“Age of Entitlement” alive and well for fossil fuels

Originally posted in RenewEconomy on 3 March 2014

“Age of Entitlement” alive and well for fossil fuels

As Australian industries queued up in early 2014 to announce their impending closure, adding tens of thousands to the ranks of the unemployed, Joe Hockey was steadfast. Forget about bailouts from government. “The age of entitlement is over and the age of personal responsibility has begun.”

As Mr Hockey said: “We need to help those people who are most vulnerable in our community. That is our duty and we will do that.”

The Federal Government spends over $10 billion per year on subsidies that encourage the production and use of fossil fuels. About $65 million per electorate or, if you want to make it really personal, $430 per taxpayer each year.

Market Forces and Environment Victoria have just updated figures based largely on the Treasury’s Tax Expenditure Statement. Check them out here. It shows that over the next four years, Australian taxpayers are set to spend over $40 billion on programs that encourage fossil fuel production and consumption.

We’ve identified priorities including the mining industry’s fuel tax discount, accelerated depreciation to the oil and gas industries and concessional rates of aviation gasoline that would restore $12.3 billlion to the public purse over the next three years and will be working as part of the “Paid to Pollute” alliance to get these subsidies removed. People wanting to be part of that effort can take the first step by signing the petition to Joe Hockey on the Paid to Pollute website or Market Forces’ page.

Last year brought some success for the alliance, as a $550 million per year exploration and prospecting subsidy was cancelled in the 2013 budget. However, the reduction in fossil fuel subsidy spending is set to be wiped out by the increasing costs of other programs unless more action is taken.

Perversely, the most likely candidate for fossil fuel subsidy reform would result from the removal of Clean Energy Future (aka great big scary tax you’ll barely notice). Linked to the carbon price is the “Energy Security Fund”, a multi-billion dollar program involving giving large sums of free carbon permits to Australia’s most polluting power stations.

Should the carbon price go, and take the coal “compensation” with it, that’s about $3 billion saved out to 2016/17 but of course, at the cost of tens of billions of dollars in revenue from the carbon price itself. The words “baby” and “bathwater” leap to mind.

Fossil fuel subsidies always looked more absurd with the presence of a carbon price. Taxing polluting fuels while paying for their use sounds like a multi-billion dollar policy conflict. And even if the carbon price is replaced by direct action, which appears to be about giving out money as incentives to reduce pollution, this contradiction holds.

If the environmental and economic reasons weren’t enough, it’s worth noting that cancelling subsidies like the mining industry’s fuel tax credits would go down a treat with the public. Polling has repeatedly shown public support for cancelling this subsidy, the most recent of which we commissioned and found that support was highest in Queensland, one of the biggest mining states.

An Age of Entitlement probably sounds pretty good for the fossil fuel industry. It had become important and thrived from the age of industrialisation. But now with cleaner, cheaper options available for energy and that pesky reality of carbon pollution hurtling the climate towards being barely fit for habitation, another rationale for its existence is needed. Entitlement sounds as good as anything else, and probably helps explain petulant and stubborn responses like this to the idea of removing mining subsidies, which The Australia Institute has assessed as also amounting to billions of dollars per year (note that some of these figures will overlap with our fossil fuel subsidies numbers).

So look. I’m not here to pass judgement on the merit of keeping our car manufacturers or SPC Ardmona open. We’re talking here about spending public money and we should always do that in the interests of what’s best for Australia. But if the age of entitlement has indeed ended and if the Treasurer is so determined to cut waste, surely it makes sense to start with removing unnecessary handouts to polluting and already wealthy industries and instead using that money to support Australian jobs and industries and services that build this country’s future.