The Environment – Introduction
2.1 The Government's tax package does not specifically address environmental
issues or the possibility of ecological tax reform. The key environmental
issues which are raised by the proposed tax reforms are those resulting
from the reduction in fuel excises and the imposition of a ten per cent
GST on sustainable energy products. This chapter provides background information
on related issues.
Greenhouse Gas Emissions
2.2 Greenhouse gases contribute to the warming of the earth and its lower
atmosphere. These gases absorb and re-emit radiation from the earth's
surface. Greenhouse gases occur naturally, but human activity has substantially
increased concentrations, which are now commonly referred to as `greenhouse
gas emissions'.
2.3 Global warming will cause dangerous impacts, including longer droughts,
more intense floods and storms, coral bleaching, loss of biodiversity,
loss of forests, the spread of infectious diseases and agricultural pests,
and a rise in sea level.
2.4 The stationary energy and transport sectors generate most of the
greenhouse gas emissions, accounting for over 60 per cent of emissions.
Most of the remainder are from agriculture and land use change. [1]
Australia has the third highest greenhouse emissions from transport in
the world, much higher than the OECD average. [2]
2.5 Those emitted by transport include carbon dioxide (CO2), methane
(CH4), nitrous oxide (N2O) and chloroflourocarbons (CFCs). [3]
Emissions of greenhouse gases are often expressed in terms of CO2 equivalent
emissions – CO2 being the major contributor to greenhouse gas emissions.
2.6 Compressed natural gas (CNG) produces the lowest level of CO2 emissions
across the total fossil fuel cycle, followed by liquid petroleum gas (LPG).
Gaseous fuel engines therefore provide one method of reducing greenhouse
gas emissions. [4]
Air Pollution
2.7 In addition to the global warming effect of greenhouse gases, some
emissions from transport and other industries directly pollute the local
environment. The main local air pollutants generated by transport vehicles
are carbon monoxide (CO), oxides of nitrogen (NOx), sulphur oxides (SOx),
a range of volatile organic compounds (VOCs), photochemical oxidants (primary
O3) and particulates, including smoke. A number of VOCs, oxidants and
particulate groups are acutely toxic. Examples are benzine, formaldehyde,
lead and chromium. [5]
Carbon Monoxide (CO)
2.8 CO is a colourless and odourless gas resulting from incomplete oxidation
of carbon. It affects human health by reducing the amount of oxygen that
can be carried by the blood. [6]
Nitrous Oxides (NOx)
2.9 Nitrous oxides lead to photochemical [7]
pollution after interaction with photochemically reactive volatile organic
compounds. In addition, NOx can lead to negative health effects both directly
and indirectly. [8]
Particulates – `smoke'
2.10 Particulates are those solid substances that come from the exhaust.
In older diesel engines this is seen as black smoke. Particulates are
formed when particles passing through the engine are emitted unburnt.
Modern diesel engines that are properly maintained emit fewer particulates
so that little or no smoke can be seen coming from their exhausts. However,
there are still significant, carcinogenic emissions from these engines.
Low sulphur fuels can reduce the level of particulate emissions. [9]
2.11 Diesel particulates are toxic and extremely detrimental to health.
In August 1998 the California Air Resources Board (ARB) approved a proposal
to list particulate emissions from diesel-fuelled engines as a Toxic Air
Contaminant (TAC). Overall, more than 40 substances in diesel are listed
as TACs by the ARB and by the US Environmental Protection Authority as
hazardous air pollutants. [10]
2.12 Long-term exposure to diesel has been associated with a 40 per cent
increase in the relative risk of lung cancer. In addition, there is a
greater incidence of cough, phlegm and chronic bronchitis among those
exposed to diesel exhaust than among those not exposed. [11]
2.13 The burning of waste sump oil as a cheap fuel produces harmful emissions
of lead, cadmium, chromium, zinc, sulphur, nitrogen, hydrocarbons and
chlorinated hydrocarbons. [12]
Alternative Fuels
2.14 Alternative fuels include natural gas (NG), ethanol, methanol, vegetable
oils, hydrogen, electricity and some petroleum-based fuels including reformulated
gasoline, LPG and diesel fuel in light duty vehicles. [13]
2.15 NG is mostly methane, and is used in road transport mainly in its
compressed form (CNG). At present most LPG and CNG vehicles are dual-fuel
vehicles, converted after purchase. LPG is available from a network of
refuelling stations around Australia, whereas CNG tends to be used by
fleet vehicles refuelling at central facilities. [14]
2.16 Environmental benefits from the use of gaseous fuels can be gained
through reductions in greenhouse gas emissions, mainly CO2, or noxious
emissions in urban areas. Noise levels can also be lower. The following
gives a summary of the cost and other benefits of each fuel.
Natural Gas (NG)
2.17 No excise is payable on NG, which means that CNG costs around 35
cents per litre (c/L). [15] However, NG vehicles
(NGVs) consume more NG than the diesel used by an equivalent diesel engine
over the same distance. Depending on the engine, this can range from a
multiplying factor of between 1.05 and 1.5, with the latest engines being
in the 1.05 to 1.25 range. Assuming a commercial price for CNG of 35 c/L,
the additional usage means that the diesel equivalent price of CNG is
between 37 and 53 c/L. [16]
2.18 Carbon (the source of CO2 emissions) is linked with hydrogen to
form fuels. The simpler the combination of carbon and hydrogen the lower
the potential for CO2 emissions. Methane (CH4) has the simplest combination
of all fuels other than pure hydrogen. This means that it has the potential
to be the lowest CO2 producing fuel of all the fuels readily available.
[17]
2.19 Australia has relatively large quantities of NG underground reserves.
Little processing is required between the gas well and its delivery to
the customer. As such, NG is potentially an even lower contributor to
greenhouse gases than other fuels. [18]
Liquid Petroleum Gas (LPG)
2.20 LPG contains propane (desirable for engines) and butane (less desirable).
The relative levels of propane and other constituents can vary quite substantially.
The price of LPG for cars is between 20 and 30 c/L. [19]
2.21 LPG-fuelled engines can now produce relatively high levels of power,
making them more useful in larger vehicles. However, LPG-fuelled vehicles
require a greater volume of fuel to travel the same distance as an equivalent
diesel engine vehicle. The multiplying factor is estimated to be between
1.7 and 2.0. [20]
2.22 LPG has more carbon involved in its basic structure than NG. As
such, LPG is potentially a lower contributor to greenhouse gases than
diesel, but a higher contributor than NG. [21]
Renewables
2.23 Renewable energy sources include solar, wind, hydro, biomass, geothermal,
wave and tidal power.
2.24 Solar energy can be converted into both thermal energy (heat) and
electricity. Goods used in the production of solar energy systems are
currently exempt from wholesale sales tax (WST), except the water tanks
required for solar hot water systems, which are subject to 12 per cent
WST. [22]
2.25 Wind power systems are subject to 22 per cent WST, although many
purchasers of wind power generation systems are able to claim exemptions.
These include government bodies, primary producers and miners. [23]
Other renewable energy systems attract little or no WST. [24]
2.26 Despite a worldwide trend in ecological tax reform, the proposed
new tax system would result in solar technology becoming more expensive
relative to fossil fuels. [25] In many OECD
countries, the introduction of a VAT [26] has
been accompanied by new or increased environmental and resource-based
taxes, levied at a higher rate than the base VAT rate. [27]
Environmental Standards for Vehicles
2.27 Australian emission standards for diesel vehicles are extremely
lenient. Most four-wheel drive diesel vehicles permitted under Australian
standards would not be allowed on the roads in the US, Japan or Europe.
[28]
2.28 Australian Design Rule 70 (ADR70), which covers emissions from on-highway
diesel engines, requires all engines to meet the Euro I standard. ADR
70 is currently being reviewed with a view to tightening exhaust emissions.
The current proposal is that new emission levels will be introduced in
2002 to meet the current European standard, Euro II, a significantly higher
standard than that currently called for by ADR 70. In the US the current
standard is EPA 1999. This is three steps on from the standard called
for in ADR 70, equivalent to EPA 1991. [29]
(See Table II.1, below.)
2.29 The Committee was told that at best Australia is going to move in
the next year or two to the 1994 US standard for diesel emissions, and
that Australian standards are currently eight to ten years behind those
applying in the United States, Europe or Japan. [30]
Very few countries in the world have more relaxed emission standards than
Australia. [31] It is interesting to note that
Euro II and EPA 98 standards both incorporate fuel specifications, whereas
Australian standards do not. [32]
Diesel Fuel Vehicles
2.30 Due to its complex carbon structure, diesel produces higher levels
of CO2 than other fuels. [33] However, diesel
engines which are cleaner than what is required under ADR 70 are now available.
The rules governing emissions from diesel engines in Australia are substantially
less stringent than those governing the manufacturers of most diesel engines
in their home country. [34]
2.31 Some Australian engine and vehicle suppliers have imported the latest
engines complying with the latest emission standards in Europe and the
US. Some suppliers have imported engines that are built to earlier designs,
or have modified current designs. [35]
Gaseous Fuel Vehicles
2.32 Engines developed for the bus industry are currently being used
in Adelaide, Brisbane, Canberra, Geelong, Melbourne, Perth and Sydney.
These engines are manufactured by the major players in Europe such as
Mercedes-Benz, MAN, etc. [36]
2.33 In addition to gaseous fuel engines produced by the original manufacturer,
conversions have been developed for engines already in service. Whilst
these conversions do not have the same level of emission reduction currently
available from engines specifically produced for gaseous fuel use, they
do provide a significant potential for a reduction in emissions from the
existing vehicle population. [37]
2.34 When comparing fuels it is important to know their energy density
and their ability to reduce greenhouse emissions. The following table
provides an energy comparison between fuels. Greenhouse gas emissions
directly relate to a particular fuel's energy density. The actual energy
density of fuels can vary slightly but the relativity will remain reasonably
constant.
Table II.4 (PDF format) [38]
Footnotes
[1] National Greenhouse Gas Inventory Committee
Report, 1997, p xix.
[2] Mr John Kirk, Australasian Railway Association,
Hansard, Melbourne, 23 February 1999, p 34.
[3] Bureau of Transport Economics, Information
Paper No. 39, p 2.
[4] Bureau of Transport Economics, Information
Paper No. 39, p xix.
[5] Bureau of Transport Economics, Information
Paper No. 39, p 2.
[6] Improvement of Heavy-Vehicle Emissions
in Conjunction with Reduction in Fuel Excise, A better way to a cleaner
future, paper by Mr Ian Loy, Caterpillar Australia, tabled in evidence,
Melbourne, 23 February 1999, p 7.
[7] Caused by the action of light, particularly
sunlight.
[8] Improvement of Heavy-Vehicle Emissions
in Conjunction with Reduction in Fuel Excise, A better way to a cleaner
future, paper by Mr Ian Loy, Caterpillar Australia, tabled in evidence,
Melbourne, 23 February 1999, p 7.
[9] Improvement of Heavy-Vehicle Emissions
in Conjunction with Reduction in Fuel Excise, A better way to a cleaner
future, paper by Mr Ian Loy, Caterpillar Australia, tabled in evidence,
Melbourne, 23 February 1999, p 7.
[10] Australian Conservation Foundation, Taking
your breath away … How the Tax Reform Package affects Air
Pollution and Human Health, March 1999, p 4.
[11] Australian Conservation Foundation, Taking
your breath away … How the Tax Reform Package affects Air
Pollution and Human Health, March 1999, p 4.
[12] Mulhern Waste Oil Removal Pty Ltd, supplementary
material, 4 March 1999, p 1.
[13] Bureau of Transport Economics, Information
Paper No.39, p xvii.
[14] Bureau of Transport Economics, Information
Paper No.39, p xvii.
[15] 1 cubic metre of NG has virtually the
same heat content as 1 litre of diesel.
[16] Improvement of Heavy-Vehicle Emissions
in Conjunction with Reduction in Fuel Excise, A better way to a cleaner
future, paper by Mr Ian Loy, Caterpillar Australia, tabled in evidence,
Melbourne, 23 February 1999, p 4.
[17] Improvement of Heavy-Vehicle Emissions
in Conjunction with Reduction in Fuel Excise, A better way to a cleaner
future, paper by Mr Ian Loy, Caterpillar Australia, tabled in evidence,
Melbourne, 23 February 1999, p 4.
[18] A better way to a cleaner future,
p 4.
[19] A better way to a cleaner future,
p 4.
[20] A better way to a cleaner future,
p 5.
[21] A better way to a cleaner future,
p 5.
[22] Australia Institute, Submission 120, pp
4-5.
[23] Sales Tax (Exemptions and Classifications)
Act (Schedule 1, Items 1, 2, 126, 126A, 127 AND 140) and the Sales Tax
Assessment Act, Section 30.
[24] Australia Institute, Submission 120, p
5.
[25] Mr Michael Krockenberger, Australian Conservation
Foundation, Hansard, Melbourne, 23 February 1999, p 3.
[26] Value Added Tax (equivalent to GST).
[27] Australian Conservation Foundation, Submission
932, p 9.
[28] Dr Clive Hamilton, Australia Institute,
Hansard, Canberra, 1 March 1999, p 264.
[29] Improvement of Heavy-Vehicle Emissions
in Conjunction with Reduction in Fuel Excise, A better way to a cleaner
future, paper by Mr Ian Loy, Caterpillar Australia, tabled in evidence,
Melbourne, 23 February 1999, pp 5, 6.
[30] Mr James Whelan, Queensland Conservation
Council, Hansard, Brisbane, 3 March 1999, p 545.
[31] Mr James Whelan, Queensland Conservation
Council, Hansard, Brisbane, 3 March 1999, p 551.
[32] Mr James Whelan, Queensland Conservation
Council, supplementary information, 17 March 1999, p 1.
[33] Improvement of Heavy-Vehicle Emissions
in Conjunction with Reduction in Fuel Excise, A better way to a cleaner
future, paper by Mr Ian Loy, Caterpillar Australia, tabled in evidence,
Melbourne, 23 February 1999, p 4.
[34] A better way to a cleaner future,
p 6.
[35] A better way to a cleaner future,
p 6.
[36] A better way to a cleaner future,
p 6.
[37] A better way to a cleaner future,
p 6.
[38] Improvement of Heavy-Vehicle Emissions
in Conjunction with Reduction in Fuel Excise, A better way to a cleaner
future, paper by Mr Ian Loy, Caterpillar Australia, tabled in evidence,
Melbourne, 23 February 1999, p 19.