One year ago I became the first independent member for Bradfield. For three decades before that, I worked in energy, climate and finance, and in that time I\u2019ve watched governments of all persuasions make the same mistake: leaning on fossil fuels to solve the problems created by fossil fuels.<\/p>\n
Today, these missed opportunities are doing more damage than ever. The biggest fossil fuel crisis in history has pushed us into a new reality, with the head of the International Energy Agency declaring the imminent death of the fossil fuel era: \u201cThe damage is done \u2026 This will have permanent consequences for the global energy markets for years to come.\u201d<\/p>\n
If fossil fuels are the problem, they cannot be the solution. There are simple changes available to the government that would achieve its goals of improving energy security, balancing the budget and reducing emissions. Unfortunately, however, these changes are still being ignored.<\/p>\n
The most recent budget made these missed opportunities abundantly clear. First, the government poured about $14 billion into liquid fuel security, underwriting oil imports and establishing a government-owned fuel reserve. This is important for supply chain resilience, but it\u2019s only a short-term fix, and an\u00a0expensive one.<\/p>\n
Electrifying transport and heavy industry is the only real long-term solution for energy security. Yet new budget funding for electrification is negligible: a few small measures, such as $40 million for electrifying Australia Post\u2019s truck fleet. Electric trucks are technologically mature and commercially viable. In China, electric truck sales are predicted to overtake diesel truck sales this year. It would take an investment of just $3 billion to deploy 30,000 to 50,000 new electric trucks by 2030 and displace up to a billion litres of diesel a year. This would make our roads quieter and our air cleaner, and ensure we can stock our supermarket shelves during an oil shock.<\/p>\n
Then there\u2019s the Fuel Tax Credit Scheme, Australia\u2019s largest fossil fuel subsidy, which retained its place in the list of the budget\u2019s 20 largest expense items. The scheme hands out billions every year to incentivise the country\u2019s biggest resource companies to keep burning diesel: companies such as BHP, Rio Tinto and Fortescue.<\/p>\n
This policy makes no sense from any angle. It undermines energy security by encouraging mining companies to use more diesel \u2013 taking it away from the other industries and ordinary Australians struggling to meet rising prices. It also comes at an enormous fiscal cost. The scheme is estimated to cost $10.7 billion this financial year, of which about $4.5 billion will go to mining companies, and $47 billion over the forward estimates.<\/p>\n
The Fuel Tax Credit Scheme, Australia\u2019s largest fossil fuel subsidy … hands out billions every year to incentivise the country\u2019s biggest resource companies to keep burning diesel: companies such as BHP, Rio Tinto and Fortescue. This policy makes no sense from any angle.<\/p>\n
Any attempt to pressure the government on this issue has the wheels spinning and elicits a predictably furious response from sections of the mining industry. Last month, I brought an amendment that laid bare this truth. My amendment pointed out that while the government has temporarily reduced the fuel excise to deliver cost-of-living relief for consumers, it continues to permanently cut the fuel excise for mining companies through the Fuel Tax Credit Scheme.<\/p>\n
The government and Coalition voted the amendment down \u2013 although One Nation\u2019s newest MP, David Farley, unexpectedly supported it, perhaps in error, drawing the ire of the Minerals Council. More than 300 Labor branches are now also calling for changes to the scheme, but the government refuses to budge.<\/p>\n
The Fuel Tax Credit Scheme also works against the government\u2019s emissions reduction policies. In response to a question I asked during Question Time last month, Climate Change and Energy Minister Chris Bowen suggested these incentives to burn diesel are outweighed by incentives to reduce emissions under the safeguard mechanism, the government\u2019s flagship climate policy.<\/p>\n
Sadly, the opposite is true. The safeguard mechanism is meant to drive down emissions from our largest polluters, but it is riddled with holes and covers less than a third of Australia\u2019s total emissions. There are feeble penalties, no real emissions caps and unlimited offset use. In practice, the safeguard mechanism gently asks companies to pollute less, while the Fuel Tax Credit Scheme pays them generously to carry on polluting.<\/p>\n
Recent revelations about BHP show this in action. Leaked documents reveal BHP shelved plans to electrify its fleet and kept spending hundreds of millions on new diesel trucks. This decision was surely incentivised by the government\u2019s regressive policy on fuel tax credits. Last financial year, BHP collected $622 million in these tax credits and was forced to pay less than $9 million under the safeguard mechanism. In the same year, it made more than $15 billion in after-tax profit. This puts the lie to Bowen\u2019s claim about the safeguard mechanism. Why would BHP electrify its vehicles when faced with these imbalanced incentives?<\/p>\n
The safeguard mechanism is due to be reviewed this year, which offers an opportunity to rebalance this broken system. Yet reforming it will mean little if the Fuel Tax Credit Scheme remains untouched. Thankfully the solution is not complicated. Capping the scheme at $50 million per recipient would affect just 18 large resource companies \u2013 BHP, Rio Tinto, Glencore and the like \u2013 allowing farmers and small businesses to keep receiving credits below the cap. This reform could be designed so that if companies wanted to receive credits above the $50 million cap, they would be obligated to reinvest that money into electrification and decarbonisation initiatives like the electric trucks BHP cancelled.<\/p>\n
The third problem with the budget\u2019s approach to climate action is less a missed opportunity than an own goal. Buried in the papers is a small line item confirming higher taxes on overseas clean energy investors. Ensuring foreign investors pay their fair share is a good idea, and one not contested by the renewables industry, but as always the details reveal more about what is really happening.<\/p>\n
The changes would introduce a four-year transition period into the new higher tax regime, which sounds reasonable \u2013 indeed, the treasurer frames it as a generous concession to the renewables industry \u2013 but in real terms it is too short, as most renewable energy projects need 10 to 15 years to get up. This change will simply cause a fire sale of renewable assets and then a chilling of investment after 2030.<\/p>\n
Given that three quarters of clean energy investors in Australia are international, these changes will seriously undermine the build-out of solar, wind and batteries. Modelling shows the changes will delay the achievement of our renewable energy targets. They may not even generate more tax revenue if they shrink the number of clean energy projects entering the market.<\/p>\n
When the government introduces these tax amendments, it would be well-advised to lengthen the four-year transition period to align with our 2050 climate goals and create a level playing field with domestic superannuation investors by setting a shared tax rate.<\/p>\n
Of course, the most important and infuriating aspect of these changes is that while the government is willing to raise taxes on clean energy, it remains implacably opposed to taxing gas exports. The absence of a gas export tax was a serious hole in the budget. Most Australians are now aware that we export most of our gas \u2013 forcing domestic consumers to pay international prices for whatever we keep for ourselves \u2013 but collect almost nothing in royalties or taxes on those exports. The enormous revenue they generate lands in multinational corporate coffers instead of in the public purse.<\/p>\n
The most popular proposed reform \u2013 a 25 per cent tax on export revenue \u2013 would raise an estimated $17 billion a year. That\u2019s enough for free dental, free university education, or more wraparound services for National Disability Insurance Scheme participants \u2013 take your pick.<\/p>\n
All these missed opportunities and misguided changes matter more with COP31 fast approaching. Minister Bowen has secured the role of leader of negotiations but will struggle to credibly lead the world\u2019s climate talks while continuing to subsidise fossil fuels at home. These contradictions are particularly stark following Australia\u2019s decision to endorse a global declaration to transition away from fossil fuels at last year\u2019s climate talks in Brazil.<\/p>\n
The common thread here is the government\u2019s willingness to sabotage its own objectives in aid of fossil fuel profits. In doing so, it undermines energy security, clings to a fiscally reckless multibillion-dollar subsidy and erodes its international climate credentials. These simple reforms are still on the table, and it will be harder for the government to keep ignoring them. If fossil fuels are the problem \u2013 and they are \u2013 the answer is never going to be more of them.<\/p>\n","protected":false},"excerpt":{"rendered":"One year ago I became the first independent member for Bradfield. For three decades before that, I worked…\n","protected":false},"author":2,"featured_media":777575,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[64,63,75,128],"class_list":["post-777574","post","type-post","status-publish","format-standard","has-post-thumbnail","category-environment","tag-au","tag-australia","tag-environment","tag-science"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/777574","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=777574"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/777574\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/777575"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=777574"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=777574"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=777574"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}