for these facilities, whether they are the facilities in Bendigo or Ballarat, the facilities in Tweed shire or Newcastle, or the facility in Launceston—facilities, I am told, that could be jeopardised if we get this wrong. From those landfill sites we would then see increased emissions escaping and have the perverse outcome that in passing this and getting it wrong we have actually increased emissions in parts of the economy. That would make absolutely no sense to anybody. I think everybody in the chamber who has spoken on this to date has agreed that that type of outcome would make no sense. Senator Xenophon and the coalition are attempting to prescribe a solution to ensure that that would not be the case. We think that getting a solution in the legislation in the here and now is the best way to take this forward.

We are pleased that Senator Milne and the Greens have acknowledged that there needs to be a solution and we are pleased that the government have acknowledged that there needs to be a solution. The concern, though, is that the government have to date failed to provide any reassurance to the parliament on what that solution will be and how it will be applied and, importantly, failed to provide reassurance to industry to make sure they are confident in and comfortable about the manner in which this will move ahead.

So I would leave the challenge there for the minister. We would hope to get something far more certain than the words he uttered before question time on this matter. If we do not, we will certainly be persevering with this amendment. Obviously, unless we proceed very quickly through this, he will have at least an extra couple of days to come up with something that provides all parties—and I would trust that Senator Xenophon and the Greens feel likewise—with a lot more confidence that a solution is there than what he has said to date.

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

Earlier today, in making my contribution on this amendment and acknowledging the problem that we had, I indicated that I would be taking a watching brief according to what has been negotiated in discussions between all parties, with the Greens talking to the LNC, Senator Xenophon and the govern­ment. I have had further meetings in relation to this and I am now satisfied that there will be an outcome within a month that will set an appropriate baseline that is fair and takes into account what would have occurred otherwise and what can genuinely be regarded as additional. I am satisfied that we will get to that outcome within a month to the satisfaction of all parties. The sooner that can happen the better for all parties concer­ned. I thank the industry across Australia for having drawn the attention of the Senate to what could have been a perverse or bad outcome. That is one of the good things about having a community engaged with legislation as it goes through—you can actually get to address some of these issues.

One of the main concerns I have about the amendment is the impact on the integrity of the DOIC as it has been established. The whole point here was to have an independent and rigorous assessment of methodologies and have a body that can come up with baselines and methodologies for the kinds of numbers that we come up with that are rigorous and can be defended in any fora, both domestic and global. I want to make sure that we do not have political direction of the DOIC which would undermine at the start the very idea of having an independent integrity commission.

At the same time I want to make sure that there would not be job losses or the closing down of facilities that are assisting us in reducing our emissions across Australia. I indicate to the Senate that the Greens will be opposing this amendment for that reason. I am satisfied that we have now reached a conclusion that will be satisfactory to all parties. I also put on the record that if a resolution of this issue does not occur in the next four weeks to the satisfaction of all parties, we will be discussing it again.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I am grateful for Senator Milne's contribution and also for her intervention. She has taken a keen interest in trying to get a resolution to this carbon emissions matter. I agree with the sentiments of what she is saying. If this amendment is lost—it is not a criticism of the government in any way—I worry about what remedy there is if there is an unsatisfactory solution. That is a genuine question. If the amendment is lost, what recourse can LMS, and other entities that have been doing good work on greenhouse gas abatement over many years, have? What are they left with? I accept from the minister that the negotiations are proceeding with goodwill but I am concerned that, in the absence of a legislative framework, these entities are vulnerable. They have done the right thing.

It is worth reflecting on recommendation No.1 of the Senate Environment and Communications Legislation Committee into this Carbon Farming Initiative legislation. Paragraph 2.36 states very clearly:

The committee recommends the government consider options to ensure there are no perverse incentives to cease existing abatement projects, and encourage first movers to undertake further abatement or sequestration activities under the Carbon Farming Initiative.

The devil is in the detail. If a formula is not set by legislation, which is my preferred outcome and that of my co-sponsor, my colleague Senator Birmingham—we moved this jointly, with Senator Birmingham doing so on behalf of the opposition—then we will have some difficulty. It is regrettable that it has had to come to this, that an amendment had to be introduced, but Senator Milne took a very active and laudable role in trying to deal with this matter and that was most welcome. I know this sector is very grateful for Senator Milne's interest and intervention but it is still not quite resolved, and that makes me very nervous. That is why it is important to proceed with this amendment.

If this amendment is defeated—it appears the numbers are not here to pass it—what recourse will there be if there is a stumbling block in negotiations? Secondly, as I understand it, there are some figures that are toing and froing on baselines. I know that negotiations have been taking place with goodwill on the part of the department and the minister's office and the industry sector, but what safeguards are there if there is a breakdown in negotiations? Are we back to square one and back to the uncertainty? These are businesses that need to look at their financing or refinancing, and the uncertaity would be a significant factor in their long-term commercial survival. Despite the fact that I accept everyone's goodwill on this issue, I wonder how we deal with that conundrum,?

Joe Ludwig (Queensland, Australian Labor Party, Manager of Government Business in the Senate) Share this | Link to this | Hansard source

I will go back to what I said originally about this matter. It is important to maintain the integrity of the system. Senator Milne said it in a perhaps shorter way than I am about to, but this amendment seeks to take things outside the available procedures that have been established to make sure that in an international setting those people who look at the integrity of the system see that it is not compromised.

This amendment avoids the methodology; it avoids having an independent assessment. It puts in a specific clause that would open up the ability for others to come along and say, 'We have our own specific circum­stances and we therefore want a legislative solution. We want the same as the landfill industry.' You open up the integrity and put it in jeopardy. Secondly, dealing with what I think Senator Xenophon talked about, this is not a negotiation. It is very important to keep that in mind—it is not a negotiation.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

It is.

Joe Ludwig (Queensland, Australian Labor Party, Manager of Government Business in the Senate) Share this | Link to this | Hansard source

It is not a negotiation; it is an evidence based way of gaining what the baseline would be. So you do not sit in a room, as with industrial relations, and bargain about what the baseline should or should not be. It is about an evidence based outcome. Why? Because internationally we want to maintain the integrity of the system. To do that there has to be an independent assessment. It has to be evidence based and the methodology has to be followed. That is why we do not support a separate individual amendment dealing with one industry which then bypasses that. You would want them to go through and develop the methodologies—evidence based metho­dologies—and have the independent assess­ment to ensure the integrity of the system so that where it lands it is supported by the evidence.

Ultimately it is a legislative instrument and if people disagree with it, it will come back here as a legislative instrument. We all know that, if the legislative instruments get it right, they generally go through this place. If they do not then there is an opportunity for those people to disallow the instruments in the Senate if they do not think they got it right. That does mean, however, that if it is disallowed it will have to go back through the process again. But that is what people can decide to choose in the Senate—it is always an option available to us. So it is much better to deal with it in that way than to simply mandate through what is ultimately an amendment to the bill, which would then be an amendment to the act, which is specific and about only one industry. It then goes around the actual integrity of the system. So what you are doing in one fell swoop is making sure that the bill itself, if it were to be passed with this amendment, would already have a hole in it; it would have a landfill—it would make sure that it would be criticised for not being able to stand up to scrutiny and not having an independent process to assess each of the methodologies. So to deal with Senator Xenophon's issue around negotiation, it is consultation, sure; but it is evidence based to arrive at appro­priate, researched figures which are backed up by the evidence. So it is not a bargain.

Lastly, to deal with the issue of ensuring that everybody got it right—it is a legislative instrument; people can decide in here that they did not get it right and make their own judgments about that. But first and foremost it is, with the best of government intention, designed to solve this in a very short space in time—because we do recognise there is an issue that needs to be resolved, but the way to resolve it is to use the framework.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I am fired up now. I appreciate the minister's answer, but it is a negotiation. The minister says it is not a negotiation, it is not collective bargaining, it is not a plea bargain—but it is a negotiation about a structure to ensure that there is some fairness and equity in this. This is not a surprise to the government or to the department. This has been going on for month after month after month. LMS have been knocking on doors, trying to get an equitable outcome here, warning of the perverse outcomes. You had the Senate committee making very clear in their first recommendation that the government should consider options to ensure there are no perverse incentives. They have been saying that the incentives are perverse under the current bill. We have had this eleventh-hour approach—and thank goodness for Senator Milne's intervention in this to try and get a just outcome, an equitable outcome, an environmentally sound outcome—and yet we are still talking about something that should have been resolved months ago. How many months have to pass, how many doors do they have to knock on, to get this outcome? This is not acceptable.

This is something that the government was aware of and was warned about; the minister's office was aware of it. And yet we still have a situation where there is a lack of certainty; there is continued uncertainty in what is being proposed. So why will it take a month? My question to the minister is: why on earth will it take a month, when you have been on notice about this for many, many months? Why can't we get a formula in place that gives certainty to this sector, which has been an early adopter—in fact, the first adopters, I would dare to say—of greenhouse gas abatement?

Simon Birmingham (SA, Liberal Party, Shadow Parliamentary Secretary for the Murray Darling Basin) Share this | Link to this | Hansard source

If I can just add to Senator Xenophon's question of why will it take a month, and put a slightly different perspective on that question: Minister, if you are going to follow all of the processes laid out in the act, if it is going to be a fully independent determination of the DOIC, how are you going to do it in a month? By the time this legislation goes back to the other place, is dealt with, is proclaimed, and then you have gone through the appointments processes of the membership of the committee who do all of their determinations and come up with a methodology as pre­scribed in the legislation, how on earth are you going to provide that certainty within such a short space of time? It strikes me that your arguments conflict with one another. It strikes me that on the one hand you are saying, 'We want to deal with this quickly; and trust us, we can and will deal with this quickly and provide certainty to this sector', but on the other hand you are saying we have to go through all of the processes laid out in this bill to maintain the integrity of it. It strikes me that it is utterly impossible for you to be able to go through all of the processes laid out in this bill, maintain the integrity of it and at the same time achieve an outcome in a very short period of time. So which is it, Minister? Is it a negotiation—which you claim it is not—that will give us an outcome in a short space of time, or is it rather a proper process of the bill which will leave this industry hanging in limbo and uncert­ainty until such time as all those of processes have gone through; and of course it will be quite some time before we actually see those regulations relating to these methodologies come back to this place.

Progress reported.