Diesel fuel rebate threat alarm

Speaking to Fairfax Agricultural Media, Mr Macfarlane said at the weekend he caught wind of a communique sponsored by NZ that Environment Minister Greg Hunt is considering signing today at the Paris summit which commits world governments to ending the subsidies.

The communique was discussed today at the Coalition’s backbench industry committee meeting sounding alarm bells on a future move to cut the DFR to the detriment of farmers.

Mr Macfarlane said the DFR wasn’t in fact a subsidy but a future change of government could see it dragged into any commitment made in Paris.

He has notified the National Farmers' Federation (NFF) which has been a staunch defender of the DFR especially at budget time and the Minerals Council of Australia which has also been placed on notice, about the pending Paris commitment.

Mr Macfarlane said while the DRF scheme wasn’t a subsidy it has been described that way by Treasury and politically, by the Greens and at times by the Labor party.

He said the Coalition government wasn’t considering axing the DFR and believed its maintenance was “of paramount importance both to farmers and miners” but needed to be cautious about any commitment in Paris.

“The real issue around this is we've seen in the past when we’ve signed up to things, that 10 years down the track they suddenly say, ‘hang on you’ve signed this agreement or protocol or communique and why aren’t you doing it?’,” he said.

“And the rules have changed, the government has changed, the ministers have changed and all the sudden you’re staring down the barrel of international pressure - perhaps even sanctions – to end something that’s of crucial importance, particularly to farmers."

But Mr Macfarlane said the DFR was “just that”.

“It’s a rebate on an excise that shouldn’t be charged and was never intended to be charged, to off-road vehicles and anything that puts it at threat, I’m hypersensitive to it,” he said.

Mr Macfarlane said he understood Mr Hunt was “pressing” to have the agreement on fossil fuel subsidy reforms, in Paris, signed today, Europe time.

But he said, “We should not sign it”.

“There’s no benefit to Australia, to sign it,” he said.

“We have a good target for the Paris talks - we’re going to achieve our exiting targets and we’ve got a great story to tell, so why put at risk something that’s so important?

“We don’t need to make heroes of ourselves and put at jeopardy something that’s incredibly important to the farming and mining sector.”

Mr Macfarlane said the problem with doing anything to the DFR was that it “tends to open a Pandora’s Box”.

“The current system is not perfect but I’m happy with the way it functions,” he said.

“It’s been made explicitly clear that for us, the DFR is a fundamental cornerstone of keeping costs down on-farm and in our mining operations.

“Mining’s under pressure and farming’s always under cost pressure so we’re keen to see this set aside.

“The IMF (International Monetary Fund) regards not having a carbon tax as a subsidy to the fossil fuel industry and could at any point deem the DFR as a subsidy and bingo - you’re then under pressure internationally so it’s best left alone.”

NFF president Brent Finlay said he’d contacted Mr Hunt’s office to clarify the government’s position on signing onto the Paris agreement to end fossil fuel subsidies.

But Mr Finlay said the DFR wasn’t a subsidy and any move to cut the farm sector’s eligibility to the scheme would have negative impacts for industry competitiveness.

He said Australia was one of the world’s least subsidised agricultural countries and the rebate - while not a subsidy - helped farmers compete in export markets, against commodities produced by countries offering far greater taxpayer support to farmers.

The 2015 UN Paris summit runs from November 30 to December 11 and will see global leaders considering agreed reduction targets for greenhouse gas emissions.

A joint report said in 2012-13, agriculture accounted for 45 per cent of claims on the rebate, valued at $679 million or 13pc of the total $5.408 billion.

In contrast, mining was responsible for 1pc of claims but comprised 40pc of the overall value totalling $2.13b.

At the time, NIC chief executive Tom Chesson said the diesel excise rebate was not a subsidy or a handout, as the excise paid on diesel was originally introduced to pay for road infrastructure.

“To put it simply: we don’t pump water on public roads and we only receive the rebate for off-road use,” he said.

“Any government cuts to the scheme would be greeted with dismay by irrigated agriculture that is already reeling from the high cost of energy.”

At the time, NFF president Brent Finlay said food producers were only reimbursed for tax already paid on a key business input.

“The fuel tax credits scheme is critical for Australia’s agricultural sector, where food producers already operate without the subsidies enjoyed by our international competitors,” he said.

Queensland National party Senator Matthew Canavan said it was a “die in the ditch issue”.

Senator Canavan said he believed the Paris agreement could not be signed unless it was made clear that the DFR was excluded.

He said Australia offered virtually no subsidies on fossil fuels – a point identified by the Productivity Commission.

“This is a die in the ditch issue because the rebate is essential to maintaining the profitability of our agriculture sector,” he said.

It’s understood other National Party MPs are upset by the potential move to sign the Paris agreement and possible threat to the DFR, including deputy-leader Barnaby Joyce.

Prime Minister Malcolm Turnbull and Opposition Leader Bill Shorten are also in Paris for the UN conference.

Queensland LNP MP and Chair of the Coalition’s backbench policy committee for industry, science, innovation and resources George Christensen also expressed fears Mr Hunt could sign the Paris fossil fuel subsidy agreement.

That concern would remain, despite moves to potentially include a side-letter with anything Australia signs onto, saying the DFR is not a subsidy.

Mr Christensen said signing the agreement “opens the door” for future Australian governments to pass legislation cutting the DRF which would be “reckless” for primary industries.

He said Mr Hunt didn’t need to sign anything in Paris and that the backbench committee had met today and unanimously agreed to oppose signing the agreement.

Mr Christensen said the issue hadn’t yet been discussed and debated in the Coalition’s join party-room meeting or to his knowledge been agreed to by cabinet.

He said the National party room met today and discussed the issue and while he would not comment on specific details of those talks “you can rest assured the Deputy-Prime Minister knows about it”.