Energy and transport subsidies in Australia
Encyclopedia
The environmental impact of transport in Australia is considerable. Australia
subsidizes fossil fuel
energy, keeping prices artificially low and raising greenhouse gas
emissions due to the increased use of fossil fuels as a result of the subsidies. The Australian Energy Regulator
and state agencies such as the New South Wales
' Independent Pricing and Regulatory Tribunal
set and regulate electricity prices, thereby lowering production and consumer cost.
According to a report by The Institute for Sustainable Futures (ISF) http://www.isf.uts.edu.au/ at University of Technology Sydney, titled: "Energy and Transport Subsidies in Australia", roughly 70% of the country's greenhouse gas emissions are caused by the energy and transport industries. The uptake of renewable energy in these sectors is slow because of subsidies to fossil fuels and the high cost of acquiring the sophisticated technology required to produce cleaner fuels. Furthermore, fossil fuels are easier to transport and use, compared to renewable energy, which often require sophisticated instruments to acquire and store. The report revealed that for the 2005–2006 financial year, transport subsidies were measured to reach up to $10.1 billion, of which 74% related to transport, 18% to electricity and 4% to renewable and efficient energy. These subsidies help energy generation companies increase their profits, therefore encouraging the building of additional coal-fuel power plants. Interestingly, investing in other, more sustainable, types of electricity generation plants would have cost less than continuing to subsidize the building of these power plants . On a positive note, alternative transport fuels such as natural gas
and liquefied petroleum gas are excused from fuel excise/tax.
Tax calculated for the use of a company car is calculated as such: the further the person drives the car, the higher the business use and the lower the personal use. Since tax is calculated based on personal use, drivers tend to drive longer distances to lessen the amount of tax that they have to pay. This leads to a higher consumption of vehicular fossil fuels and, subsequently, higher greenhouse gas emissions.
Dr Hal Turton, the Group Leader of the Energy Economics Group at Swiss research establishment, the Paul Scherrer Institute
, discussed in his report for Canberra-based think tank
The Australia Institute
titled: "The Aluminium Smelting Industry: Structure, Market Power, Subsidies and Greenhouse Gas Emissions", that the yearly electrical use subsidy for the use of the six aluminium smelters in Australia is at least A$210 million. According to the report, Australia's aluminium smelting industry is party to one of the most subsidized electricity charges as compared to other similar establishments. The ISF report found that removing electrical subsidies would bring up electricity prices by 3.9%, which would lead to a fall in demand of electricity by 1.4% in the long run. Reducing transport subsidies would increase prices by 32%, which would lead to a fall in demand worth 18%. It suggests that subsidies should be removed gradually so as not to hurt drivers who have no choice but to use petrol (due to the lack of alternatives), and that taxpayer's funds be channeled to subsidize the sustainable energy industry instead.
The National Roads and Motorists' Association (NRMA) is pushing for Australian petrol consumption to be reduced by 50% by 2050. It is advocating a move towards greener transport, and has called for a reduction of the A$10 billion subsidies given to the nation's fossil fuel industry .
are getting the subsidies. Coal power industries are also subsidized under the Greenhouse Gas Abatement Program (GGAP) .
environmental science professor Mark Diesendorf
, Macquarie University
management professor John Mathews and Monash University
Honorary Senior Research Fellow, Graeme Pearman.
The report was titled: "A Roadmap for Alternative Fuels in Australia: Ending our Dependence on Oil" .
The report suggests a 12-step 'roadmap' to address the issue of fossil fuel usage in motor vehicles.
defines an energy subsidy as: "...any government action that concerns primarily the energy sector that lowers the cost of energy production, raises the price received by energy producers or lowers the price paid by energy consumers."
There are six types of financial subsidies practiced:
in March 2008 :
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
subsidizes fossil fuel
Fossil fuel
Fossil fuels are fuels formed by natural processes such as anaerobic decomposition of buried dead organisms. The age of the organisms and their resulting fossil fuels is typically millions of years, and sometimes exceeds 650 million years...
energy, keeping prices artificially low and raising greenhouse gas
Greenhouse gas
A greenhouse gas is a gas in an atmosphere that absorbs and emits radiation within the thermal infrared range. This process is the fundamental cause of the greenhouse effect. The primary greenhouse gases in the Earth's atmosphere are water vapor, carbon dioxide, methane, nitrous oxide, and ozone...
emissions due to the increased use of fossil fuels as a result of the subsidies. The Australian Energy Regulator
Australian Energy Regulator
The Australian Energy Regulator is the regulator of the wholesale electricity and gas markets in Australia. It is part of the Australian Competition and Consumer Commission and enforces the rules established by the Australian Energy Market Commission....
and state agencies such as the New South Wales
New South Wales
New South Wales is a state of :Australia, located in the east of the country. It is bordered by Queensland, Victoria and South Australia to the north, south and west respectively. To the east, the state is bordered by the Tasman Sea, which forms part of the Pacific Ocean. New South Wales...
' Independent Pricing and Regulatory Tribunal
Independent Pricing and Regulatory Tribunal of New South Wales
The Independent Pricing and Regulatory Tribunal of New South Wales is an independent body that oversees regulation in water, gas, electricity and transport industries in NSW...
set and regulate electricity prices, thereby lowering production and consumer cost.
According to a report by The Institute for Sustainable Futures (ISF) http://www.isf.uts.edu.au/ at University of Technology Sydney, titled: "Energy and Transport Subsidies in Australia", roughly 70% of the country's greenhouse gas emissions are caused by the energy and transport industries. The uptake of renewable energy in these sectors is slow because of subsidies to fossil fuels and the high cost of acquiring the sophisticated technology required to produce cleaner fuels. Furthermore, fossil fuels are easier to transport and use, compared to renewable energy, which often require sophisticated instruments to acquire and store. The report revealed that for the 2005–2006 financial year, transport subsidies were measured to reach up to $10.1 billion, of which 74% related to transport, 18% to electricity and 4% to renewable and efficient energy. These subsidies help energy generation companies increase their profits, therefore encouraging the building of additional coal-fuel power plants. Interestingly, investing in other, more sustainable, types of electricity generation plants would have cost less than continuing to subsidize the building of these power plants . On a positive note, alternative transport fuels such as natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
and liquefied petroleum gas are excused from fuel excise/tax.
Tax calculated for the use of a company car is calculated as such: the further the person drives the car, the higher the business use and the lower the personal use. Since tax is calculated based on personal use, drivers tend to drive longer distances to lessen the amount of tax that they have to pay. This leads to a higher consumption of vehicular fossil fuels and, subsequently, higher greenhouse gas emissions.
Dr Hal Turton, the Group Leader of the Energy Economics Group at Swiss research establishment, the Paul Scherrer Institute
Paul Scherrer Institute
The Paul Scherrer Institute is a multi-disciplinary research institute which belongs to the Swiss ETH-Komplex covering also the ETH Zurich and EPFL...
, discussed in his report for Canberra-based think tank
Think tank
A think tank is an organization that conducts research and engages in advocacy in areas such as social policy, political strategy, economics, military, and technology issues. Most think tanks are non-profit organizations, which some countries such as the United States and Canada provide with tax...
The Australia Institute
The Australia Institute
The Australia Institute is a left wing Australian think tank conducting public policy research, funded by grants from philanthropic trusts, memberships and commissioned research....
titled: "The Aluminium Smelting Industry: Structure, Market Power, Subsidies and Greenhouse Gas Emissions", that the yearly electrical use subsidy for the use of the six aluminium smelters in Australia is at least A$210 million. According to the report, Australia's aluminium smelting industry is party to one of the most subsidized electricity charges as compared to other similar establishments. The ISF report found that removing electrical subsidies would bring up electricity prices by 3.9%, which would lead to a fall in demand of electricity by 1.4% in the long run. Reducing transport subsidies would increase prices by 32%, which would lead to a fall in demand worth 18%. It suggests that subsidies should be removed gradually so as not to hurt drivers who have no choice but to use petrol (due to the lack of alternatives), and that taxpayer's funds be channeled to subsidize the sustainable energy industry instead.
The National Roads and Motorists' Association (NRMA) is pushing for Australian petrol consumption to be reduced by 50% by 2050. It is advocating a move towards greener transport, and has called for a reduction of the A$10 billion subsidies given to the nation's fossil fuel industry .
Details of subsidies
The total energy and transport subsidies amount to $9.3 billion to $10.1 billion, of which $9 billion to $9.8 billion went to support the production and use of fossil fuels. Public sector agencies such as state departments, government ministries and Geoscience AustraliaGeoscience Australia
Geoscience Australia is an agency of the Australian federal government. It carries out geoscientific research.On a user pays basis it produces geospatial products such as topographic maps and satellite imagery.-History:...
are getting the subsidies. Coal power industries are also subsidized under the Greenhouse Gas Abatement Program (GGAP) .
Jamison Report
The Jamison Report was published by the NRMA in July 2008, and focused on alternative fuels and reducing emissions from motor vehicles. It was written by the Jamison Group, a team of four well-respected academics in the transport and energy fields, namely: CSIRO energy advisor David Lamb, University of New South WalesUniversity of New South Wales
The University of New South Wales , is a research-focused university based in Kensington, a suburb in Sydney, New South Wales, Australia...
environmental science professor Mark Diesendorf
Mark Diesendorf
Mark Diesendorf teaches Environmental Studies at the University of New South Wales, Australia. He was formerly Professor of Environmental Science at...
, Macquarie University
Macquarie University
Macquarie University is an Australian public teaching and research university located in Sydney, with its main campus situated in Macquarie Park. Founded in 1964 by the New South Wales Government, it was the third university to be established in the metropolitan area of Sydney...
management professor John Mathews and Monash University
Monash University
Monash University is a public university based in Melbourne, Victoria. It was founded in 1958 and is the second oldest university in the state. Monash is a member of Australia's Group of Eight and the ASAIHL....
Honorary Senior Research Fellow, Graeme Pearman.
The report was titled: "A Roadmap for Alternative Fuels in Australia: Ending our Dependence on Oil" .
The report suggests a 12-step 'roadmap' to address the issue of fossil fuel usage in motor vehicles.
- Reduce oil dependence in Australia by 20 percent by 2020; 30 percent by 2030; and by 50 percent by 2050. This would complement the National Emissions TradingEmissions tradingEmissions trading is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants....
Scheme. - Promote and develop alternative fuels
- Compulsory fuel consumption and carbon dioxide standards
- Further compulsory emissions standards. This point suggests that the authorities bring emissions standards for greenhouse gases such as carbon monoxide on par to world standards in order to align the country's policies to international best practice.
- Alternative fuel market mandates. The Group recommends that voluntary targets be scrapped in favour of "mandated targets of five percent in 2010; 15 percent in 2015; and 20 percent in 2020". According to the report, the targets are required to fuel growth of investment in sustainable fuel industries, and wrest the grip of the energy market away from the small group of large oil and coal companies that dominate the industry. It goes on to say that: "Mandates beyond 20 percent will not be needed as market forces will take over beyond that point".
- Tax incentives for vehicles running on alternative fuels or propulsion systems. The Group suggests that tax incentives be given to producers of greener cars, and to consumers who purchase such vehicles.
- Tax incentives for alternative fuels and infrastructure. The group suggests that tax intensives should be given to any establishment that comes up with clean fuels or constructs the infrastructure required to develop the industry. Also, it suggests giving exemptions to fuel tax for those who use alternative fuel.
- Wind back subsidies that reinforce oil dependence. This is in particular reference to the A$10 billion worth of subsidies handed out to producers and users of fossil-fuel transport fuel.
- Use of Green Car Fund. This is in reference to the federal government's pre-election promise to provide a Green Car Fund for the country's motor industry.
- State governments to play their role. Here, the Group suggests that state governments adjust their taxes and tariffs. For example, consumers who drive vehicles that consume lesser amounts of fuel should be made to pay lower registration fees.
- Allow carbon credits to grow alternative fuel industries. The idea is that to encourage growth in the alternative fuels industry, the government should allow carbon credits to be awarded to players in that industry.
- Foster urban public transport and sustainable mobility options. Here, the group calls for improved public transport infrastructure and for better facilities for walking and cycling.
Types of financial subsidies
The International Energy AgencyInternational Energy Agency
The International Energy Agency is a Paris-based autonomous intergovernmental organization established in the framework of the Organisation for Economic Co-operation and Development in 1974 in the wake of the 1973 oil crisis...
defines an energy subsidy as: "...any government action that concerns primarily the energy sector that lowers the cost of energy production, raises the price received by energy producers or lowers the price paid by energy consumers."
There are six types of financial subsidies practiced:
- Direct financial transfer: This is usually the simplest type of subsidy to recognize since governments normally declare these in yearly budget reports. Such subsidies can come in the form of rebates, direct subsidies, grants or low-interest loans.
- Tax expenditure: These are incentives, rebates, exemptions and benefits offered by the tax system.
- Energy related services provided by the public service at lower than the actual cost: Items that fall under this category are: Government spending in energy infrastructure and services, public grants for studies conducted on energy-related subjects and subsidies given to run facilities and services that fall below reaching the supposed return on investment.
- Capital cost subsidies: These include subsidies on interest rates, debts, and liability guarantees.
- Trade restrictions: These include restrictions such as embargoes, quotas and increased production cost.
- Energy sector regulation: These include price controls, market protection policies and demand guarantees.
Public Opinion
According to a survey conducted by Australian polling and market research company NewspollNewspoll
Newspoll Market Research is an Australian company providing opinion polling and other market research services. Its chief executive is Martin O'Shannessy.Newspoll's surveys of voter opinion are published in The Australian....
in March 2008 :
- 60% of all respondents from all states said that they would like to see a lot more resources pumped into subsidising renewable energy, while another 30% said that they would prefer if both fossil fuel energy and renewable energy were given equal funding.
- 29% feel that the federal government provides more subsidies to fossil fuel energy compared to renewable energy. A further 26% are of the view that there is an equal level of funding, while 36% do not know.
- 56% of those who wanted to see equal or more funding for renewable energy want the federal government to kick in subsidies immediately, while a further 28% wanted action to be taken within the year.
See also
- Climate Change in Australia – OverviewClimate change in AustraliaClimate change has become a major issue in Australia due to drastic climate events since the turn of the 21st century that have focused government and public attention. Rainfall in Australia has increased slightly over the past century, although there is little or no trend in rainfall in northeast...
- Carbon Pollution Reduction SchemeCarbon Pollution Reduction SchemeThe Carbon Pollution Reduction Scheme was a proposed cap-and-trade system of emissions trading for anthropogenic greenhouse gases, due to be introduced in Australia in 2010 by the Rudd government, as part of its climate change policy. It marked a major change in the energy policy of Australia...
- Carbon capture and storage in AustraliaCarbon capture and storage in AustraliaCarbon capture and storage is an approach to mitigate global warming by capturing carbon dioxide from large point sources such as fossil fuel power plants and storing it instead of releasing it into the atmosphere...
- Effects of global warming on AustraliaEffects of global warming on AustraliaPredictions measuring the effects of global warming on Australia assert that climate change will negatively impact the continent's environment, economy, and communities...
- Energy policy of AustraliaEnergy policy of AustraliaEnergy policy of Australia describes the energy policy in the politics of Australia. Energy in Australia describes energy and electricity production, consumption and export/import in Australia...
- Feed-in tariffs in AustraliaFeed-in tariffs in AustraliaFeed-in tariffs in Australia have been enacted by several State Governments for electricity generated by solar photovoltaic systems. Feed-in tariff are a premium rate paid to producers of renewable energy...
- Garnaut Climate Change ReviewGarnaut Climate Change ReviewThe Garnaut Climate Change Review was a study by Professor Ross Garnaut, commissioned by then Opposition Leader, Kevin Rudd and by the Australian State and Territory Governments on 30 April 2007...
- Greenhouse MafiaGreenhouse MafiaGreenhouse Mafia is allegedly the "in house" name used by Australia’s carbon lobby for itself. It was also the title of a program aired by the ABC on the 13 February 2006 episode of its weekly current affairs program Four Corners....
- Greenhouse Solutions with Sustainable EnergyGreenhouse Solutions with Sustainable EnergyGreenhouse Solutions with Sustainable Energy is a 2007 book by Australian academic Mark Diesendorf. The book puts forward a setof policies and strategies for implementing the most promising clean energy technologies by all spheres of government, business and community organisations...
- Mandatory renewable energy targetsMandatory renewable energy targetsA mandatory renewable energy target is a government legislated requirement on electricity retailers to source specific proportions of total electricity sales from renewable energy sources according to a fixed timeframe. The additional cost is distributed across most customers by increases in other...
- Mitigation of global warming in AustraliaMitigation of global warming in AustraliaMitigation of global warming involves taking actions to reduce greenhouse gas emissions and to enhance sinks aimed at reducing the extent of global warming. This is in distinction to adaptation to global warming, which involves taking action to minimise the effects of global warming...
- New South Wales Greenhouse Gas Abatement SchemeNew South Wales Greenhouse Gas Abatement SchemeThe New South Wales Greenhouse Gas Abatement Scheme , which commenced on 1 January 2003, is a mandatory greenhouse gas emissions trading scheme that aims to lower greenhouse gas emissions to 7.27 tonnes of carbon dioxide per capita by the year 2007.-External links:*...
- Renewable energy in AustraliaRenewable energy in AustraliaRenewable energy in Australia represents 5.2% of total energy consumption, but only 1.7% of total production, the difference being the result of significant non-renewable energy exports. In the five years to 2009 renewable energy consumption grew by 3.5%, faster than other energy sources. Of all...