CPD’s submission to the Senate Select Committee on Taxation of Gas Resources is focused on the long-term future of Australia’s exports, and how to ensure an orderly transition as global demand for fossil fuels declines.
In the short term, it makes the case for a revenue-based (rather than profit-based) gas export levy to ensure Australians can share in the benefits from our sovereign resources.
Building from a gas export levy, it suggests Australia should have a policy framework to encourage the gradual phase down of fossil fuel exports over the long term, supporting employment and investment in achieving a global transition away from fossil fuel use.
CPD’s submission to the Senate Select Committee on Taxation of Gas Resources focuses on the long-term future of Australia’s exports, and how to ensure an orderly transition as global demand for fossil fuels declines.
The Committee was established to look at the tax treatment of Australian gas exports, including the impact of any proposed changes on households, businesses, government revenue and investment. The most common change being proposed was a 25% windfall tax on exports.
Firstly, the submission recommends implementing a gas export levy that is simple, permanent and immediate, based on the value of gas sold rather than profits or windfalls. Previous attempts to tax profits (such as the Petroleum Resource Rent Tax) have been ineffective at generating revenue due to their complexity and potential for minimisation of reportable profits through accounting techniques.
However, the submission’s primary recommendation is to develop a long-term energy export transition framework to plan for an orderly transition away from fossil fuels being a major Australian export. This could be implemented through something like tradable export rights, managed quantitative constraints, or a price-based signal. The strength of this signal would increase over time. Much like the facility baselines in the Safeguard Mechanism, it would be something that gradually and predictably moves Australian industry towards green energy exports.
With our major export partners such as Japan, China and South Korea all shifting their economies to clean energy, a reduction in demand for Australia’s fossil fuels is inevitable. This will be best managed through a gradual and predictable process, to ensure Australia is not left holding the bag – a process that can also generate revenue to develop alternatives and mitigate impacts.
In the short term, we need to get our tax settings right. Even before the current fuel crisis, there were growing calls for a windfall tax on gas exports to capture and share more of the value of Australia’s sovereign resources. Without adequate taxation, high gas prices driven by the war in the Middle East largely pad the profits of gas companies, and do little to ease the burden on domestic consumers facing higher prices for goods.
CPD is about to embark on an economic modelling exercise to develop our proposal for an energy export transition framework, with publication due later this year.
During the hearing there was significant discussion of job impacts, so CPD provided supplementary information to the Committee, taken from our 2022 Who’s Buying report.
The ETP Forum comprises CPD, Climateworks Centre, the Indonesian Research Institute for Decarbonisation, the Institute for Essential Services Reform, the Purnomo Yusgiantoro Centre and the International Institute for Sustainable Development, and was established in 2022. The ETP Forum helped coordinate support to Indonesia’s G20 Presidency in 2022 and ASEAN Chairship in 2023.
