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AUSTRALIA PACIFIC
Fuelling Climate Change
or a Renewables Future?
Submission to the Fuel Taxation Inquiry
September 2001
2
1. Introduction
Greenpeace welcomes the opportunity to comment on the Government’s Fuel
Taxation Inquiry Issues Paper 1 . This Inquiry comes at a critical juncture in
international and domestic policy making on fuel use and efforts to avert dangerous
climate change. There are now well established arguments as to why society needs
to move away from fossil fuels, which are the main cause of climate change.
Earlier this year the United Nations Intergovernmental Panel on Climate Change
(IPCC) in its Third Assessment Report found "new and stronger evidence" that
human activity is influencing the climate largely through burning fossil fuels such as
coal, oil and gas.2 Climate change is predicted to have far reaching and on balance
negative economic, social and environmental consequences. Human health and
settlements, agriculture, forestry, biodiversity, water and coastal resources will be
affected.
The threat of global climate change demands a shift away from using fossil fuels. The
primary objective of the United Nations Framework Convention on Climate Change
(UNFCCC), which has been ratified by Australia, is “the stabilisation of greenhouse
gas concentrations in the atmosphere at a level that would prevent dangerous
anthropogenic interference with the climate system.” 3 In order to prevent this
dangerous climate change we can only afford to use 25% of the world's existing fossil
fuel reserves.4 This means we have to phase out fossil fuels and replace them with
renewable energy and fuels.
Greenpeace recommends that Federal and state governments need to develop as a
matter of urgency a transition strategy to switch from fossil fuels to renewable energy
and fuels so that it can occur in an orderly and manageable fashion, but within a
timeframe necessary to prevent dangerous climate change. The current development
of a national energy policy through the COAG process provides an ideal opportunity
for this.
At the resumed climate negotiations in Bonn, July 2001 the international community
made significant progress in agreeing how to implement the Kyoto Protocol that
enshrines legally binding emissions reduction targets for Annex 1 countries. 5
Ratifying and implementing the Kyoto Protocol is now a matter of extreme urgency.
Greenpeace recommends that all parties to the Kyoto Protocol, including the
Australian government (a signatory to both the UNFCCC and the Kyoto Protocol),
should ratify the Kyoto Protocol, without the US if necessary, so that it can enter into
force by the World Summit on Sustainable Development (Rio +10) to be held in
1
From here on this will be referred to as the Issues Paper.
IPCC (2001) Third Assessment Report - WG I Climate Change 2001: The Scientific Basis, Summary for Policy
Makers. See http://www.ipcc.ch
3 Framework Convention on Climate Change (FCCC), Article 2. United Nations, 1992.
4 Greenpeace (1997) Fossil Fuels and Climate Protection: The Carbon Logic
5
UNFCCC (2001) Report of the Conference of Parties: Cop 6, second part
http://www.unfccc.de/resource/recops.html; Message from the Presidents http://www.unfccc.de
2
3
South Africa in September 2002. Several governments have already made such a
commitment.
Fossil fuels also have significant negative impacts at the local level. Health effects of
air pollution associated with petrol based fuels are extensive. A review of Australian
and international studies reports increases in mortality and incidences of heart
disease, hypertension, strokes, respiratory illness and damage to the IQs of children
and demonstrates that the costs of these health effects are very large and measures
to reduce pollution have high rates of return.6
Greenpeace believes that current government policy on fuel taxation (as
demonstrated by the terms of reference for the Fuel Taxation Inquiry) constrain
efforts to reduce Australia’s dependency on fossil fuels and the associated
greenhouse gas emissions and urban air pollution.7
Greenpeace notes that the Inquiry will be undertaking further consultation after the
deadline for submissions on the Issues Paper 8 and would welcome the opportunity
to discuss further any of the issues raised in this submission, but particularly the
issue of shale oil (discussed in Section 4).
2 Objectives of fuel taxation
Australia has the unenviable record of being the world’s largest per capita
greenhouse emitter, including land clearing. 9 Greenhouse gas emissions from
transport, accounting for 18 per cent of 1998 greenhouse gas emissions 10 , are
escalating and urban air pollution remains a major health concern. Of OECD
countries Australia has the lowest pre-tax price for petrol and the fourth lowest total
price including tax. 11 The OECD’s International Energy Agency (IEA) has urged
Government to increase fuel taxes and implement carbon taxes to curb Australia’s
high energy consumption due in part to cheap fuel.12
The Inquiry recognises fuel taxes as ‘a relatively stable and reliable source of
revenue to fund the range of services provided by governments’.13 However, the IEA
expects conventional oil production to peak between 2010 and 2020. 14 Beyond 2020
resources may become a key constraint on oil demand, along side policy measures
6
The Australia Institute, Australian Conservation Foundation, Australian Medical Association (1999) Joint
Submission to the Senate Committee on a New Tax System.
7 The Inquiry is asked to ‘have regard to a number of issues including: the use of fuel that would deliver better air
quality and contribute to greenhouse objectives. At the same time it is bound by:
government commitments to maintain the benefits of current fuel rebates, subsidies and grants;
not to consider long-term real increases in the effective level of diesel or petrol taxes;
the Government’s wish to achieve overall budget neutrality.
8 Issues Paper, p6.
9 Turton, H. and Hamilton, C. (2001) Comprehensive emissions per capita for industrialised countries. The
Australia Institute.
10 Issues Paper, p38.
11 Issues Paper, p42.
12 International Energy Agency (1997). Energy Policies of IEA Countries: Australia 1997 Review (IEA), In Turton,
H. and Hamilton C., (1998) The GST Package and Air Pollution. The impact of proposed indirect tax changes on
atmospheric emissions; OECD (2001) Economic Survey of Australia, August 2001
http://www.oecd.org/pdf/M00008000/M00008134.pdf
13
14
Issues Paper, p7.
Issues Paper, p16.
4
to reduce greenhouse emissions. Clearly Government must consider how it will raise
the necessary funds for public services as the availability of conventional fuels
declines and where fuel is used more efficiently because of advances in
technology.15
In a freely functioning market without government intervention the price of fuel
excludes the costs to the community of local air pollution, congestion, accidents,
associated impaired health and mortality and biodiversity loss and global climate
change. Several policy mechanisms exist to ensure the price of petrol more fully
reflects environmental and social externalities including fuel taxes, vehicle emission
standards and road charging.
Broad community support exists for the development and use of clean renewable
transport fuels. An Australian Automobile Association (AAA) survey in 2000 found
that 75 per cent of respondents were concerned about the effect of motor vehicle use
on the environment and would support programs to get petrol companies to develop
cleaner fuels, improve the fuel efficiency of cars and manufacture vehicles which use
alternative fuels.16
In October 2000 Greenpeace released results of a national survey on petrol taxes
showing 64% of Australians were willing to pay the current price for fuel if a
proportion of the tax were spent developing non-polluting alternative fuels and public
transport.17
Greenpeace recommended to the Federal and state governments at the time, and
recommends to the Inquiry, that a ‘transport and environment fund’ be established
with money from the national fuel excise. This fund would be designed to assist in the
development of alternative non-polluting transport fuels and technologies (such as
hydrogen fuel cells) and the expansion of urban public transport, with a view to
substantially reducing Australia’s over reliance on oil for transport. The programs
from such a fund would aim to reduce urban pollution and congestion as well as
greenhouse gases from the transport sector. Attached is a copy of the letter from
Greenpeace to the Prime Minister and state Premiers suggesting the establishment
of such a fund.
3 Renewable fuels
Petroleum products contribute the major share of energy use by the road transport
sector with petrol contributing around 65 per cent and diesel 28 per cent. Current
government policy is focused on fossil fuel based transport fuels and renewable fuels
receive inadequate support giving no meaningful incentives to farmers, hauliers and
15
Issues Paper, Table 6.1, p39
The AAA survey, cited on their website, notes, motorists are to a high degree (75%) concerned about the effect
of motor vehicle use on the environment and most strongly support the following four policy responses to reduce
the impact of cars on the environment. No mention is made of funding for these possible programs:-keeping cars
well maintained; petrol companies developing cleaner fuels; improving the fuel efficiency of cars; manufacturing
vehicles which use alternative fuels.
17 Greenpeace contracted Taylor Nelson Sofres to carry out a national survey posing the question: “Would you be
happy to pay the current price for fuel if a proportion of the tax were spent developing non polluting alternative
transport fuels and public transport”. 64% of Australians surveyed said yes. The survey was carried out on the
weekend of 14/15 October.
16
5
motorists to switch to renewable fuels. Green fuels do not resolve the non-fuel
impacts of transport, but they can contribute to major reductions in emissions that
cause climate change and air pollution.
Greenpeace recommends that:
 renewable fuels urgently receive much greater government support as part of a
national strategy to replace fossil fuels with renewable energy and fuels,
 government financial support for fossil fuel based transport fuels be transferred to
renewable fuels, and
 the fuel taxation system be used to encourage renewable fuels and not fossil fuel
based transport fuels.
A number of government programmes are in place to encourage the use of natural
gas and LPG in internal combustion engines. 18 Natural gas is significantly less
polluting than petrol or diesel and existing vehicles can be converted to run on it.
Greenpeace recommends that the Inquiry and governments recognise that gas is not
a long term solution to climate change, as it is a fossil fuel and does not have zero
emissions.
Biodiesel can play an important role in reducing transport fuel emissions. Biodiesel is
non-toxic and biodegradable and can be used in standard diesel engines. It is not
pollution-free but has significant advantages over petrol and diesel. Biodiesel
produces about 40% of the greenhouse emissions of petro-diesel.19 It also provides
an indigenous source of fuel, increasing Australia's security of supply. This is
particularly important for sectors that rely primarily on imported diesel for fuel, such
as mining, agriculture, forestry and construction.
While biodiesel is widely produced and used in France, Germany, Italy and the US it
remains underdeveloped and inadequately supported by governments in Australia.20
In Germany 150,000 cars run on biodiesel and the fuel is available in thousands of
filling stations. Biodiesel is used in bus and truck fleets across the US where in
January 2000, the government announced capital grants to farmers wanting to
produce biodiesel of $150 million a year.
There are a number of transport fuels that are cleaner than oil based fuels, but are
not necessarily long term solutions to climate change. These include natural gas,
biodiesel and ethanol.
Greenpeace recommends that the Inquiry and governments recognise that
renewable fuels and technologies that provide a long term solution, such as fuel cells
powered by hydrogen produced from renewables, need to be adequately supported
at the same time as transitional fuels that deliver short term benefits.
18
Issues Paper, p12.
Greenpeace UK (2001) Oil can’t fuel the future: the case for green fuels in the UK, Greenpeace, Canonbury
Villas, London.
20 Biodiesel Association of Australia.
19
6
4 Oil shale – a step in the wrong direction
Under excise legislation, producers of naptha from shale mined in Australia are
eligible to claim a payment for naptha that is used to produce unleaded petrol.21
Greenpeace opposes this payment. Naptha is produced at the experimental Stuart
Project, an attempt by Australian companies Southern Pacific Petroleum and Central
Pacific Minerals (SPP/CPM) to develop technology to extract oil from shale rock.
Greenpeace has been campaigning against the Stuart Project since 1998 because of
its greenhouse gas emissions and the need to move away from fossil fuels to stop
dangerous climate change. If the Stuart Project is successful it will lead to the
development of oil shale industries in Australia and overseas, creating a massive
new source of greenhouse gas emissions.
Oil shale is the most greenhouse intensive of all fossil fuels. According to SPP/CPM,
oil shale is nearly four times more greenhouse intensive than conventional oil. 22
SPP/CPM have not provided any concrete evidence that they can achieve their
stated goal of comparable or lower greenhouse emissions from shale oil than from
conventional oil by Stage 3 of the Project which would require a reduction in
emissions of nearly 80 per cent.
The Stuart Project alone could increase Australia's greenhouse emissions by 1.5% to
2.3% above 1990 levels, whilst the development of all of SPP/CPM's oil shale
deposits would result in an increase of 23% to 39% above 1990 levels. Local
residents have suffered negative health effects from toxic air emissions from the
plant,23 which has been labelled "a public health nuisance" by Queensland Health. 24
Some are taking legal action against SPP/CPM to get compensation for damages
suffered as a result of the Project.25
The full scale Stuart Project would also be Australia's largest single source of the
highly toxic persistent organic pollutant dioxin. Dioxin has been linked to health
impacts including cancer, hormone disruption, effects on development in children and
suppression of the immune system. The Australian Government signed a global
treaty to reduce and eliminate dioxins earlier this year.
Furthermore, SPP/CPM have stated that they want to mine the part of the Stuart oil
shale deposit that extends into the Great Barrier Reef World Heritage Area, despite
the opposition of the Great Barrier Reef Marine Park Authority.26
There is strong and widespread opposition to the development of oil shale. Over
14,000 people have written to the Queensland Government opposing the Stuart
Project. More than 10,000 of these made formal submissions as part of the
21
Issues Paper, p30.
Presentation by Dr Stephen Grocott, SPP/CPM, 8 February 1999.
23 Suncor, Incident Report, 2 October 1999.
24 Queensland Health, Reported health effects related to the Stuart Shale Oil Project Stage 1 (Interim Report), 14
May 2001.
25 Courier Mail, Residents battle with shale plant, 7 March 2001.
26
Briefing from Ian McPhail, Chairman, Great Barrier Reef Marine Park Authority to Senator Hill, Minister for the
Environment, 28 January 1999 re Meeting with Sir Ian McFarlane, Chairman, SPP/CPM, 15 January 1999.
22
7
government approval process for Stage 2 of the Project, a record number of
objections for any project in the state. 27 Greenpeace made a joint submission
opposing the Project with eighteen other environment, tourism and fishing groups.
The Project is more than 18 months behind schedule and nearly 20% overbudget, 28
with technical problems unresolved and successful commissioning not yet achieved.
In April this year former joint venture partner Suncor pulled out of the Project, 29
suffering a loss of $171 million and forgoing several million shares in SPP and CPM.
SPP/CPM have stated publicly that the current project would be uneconomic without
the excise exemption.
The Government’s exemption for oil shale is in contravention of Article 2 of the Kyoto
Protocol to which Australia is a signatory. Article 2 reads as follows:
Each Party included in Annex 1,….in order to promote sustainable development,
shall:
(a) implement and/or further elaborate policies and measures in accordance with its
national circumstances, such as:…
(v) Progressive reduction or phasing out of market imperfections, fiscal incentives,
tax and duty exemptions and subsidies in all greenhouse gas emitting sectors that
run counter to the objectives of the Convention and the application of market
instruments.
While this article is not legally binding there is an expectation in the international
community that Annex 1 parties will broadly adopt these measures in order to meet
their emissions reduction targets.30
The development of oil shale is a step in the wrong direction and will cause
significant negative environmental impacts, including further climate change.
Greenpeace believes that the use of government financial support to make economic
a project that is already having negative environmental and social impacts and could
lead to the development of an industry that will have further serious impacts is a
misuse of policy measures and taxpayers money and sends all the wrong signals
about the future development of fuels. Governments should be using measures like
exemption from excise to encourage and support clean renewable transport fuels
rather than environmentally damaging unrenewable fuels such as shale oil.
Greenpeace recommends:
 that the existing excise exemption on naptha from shale oil be removed,
 that there is no increase or extension of existing government financial support for
the development of oil shale, including that provided through fuel taxation, and
27
Queensland Department of State Development, Preliminary Environmental Assessment Report - Draft
Environmental Impact Statement Stuart Oil Shale Project Stage 2, January 2000.
28 Dow Jones, Australian Shale Oil Industry In Historic Turn, 8 February 2001.
29 Suncor & SPP/CPM media release, SPP/CPM Purchases Suncor's Interest in the Stuart Oil Shale Project, 5
April 2001.
30
Turton, H. and Hamilton, C. (1998) The GST Package and Air Pollution. The impact of proposed indirect tax
changes on atmospheric emissions. The Australia Institute.
8
 that there is no new government financial support for the development of oil
shale, including that provided through fuel taxation.
5. Aviation fuel taxes
Air transport gives rise to a variety of emissions including carbon dioxide, nitrogen
oxides, particles, volatile organic compounds (VOC) and sulphur dioxide. This
cocktail contributes to climate change, the destruction of the ozone layer, acidification
and local air pollution.
According to the IPCC Special Report on Aviation and the Global Atmosphere,
greenhouse gas emissions from aviation now account for 3.5% of the total
contribution of man made greenhouse gases to global warming and could account for
up to 15 per cent of global warming by 2050. 31 The IPCC states that improvements
in aircraft and engine technology and air traffic control will not fully offset the effects
of the projected growth in aviation on emissions. Several policy options exist to
reduce emissions such as removal of subsidies and incentives, environmental levies
(charges and taxes) and emissions trading.
Duty exemptions on aviation fuel partly explain the rapid and unsustainable growth
rates in air travel. In Australia aircraft fuel and kerosine is taxed at 2.8 cpl whereas
engine and burner use is taxed at 38 cpl. 32 This is not efficient because it
‘overstimulates’ aviation which is relatively the most polluting form of transport. 33
Greenpeace recommends that the excise duty on aviation kerosine should be
increased in order to create an economic level playing field for other transport
modes.
Currently emissions from international transport are excluded from national emissions
inventories under the Kyoto Protocol. Greenpeace recommends that the parties to
the Kyoto Protocol should account for emissions from international transport
including aviation in national inventories of greenhouse gas emissions.
A balanced and integrated policy for sustainable development of the aviation sector
is needed. Greenpeace recommends that the Government should consider a range
of options including:



31
32
33
Increasing excise duty on aviation fuel in order to create a level economic playing
field for other modes of transport.
Introduction of an environmental aviation charge which aims to reduce emissions.
Tightening of aircraft emission and noise standards.
IPCC (1999) Aviation and the Global Atmosphere Technical Report.
Issues Paper, p22.
http://www.snm.nl/aviation.html
9
6. Recommendations
 Greenpeace recommends that Federal and state governments need to develop
as a matter of urgency a transition strategy to switch from fossil fuels to
renewable energy and fuels so that it can occur in an orderly and manageable
fashion, but within a timeframe necessary to prevent dangerous climate change.
The current development of a national energy policy through the COAG process
provides an ideal opportunity for this.
 Greenpeace recommends that the Inquiry and governments recognise that
renewable fuels and technologies that provide a long term solution, such as fuel
cells powered by hydrogen produced from renewables, need to be adequately
supported at the same time as transitional fuels that deliver short term benefits.
 Greenpeace recommends that:
 renewable fuels urgently receive much greater government support as part of
a national strategy to replace fossil fuels with renewable energy and fuels,
 government financial support for fossil fuel based transport fuels be
transferred to renewable fuels, and
 the fuel taxation system be used to encourage renewable fuels and not fossil
fuel based transport fuels.
 Greenpeace recommends that a ‘transport and environment fund’ be established
with money from the national fuel excise. This fund would be designed to assist in
the development of alternative non-polluting transport fuels and technologies
(such as hydrogen fuel cells) and the expansion of urban public transport, with a
view to substantially reducing Australia’s over reliance on oil for transport. The
programs from such a fund would aim to reduce urban pollution and congestion
as well as greenhouse gases from the transport sector.
 Greenpeace recommends that the Inquiry and governments recognise that gas is
not a long term solution to climate change, as it is a fossil fuel and does not have
zero emissions.
 Greenpeace recommends:
 that the existing excise exemption on naptha from shale oil be removed,
 that there is no increase or extension of existing government financial support
for the development of oil shale, including that provided through fuel taxation,
and
 that there is no new government financial support for the development of oil
shale, including that provided through fuel taxation.
 Greenpeace recommends that all parties to the Kyoto Protocol, including the
Australian government (a signatory to both the UN Framework Convention on
Climate Change and the Kyoto Protocol), should ratify the Kyoto Protocol, without
the US if necessary, so that it enters into force by the World Summit on
Sustainable Development (Rio +10) to be held in South Africa in September 2002.
Several governments have already made such a commitment.
10
 Greenpeace recommends that the parties to the Kyoto Protocol, including the
Australian Government, should include emissions from international transport
including aviation into national inventories of greenhouse gas emissions.
 A balanced and integrated policy for sustainable development of the aviation
sector is needed. Greenpeace recommends that the Government should consider
a range of options including:



Increasing excise duty on aviation fuel in order to create a level economic
playing field for other modes of transport.
Introduction of an environmental aviation charge which aims to reduce
emissions.
Tightening of aircraft emission and noise standards.
11
Wednesday 1 November, 2000
The Honourable John Howard, MP
Prime Minister
Parliament House
Canberra, ACT 2600
Dear Prime Minister,
1.
2. ON THE ISSUE OF PETROL EXCISE AND THE ENVIRONMENT
Greenpeace understands Friday's Premiers Conference will address calls from a
number of State Premiers and motoring organisations for a freeze on the petrol
excise in next year’s round of Consumer Price Index (CPI) tax increases.
Greenpeace believes this discussion gives you the opportunity to lead debate on
the issue of petrol consumption beyond the price per litre at the bowser, to
include the far more important issues of climate change and the environmental
impact of transport.
Urban air pollution and greenhouse gas emissions from transport currently account
for 16% of Australia’s total emissions. To avoid the dramatic and dangerous climatic
shifts predicted by world scientists, Australia and the world need to move away from
using fossil fuels to clean energy alternatives. The current national debate on petrol
pricing provides an opportunity for government leadership on the issue of petrol
consumption and our long-term need to move away from using fossil fuel energy.
Greenpeace urges you to act.
Greenpeace has found broad community support for the development and use of
alternative, clean transport fuels. A recent national survey found that 64% of
Australians would be happy to pay the current price for fuel if a proportion of the tax
were spent developing non-polluting alternative fuels and public transport. The lack
of community access to such fuels however is a problem government can help to
address. Greenpeace calls on the Federal and State Governments to take decisive
action and establish a 'transport and environment fund' using funds from the national
fuel excise.
This transport and environment fund would assist in the development of alternative
non-polluting transport fuels and the expansion of urban public transport with a view
to significantly reducing Australia's over reliance on oil for transport.
12
The lack of access to public transport infrastructure and the increased difficulty for
rural fuel users to access alternative fuels until they are well established in Australia
needs to be recognised and addressed comprehensively. Greenpeace believes such
a fund could also help fund important research and development work into hydrogen
fuel cells; and support public transport infrastructure and services.
Global climate change and the Kyoto protocol demand a shift away from using fossil
fuels (oil, coal and gas). The voting public is also acutely aware of the urban air
pollution problems stemming from car use. Any reduction in the fuel price will not
reduce urban air pollution or greenhouse gas emissions rather they will increase.
Government funded programs to encourage the development of clean fuels and
vehicles in Australia, would be welcomed by the environment movement and
community at large.
Rather than intervening in the fuel price debate, the Commonwealth Government
should act to protect the Australian community by leading us away from fossil fuel
dependency. Greenpeace calls on you to set the example.
Yours faithfully,
Peter Mullins
Chief Executive Officer