New government subsidies deepen Australia’s reliance on fossil fuels for transport

A new government-funded program to boost Australia’s reserves of diesel launched on Monday, as the absence of any federal policy to transition from fossil fuels in transport draws increasing scrutiny.

“The Australian Government will provide up to $200 million in competitive grants to support the construction of an additional 780 megalitres of diesel storage in Australia”, wrote the Department of Industry, Science, Energy and Resources (DISER) in a recent release published on the Friday of the first week in January, within Australia’s holiday period.

“Successful projects will receive grants of up to $33.3 million, with the Government covering up to 50 per cent of total eligible project expenditure”, wrote Australia’s Energy and Emissions Reduction Minister Angus Taylor, in a separate release, highlighting Australia’s heavy and unchanged reliance on the highly polluting fuel for critical services.

“Diesel is crucial to Australia’s energy security as it underpins our critical infrastructure, transport sector and important industries, such as mining and agriculture. It is also critical during an emergency for essential services”, he said, adding that the government “will provide up to $200 million in competitive grants over three years to support the construction of an additional 780 megalitres of onshore diesel storage”.

In 2020, several changes were made to Australia’s lax fuel standards to benefit a domestic oil industry hit hard by the impacts of Covid-19.

This included the loosening of fuel standards that was designed to allow stockpiles of aviation fuels, for which demand had collapsed following Covid-19 related travel restrictions, to be converted into other transport fuels.

The International Energy Agency sets a 90 day standard for reserves of stored fuel, and Australia’s current petroleum levels sit around 62 days’ worth, with an additional 11 days worth on vessel destined to Australia and 12 stored overseas but set to be sent to Australia, according to the October 2020 Australian Petroleum Statistics (APS) report published by DISER.

The Morrison government also sought to seize upon a collapse in the international oil price, which fell to negative figures for a period in early 2020 largely due to a supply stand-off between Russia and Middle-eastern oil producers, purchasing around $100 million of oil to be stored offshore in the United States’ strategic petroleum reserves.

Throughout the 2010s, Australia’s production of refined fossil products such as LPH, automotive gasoline and diesel oil have seen a significant decrease, alongside an increase in the import of these fuels, as shown in the same APS October 2020 report. The imports were on a steady rising trend from 2010 onwards, with a recent fall attributable only to the impacts of Covid-19 on demand for transport fuels.

In conjunction with this, the production of transport fuels in Australia has markedly decreased, with early 2015 marking the starting point in the shift towards heavier reliance on the importation of fossil products to power transport.

A long-awaited “future fuels” strategy, originally a ‘National Electric Vehicles strategy’, was not released as promised by Australia’s government before the end of 2020.

In December 2020, the government announced it would bring forward subsidies for oil refineries to keep them operating, along with a collection of other significant subsidies targeted at Australia’s fossil fuel industries to protect them from the impacts of Covid-19.

“The announcement this week by energy minister Angus Taylor that he’s putting together a major package to prop up oil refineries to preserve dirty fuel supplies to one of the dirtiest car fleets on the planet simply beggars belief”, wrote analyst Bill Hare, of the package.

The run of announcements of new subsidy programs for Australia’s fossil fuelled transport sector, alongside the continued absence of any programs to reduce emissions in the sector, come as the world prepares for COP26 to be held in Glasgow this year, in which countries are expected to raise their climate ambitions, and attention moves from the power sector into other sectors like transport, buildings and mining.

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