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I rise to speak in favour of this Bill, which seeks to secure the cost-neutrality of the Product Stewardship for Oil Scheme, safeguarding the work it has been doing in the fields of environmental sustainability and resource-creation over the past thirteen years.
It was the Howard Government that introduced the Product Stewardship for Oil Scheme in 2001, a self-sustaining scheme that uses the revenue raised by excise and customs tariffs on petroleum-based oil imports to pay for benefits ranging between 3 and 50 cents per litre to incentivise the recycling of used oil.
In the months following the implementation of the Scheme, rates of proper oil deposits by consumers were on the rise and a new industry in oil recycling and re-refining emerged. This demonstrates the effectiveness of the PSO Scheme in providing significant incentives for the recycling of used oil.
The recycling and reuse of resources stimulates and diversifies the economy by carving out a space for re-refiners and recyclers of oils to provide an innovative service to the industry. The Government has been pleased to watch a vigorous industry for the collection and sale of used oils emerge, especially in the eastern States.
However, at the heart of the Government’s intent for the financial mechanism of the Scheme was that the excise levy’s purpose was to fully fund the benefits scheme. As the original intent for the Scheme to finance itself has been breached, with the PSO running at a deficit, this Bill seeks to increase customs and excise levies from 5.449 cents per litre or kilogram to 8.5 cents per litre or kilogram.
This increase to 8.5 cents per litre is in line with a previous independent report to the Government’s recommendation that the levy be increased to at least 7 cents per litre or kilogram. It also comes after Price Waterhouse Coopers reported in 2009 that the financial position of the PSO scheme had “deteriorated” and that the excise would soon need to be increased.
This measure is estimated to result in a gain to revenue over the forward estimates period of $79 million, bringing the Scheme into a cost-neutral position and continue to provide significant, costed incentives for the recycling of used oil.
The PSO is a Levy-Benefit system, intended to finance itself by offsetting the cost of benefits with excises on imports. In this way, the oil industry in Australia finances its own risk management and removes significant health and environmental risks inherent in the improper disposal of oil.
The cost of paying scaled benefits to recyclers has now outstripped the revenue the Government secures by applying the excise and customs tariffs. The challenge that this places on the Scheme is discussed in the Third Independent Report to the Government in a report to the Department of Environment in September 2013:
A major structural imbalance in the levy-benefit arrangement that is resulting in current annual deficits, which will be compounded by known increases in re-refining capacity, and is financially unsustainable in the long term. Surpluses generated by changes to levy-benefit arrangements could be redistributed towards investment in new or renewed collections infrastructure and more directly incentivising collections activity.
Annual deficits have partly been due to an increase in claims of the highest benefit scale, Category 1, which pertains to large re-refining ventures. In consultation with the industry, government had concerns that Category 1 claims were difficult to police and subject to frequent or even double claims.
There may be further potential to tighten legislation around this area, but the increase in excise will mean that the Scheme is not so financially vulnerable to sudden fluctuations or increases in particular categories of benefit claims.
According to the Third Independent Report to the Government, it is small-to-medium enterprises that are the biggest beneficiaries of this incentive scheme. The Coalition has always prided itself on our commitment to the flourishing of small to medium enterprises, which is another reason why this Bill is commendable in securing beneficial economic schemes like the PSO.
My own electorate of Rockdale is host to a Resource Recovery Centre administrated by SITA, an innovator and job creator in the area. The Recovery Centre provides residents and commercial bodies with a safe and environmentally responsible means of disposing of their household or business oil, which is then recycled by the Centre.
Disposing of petroleum-based oil such as motor oil through small enterprises like SITA is growing much more common since the introduction of the PSO scheme. The Australian Bureau of Statistics found that between 2009 and 2012, Australians taking their oil to businesses to dispose of in the proper way jumped by ten per cent.
This kind of increase became evident in 2001, shortly following the Scheme’s introduction. In 2012 to 2013, approximately 311 mega-litres of oil were collected through responsible recycling schemes. The amount actually recycled has gone from nil in the year 2000 to approximately 80 mega-litres in 2011-12.
It is the passion of collection and recycling initiatives such as the Rockdale Resource Recovery Centre to turn waste into a resource.
To demonstrate just how radically the Scheme has shifted the way we look at used oil and increased consumer respect for environmental hazards over the past thirteen years, I will quote from the Third Independent Report to the Government:
“The Scheme incentivises the recovery and re-use of used oil, at low overall cost to the Australian community, and with low implementation and compliance costs. In large parts of the country, used oil is no longer regarded as a waste but instead as a resource. More broadly, environmental and public health costs due to improper disposal of used oils and lubricants have been reduced or eliminated.”
By incentivising individuals, businesses and re-cyclers to cooperate in ensuring that oil is recycled, the Government is fulfilling its obligations to all citizens who benefit from the continued use and reuse of oil as well as its obligations to the environment.
Australians understand that oil is both a precious and easily mishandled resource. Supply is valuable and finite, but integral to our way of life in this advanced nation of ours. Equally so, Australians are well aware that disposing of oil in waterways or drains can be dangerous. In recycling used oil, both problems are addressed in one fell swoop.
So easily mishandled is the disposal of oil that Professor Jean-Daniel Saphores, an expert in natural resource economics, declared in 2002 that used oil is “the single largest environmentally hazardous recyclable material”.
Once exposed to waterways or the natural environment more generally, used oil exerts a damaging pollutant effect and is difficult to remove. Used oil is often contaminated and much more hazardous to the environment than new oil, which is why recycling used oil is such a priority.
It is a measure of a responsible Government to provide incentives and guidance to the community and enterprise with regards to the proper disposal and recycling of hazardous materials. In fact, oil industries and consumers face penalties and compliance measures from the Environmental Protections Agency if they do not dispose of oil correctly.
With the PSO Scheme, the Government instead rewards initiative and responsibility rather than punishing noncompliance. The transitional assistance provided industries by the Government, as part of this Scheme, has been integral to its success.
It is clearly in the best interests of the environment, public health, the growing recycling industry and the public purse that this Bill receives the support of the House. It is a sensible and simple measure which has been a long time coming.
After all, in 2009, after consultation with the industry and detailed reports by Price Waterhouse Coopers advising the Government of sustainability doubts, there was no legislative action taken to restore the viability of the Scheme.
The Coalition can be proud that we are legislating in this area at last to safeguard this important Scheme. By getting on with the job, we are restoring certainty and viability to the industry after doubts have accompanied its operations since its inception, especially over the last half-decade.
Supporting this Bill comes down to the fact that when schemes are running at a deficit, the Government must act. The PSO Scheme was never intended to run at a loss, but should be able to self-finance. This is true of the nation’s balance sheet as a whole. It is not normal or excusable to be running levy-benefit systems such as the PSO at a loss. We can and should be working towards cost-neutral positions for our programs as we take the road to surplus.
The fact that the financial state of this Scheme has been rolling into deficit and out of the Government’s full control warns of the way in which numerous other Government programs became untenable and unsustainable over the past six years. This Government is committed to ensuring that good schemes such as the Product Stewardship for Oil Scheme do not go the same way. We are committed to the future of the oil recycling industry and to the future of this Scheme.
I look forward to seeing the implementation of a clear, costed, and viable measure for the resources and recycling industry and strongly commend this Bill to the House.