Andrew Leigh

4 June 2014

The Excise Tariff Amendment (Product Stewardship for Oil) Bill 2014 will increase the rate of excise and excise equivalent customs duty applying to oils from 5.449 to 8.5 cents per litre or kilogram to address the cost of the Product Stewardship for Oil Scheme. The kinds of oils to which this would apply, as I understand, are oils like kerosene, turpentine and thinners. The opposition supports any move to ensure thoughtful and sustainable use of our precious natural resources. The Product Stewardship for Oil Scheme—the PSO—encourages increased collection and recycling of used oil in Australia by providing oil recyclers with product stewardship benefits.

But unfortunately, the government's commitment to protecting our natural environment does not extend much further than tokenistic gestures. The government simply has no credibility when it comes to the environment. In fact, the member for Batman beside me will sometimes interject when the Minister for the Environment jumps to his feet, 'He's not the Minister for the Environment! He's the Minister against the Environment!' A government that lacks a minister for science effectively lacks a minister for the environment.

That is why Australia is moving backwards on its reputation for protecting World Heritage icons and it is why the government has disallowed the endangered community listing of the river Murray from the Darling to the sea. Why don't we—against all reason, all advice and sneakily—have the world's largest marine reserve system re-proclaimed to undo the management plans to give them effect? They have begun the process of handing over environmental approval powers to the states, to give Campbell Newman control over the Great Barrier and Colin Barnett control over Ningaloo Reef. But worst of all, the government is moving backwards on climate change—moving from sound science and economic based approaches to approaches that will cost more and do less.

The key point of a carbon price is that it internalises the externalities—a terrific philosophy and, indeed, a philosophy that I see when I turned to the explanatory statements behind this bill on the Department of the Environment's website. On that site I see:

The levy offsets the costs of benefits paid to oil recyclers as an incentive to undertake increased recycling of used oil.

This ensures that some of the costs of used oil recycling are borne by the markets that gain the benefits from the production and use of that oil rather than from public monies and other markets. In economic terms, it internalises the externalities—a terrific idea. If only this government could do it not only for oils but also for carbon pollution. We know that Australia has a carbon price which is working well. It is not an economy-wide carbon price as some of those opposite would have you believe. It covers about 60 per cent of domestic emissions, excluding largely agriculture and transport.

But the electricity sector, the industry most directly covered by the carbon price, has seen its emissions fall 7.6 per cent, 14.8 million tonnes, in the first year of the carbon price. So let no-one tell this House that the carbon price is not working already. And so much for $100-roasts and whale being wiped off the map. We have seen strong economic activity in the period since the carbon price was put in place. There are challenges to consumer confidence in retail sales at the moment but, in the immediate period after the introduction of the carbon price, there was no evidence that it was going to lead to the economic Armageddon that those in the coalition were suggesting. It is particularly ironic that we have a Treasurer who says in his budget speech:

I look at my children and I say there is no way on God's earth I am going to leave you with a debt …

Yet this desire for dealing with deficits has not extended to, for example, reducing the deficit, because compared to PEFO, as the member for Cook yesterday pointed out, the government has increased the deficit—this year, next year and over the forward estimates. But if you are focused on intergenerational equity, why on earth would you kick the can down the road on climate change? Why would you eschew a measure which, in economic terms, internalises the externalities? It is good enough for oils; it should be good enough for tackling climate change.

Standing beside President Obama, the head of the Environmental Protection Agency, Gina McCarthy, said recently:

This is 'not just about disappearing polar bears or melting ice caps. This is about protecting our health and our homes.

This is about protecting local economies and this is about protecting jobs. And that is exactly what a carbon pricing scheme does. It ensures that we get least-cost abatement and are therefore able to keep up with the rest of the world, which is moving significantly faster than us on climate change. We know now the United States is aiming for 17 per cent emissions by 2020. Australia will struggle to hit the five per cent emissions reduction target.

How are the United States doing it? Those opposite will have you believe that the United States are purely committed to direct action; President Obama loves nothing more than direct action. But of course President Obama's first option for dealing with climate change was to take a cap and trade bill, co-sponsored by John McCain, to the congress. That was killed off. Some of the more extreme elements of the Republican Party killed off his ideal cap and trade scheme. President Obama is now going to 'pivot', as he puts it, to a cleaner energy future via strict limits on carbon emissions from power generators and through cap and trade schemes that will place a commercial price on carbon permits.

As the shadow environment spokesman, Mark Butler, noted,

Tony Abbott's refusal to accept the magnitude of climate change is sending Australia backwards while the rest of the world moves forward.

As OECD Secretary-General, Angel Gurria, pointed out:

You make a more business friendly, labour friendly and greener friendly tax structure.

It was precisely what Labor did in government in introducing the carbon price. We put in place a scheme which increased the taxes on pollution and lowered the tax on work, because we wanted more opportunities for people to work but less carbon pollution and that is exactly the outcome we saw. The OECD Secretary-General has acknowledged, as the explanatory memorandum to this bills does, that in economic terms you want to internalise the externalities.

As the Prime Minister heads to the United States, he has been roasted by John Oliver on HBO's satirical news program Last Week Tonight. A part of that is his flip-flopping on issues of climate change. The Prime Minister, as the member for Wentworth has noted, has been a weather vane on climate change, has held every possible position on climate change. He supported what he called a carbon tax—'why don't we just deal with it with a simple tax'—not while he was at university but while he was a member of this House. Flipping again—the weather vane that he is—he said on 27 July 2009 on the 7:30 Report:

I am, as you know, hugely unconvinced by the so-called settled ... Atmospheric concentrations of carbon dioxide have significantly increased ... of industrialisation, but it seems that noticeable warming has only taken place between the 1970s and 1990s.

It would be news to the Prime Minister that 13 of the 14 hottest years on record have occurred since the year 2000. Australia has just had its hottest year on record. We have had the hottest winter on record. We have had the hottest summer on record and we have just seen record hot spells across Australia. So the climate deniers have the lie put to them by the Bureau of Meteorology. I know there are members of this House who think the Bureau of Meteorology is part of a great big conspiracy with NASA, CSIRO and some of those other wicked folks that have dreamed up climate science. But to serious public policy players, this is a serious problem that demands a solution. What kind of solution? A solution that, in economic terms, internalises the externalities. What solution is this government proposing? They are proposing a $40 billion slope. According to modelling by the Climate Institute, the Emissions Reduction Fund, if it is to do the job of just getting a five per cent emissions reduction target, would need to spend $40 billion by 2020. If the government spends less than that then, as a consequence, they will not even hit that five per cent emissions reduction target. So we will undershoot five per cent while the US gets 17 per cent.

What do experts think when they look at the government's Direct Action Plan? A survey by Fairfax's Matt Wade and Gareth Hutchens found that 33 out of 35 economists rejected the government's Direct Action policy. Internationally renowned economist Justin Wolfers of the Brookings Institution at the University of Michigan—I should disclose that Justin is a friend of mine—said that he was surprised that any economist would opt for Direct Action. BT Financial's Chris Caton said any economist who did not opt for emissions trading 'should hand his degree back'. When confronted with this sort of evidence in a survey of the Economic Society of Australia, Mr Abbott, in 2011, said: 'Maybe that's a comment on the quality of our economists rather than on the merits of argument.' The Prime Minister has never seen an expert that he did not want to trash-talk. He has never seen an expert committee he did not want to shut down.

There is of course some wisdom on the other side of the House, but you have to go back a while. You do not have to go back to 2003; no, you have to go back a long way before that. In order to get to the member for Flinders' thesis, you have to go back to 1990. Greg Hunt's thesis was titled A tax to make polluters pay: the application of pollution taxes within the Australian legal system. It argued that: 'A pollution tax is both desirable and, in some form, inevitable.' It noted that 'even if some Liberals'—and he got the apostrophe wrong but let's not worry about that—'constituents do respond negatively, a pollution tax does need to be introduced to properly serve the public interest.' It goes on to say:

Ultimately it is by harnessing the natural economic forces which drive society that the pollution tax offers us an opportunity to exert greater control over our environment.

There is the member for Flinders in 1990, making the same point that the explanatory memorandum makes. Let me quote from the explanatory memorandum again: 'In economic terms, it internalises the externalities.' If it's good enough for oil, it should be good enough for carbon pollution.

Alas, the member for Flinders has moved away from that position. He moved away from it surprisingly quickly. The parliamentary secretary was impugning my motives for shifting my view on a GP co-payment; I now take the view held by the Australian Medical Association and the Medical Journal of Australia. But the member for Flinders cannot find a single serious economist to back Direct Action. What was the point at which he changed—or, dare I say it, the tipping point? Of course it was the one-vote change in the Liberal Party room, from Malcolm Turnbull to Tony Abbott as leader of the Liberal Party.

There are now climate deniers run rampant. We have the Liberal member for Dawson, George Christensen, saying that 'a number of Liberals disagree that climate change is real'. The Prime Minister's chief business adviser, Maurice Newman, disagrees with 97 per cent of the world's scientists—apparently Mr Newman is a better judge of science than 97 per cent of the world's scientists—and he thinks there is no evidence of man-made climate change or of any climate change at all. The Direct Action is a policy that pays polluters to pollute, which is more expensive and which will not do the job.

We still do not have details about the policy. As the shadow minister for the environment has pointed out, we do not have the fundamental details of a policy which the coalition took to the last election. We do not know the penalties that would apply to overpolluters. We do not know anything about the government's so-called 'safeguard mechanism'. We do not know how contracts allocated under the Emissions Reduction Fund could be for a five-year period, as the government claims, off a four-year funding base. We do not know how we can have crediting periods under the Emissions Reduction Fund for three to 15 years with a financial commitment of four years. The Minister for the Environment, Mr Hunt, has not explained how Australia could meet its target without applying a cap on pollution. And he has not made it at all clear why polluters should participate, given that there is insufficient incentives and no indication of what the benchmark auction price should be.

Prime Minister Abbott should leave his Direct Action joke at home when he goes to the United States. While President Obama is taking action on climate change, hitting a 17 per cent emissions reduction target, Mr Abbott is running in the opposite direction with a policy that will not even achieve a five per cent emissions reduction. And to equate Direct Action with President Obama's Clean Power Plan, frankly, is to insult our American friends, who are fully aware that serious action on carbon pollution needs to involve a market based mechanism. I quote again from the explanatory memorandum: 'In economic terms, it internalises the externalities.'

This is a policy which is good for oils. The policy we are debating, this bill, the product stewardship for oil bill, will increase the levy for certain oils in order to encourage the use of recycled oils and encourage the increased collection and recycling of used oils. It will put a price on oils, which will achieve an environmental outcome. Let's take that policy and let's put it to work with carbon pollution. Let's internalise the externalities and let's actually make a difference to carbon pollution.

The member for Kennedy's constituents will be as affected by this as anyone else. The significant hit to the environment in Queensland could mean the destruction of the Great Barrier Reef, a great asset for future generations. This can be dealt with if the world moves on climate change. But, while President Obama is tackling climate change, Australia is a laggard. The philosophy that underpins this bill is a good one. It is a market based one, and I commend it to the House.