Taylor’s new $2 billion fossil subsidy snubs EVs and provides security only for oil companies

The Coalition government has continued its long-running focus on providing subsidies to Australia’s fossil fuel industry, with cash handouts of up to $2 billion to tempt the world’s largest oil companies to stick around in Australia.

The “Fuel Security Service Payment” will come into action when oil refineries don’t make enough money on the fossil fuels they sell, with a maximum payment of 1.8 cents per litre handed out when the margin falls to $7.30.

The justification for subsidising fossil fuels in transport is precisely the same as the justification in the power sector: “security”.

“Supporting our refineries will ensure we have the sovereign capability needed to prepare for any event, protect families and businesses from higher prices at the bowser, and keep Australia moving as we secure our recovery from COVID19”, said energy minister Angus Taylor.

In addition: “up to $302 million in support for major refinery infrastructure upgrades to help refiners bring forward the production of better-quality fuels from 2027 to 2024”, and “$50.7 million for the implementation and monitoring of the FSSP and the minimum stockholding obligation (MSO), ensuring industry complies with the new fuel security framework”.

These were hidden in last week’s budget under the guise of ‘commercial sensitivity’ – a budget that didn’t mention electric cars at all.

The timing truly could not be worse.

Last week, a major cyber-attack on a gargantuan oil pipeline cutting through the US resulted in both limitations to supply and a flow-on mass panic as an Australian-toilet-paper-style hoarding problem resulted in major shortages throughout several states. Expectedly, fossil fuel advocates in the US proposed even more oil pipelines as the solution to the extreme vulnerability of a transport mechanism that relies on the transport of liquid fuels.

A transition from fossil fuels to transport powered by renewable electricity, including EVs, public transport and two-wheeled options such as e-bikes, would ease this problem. Electricity networks are also vulnerable to cyberattacks, but electricity is not a specialised, machine-specific fuel type and distributed forms of generation such as solar and batteries are deepening resilience even further. We know the ‘security’ argument is just tail-chasing to paper over the incredible vulnerability of relying on imported oil for the functioning of the Australian economy.

The argument that domestic refining capacity reduces reliance on imported petroleum and jet fuel is similarly empty – those refineries rely on imported oil to refine. The vulnerabilities in the supply chain remain. Australia’s refineries are in a structural decline, and massive government subsidies are the only thing that can slow that process.

But what most don’t realise is that Australia is far worse than most other countries. Australia is one of the few countries in the OECD not to have vehicle emissions standards. That means Australia’s fuel quality is among the worst in the world. That is reflected in the emissions intensity of Australia’s road transport, which is reported below by the IEA up to 2018:

What is being touted as a progressive action – “fast-tracking” a switch to better fuel quality – should have happened years, if not decades ago. It’s already totally out of date, because a transition to fuel-free vehicles is right around the corner. By the time Australians can purchase cleaner European cars due to upgraded fuel standards, fuel won’t even be the best option.

Of course, both emissions and fuel security issues could be first eased and ultimately resolved with rapid regulatory action to set strict emissions standard, and make zero emissions transport alternatives affordable and accessible o anyone who needs them. But the absence of any transport climate policy in Australia means the current projections show a flatline of emissions out to the next decade, even with an assumed proportion of 19% new EV sales by 2030 by the government’s own modelling:

There is a circular justification for this that features in today’s report. “Although the world is moving towards electric vehicles, diesel consumption has increased in the past five years. The government anticipates it will take between 10 and 20 years to fully transition to electric vehicles and longer for heavy vehicles”, writes Phillip Coorey in the Australian Financial Review. Of course it does: the government’s own decision to not accelerate climate action is the reason that it will take so long. That’s a closed loop of eternal self-fulfilment.

Last week, European-focused analytics group and Bloomberg New Energy Finance released a new report showing that the date EVs are expected to be fully cost competitive with combustion cars keeps creeping closer. But they highlight that major new policies are required to accelerate this transition to ensure climate goals are met.

It’s relatively safe to assume that these new policies to prop up fossil fuel companies are pre-emptive strikes on the looming threat of EVs. Change is coming for sure now, and it is very likely that a range of policy efforts will accelerate this. In the best case scenario, the world will be well on the way to phasing out fossil transport by 2035-2040. Australia’s big new fossil fuel subsidy package is a continuation of the government’s theme: pushing against global trends in the futile hope that buys them another couple of years of delay and denial.