Why the diesel fuel rebate needs to stay

Last time a global climate change agreement was signed by Australia, we met our targets largely by imposing costs on the agricultural sector. 

Australia was one of the few countries that met its Kyoto targets, and some Australian politicians trumpet this fact – but few go on to describe that we only did so by reducing land clearing, not through more wind turbines or solar panels.

Specifically, state governments took away farmers’ rights to cut down their own trees. No compensation was provided but a social good was paid for by imposing costs on only a narrow few — our farmers.

The Greens — and their assorted allies — are trying the same trick again.

At the Paris climate change negotiations, they are trying to force an agreement to end fossil fuel subsidies and they absurdly define Australia’s diesel fuel tax rebate arrangements as a “subsidy”.

The diesel fuel tax rebate provides sectors that largely do not use public roads — primarily the farming, fishing and mining sectors — with a refund on the fuel excise that they otherwise would be forced to pay to fund the construction of public roads that they don’t use. It is as fair as it sounds: a farmer doesn’t harvest grain on the Pacific Highway, so the costs of the diesel in the tractor should not fund bitumen between Brisbane and Sydney.

That logic is exactly what a proposed agreement to end fossil fuel subsidies — at the Paris climate change negotiations – would have made us do. The agreement stated that “The International Monetary Fund views that fossil fuel prices should reflect not only supply costs but also environmental impacts like climate change and the health costs of local air pollution.” In other words, if governments do not decide to charge a tax to cover the perceived costs to the environment of fossil fuels, then that is a “subsidy” and it must be stopped.

In the inverted logic of green activists, not making someone pay a tax is a “subsidy”. A bit like “You should thank me for not stealing your wallet”.

Meanwhile, actual subsidies to agricultural production, which distort global commodity markets, costing Australian producers in particular, remain largely untouched by international agreements, including the recently signed Trans-Pacific Partnership. International negotiators should focus on ending these actual subsidies before going after imagined ones.

Not that Australia should have any fear, in theory, of signing a fair dinkum agreement to end subsidies. We basically pay no subsidies specifically to fossil fuel. For example, the Productivity Commission estimates subsidies paid to the mining sector are just 0.1 per cent of their output, the lowest for any sector.

Thankfully there was an outcry about the sham agreement proposed in Paris from farming representative groups, the Nationals party and rural Liberal members of Parliament. That outcry prevented Australia from signing an agreement.

The proposed agreement would have once again sacrificed the interests of primary production to the interests of urban-based environmental activists. Those green activists want the warm glow that comes from thinking you are saving the world, without suffering the costs by actually making a difference — say, for example, by not travelling all around the world on fossil-fuel-powered, taxpayer-funded jets to yet another climate change talkfest.

This article was originally published in the Queensland Country Life on 10 December 2015.  

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