Greens' Kick Own Goal By Blocking Fuel Excise Rise

The Greens are voting against the Abbott government’s increase in the fuel excise. 

It’s a strange move for a minor party best known for its environmental policies.

In pure policy terms, Milne’s position on fuel excise makes little sense. Fuel excise is a tax on petrol. Petrol is a fossil fuel. The Greens want less fossil fuel pollution, and they want to move Australia away from fossil fuels and towards renewable energy.

So raising the fuel excise would be something you’d think the Greens would be in favour of.

Indeed, in their 2013 election platform, they quite explicitly stated that they want to raise fuel taxes for the mining and agriculture sector.

“The Australian Greens will reinvest over $12 billion from abolishing key tax breaks to the fossil fuel industry into the smart, clean industries for the future,” their platform states. 

That document has an entire section, entitled “Make Polluters Pay.” Its very first line reads, simply, “we value our clean air.”

It’s not too hard to join the dots in this particular diagram.

Perhaps that’s why Christine Milne seemed so hesitant in explaining the decision yesterday last night. Speaking to reporters, Milne defended the backflip, arguing that the tax increase would have resulted in more spending on roads.

“It is a difficult issue for us because we want to see people using less polluting fuels, but if we facilitate this we will see more and more money going into roads with more cars on them,” she said.

But the veracity of that claim was always in question. The government has already indicated it would go ahead with its infrastructure plans, whether the fuel excise was raised or not. Front-bencher Jamie Briggs said as much on Sunday night. 

In any case, Milne’s claims that the money will all be spent on roads is a nonsense. The fuel excise is a not a true hypothecated tax in the way the GST is. Excise income accrues to the Treasury, and the government can spend it as it wishes.

The Greens have consistently argued that the Australian government needs more revenue in order to pay for schools, hospitals and environmental protection. And yet now the party is blocking a tax increase. A tax increase that is levied on fossil fuels.

There are cogent, valid arguments against raising the fuel excise. For instance, as Milne rightly points out, fuel excise is regressive: it hurts poorer Australians proportionately more than wealthier ones. In that respect, the carbon tax, which had strong compensation mechanisms built in, was a far fairer tax.

But the Greens can no longer save the carbon tax. After July 1, carbon legislation becomes beholden to the new Senate, which will be controlled by right-wing minor parties headed by Clive Palmer. Given Palmer’s populist politics, not to mention his election promises, there is every chance that he will combine with the Coalition to abolish it.

In an Australia with no carbon tax, fuel excise then becomes one of the most important remaining instruments to constrain fossil fuel pollution. If the Greens really believe in curbing fossil fuel pollution – hell, if they even believe in the value of price signals as instruments of environmental policy – then supporting an increase in the fuel excise is the right thing to do.

And let’s remember that this is not a big increase. Some estimates of its impact range as low as 40c a week. The real value of the fuel excise changes lie in the future, as the indexation abandoned by John Howard is finally restored. This will increase the federal budget’s bottom line by several billion over the forward estimates.

The decision in 2001 by Howard to abandon fuel excise indexation was only ever a knee-jerk response to popular anger over high petrol prices. This is the first opportunity in 13 years to address his revenue-busting political fix.

The Abbott government’s austerity drive provides a rare chance to permanently increase the Commonwealth’s revenue base, which the Greens say they are in favour of, as well as put an increased price on pollution, which the Greens are also in favour of.

By voting it down now, the Greens may end up in the worst of both worlds, with neither a tax on carbon, nor an increase in fuel tax.

Voters hate high fuel prices, for obvious reasons. They also hate sky-high electricity bills, but that didn’t stop the Greens from supporting several policies that acted to increase electricity bills.

In those cases, the Greens argued, honestly, that reducing pollution and encouraging renewable energy were higher priorities.

In 2009, the Greens voted against the Rudd government’s Carbon Pollution Reduction Scheme. They argued at the time that the CPRS wasn’t a good enough carbon pricing scheme, and that a stronger and better policy was needed.

At the time, I argued that the decision was justified, because the CPRS was a fundamentally flawed policy.

But there is no doubt that the decision to vote against the CPRS has been used by Labor and the Greens’ many enemies as a weapon against the party. It is particularly effective because, on first impressions, it seems so self-defeating. Why would the Greens vote against a price on carbon?

The decision to vote against the fuel excise may well turn out to be another own goal. In fact, the arguments for blocking the fuel excise increase are much weaker than those for blocking the CPRS.

Petrol in Australia is taxed far more lightly than many other countries. There are numerous sound justifications for raising fuel taxes: to help provide revenue for health, education and renewable energy; to send a stronger price signal against pollution; to better capture the cost of congestion; to encourage investment in alternative transport solutions.

The Greens appear to be playing politics with an issue that should be a no-brainer for them. That’s a move that could easily backfire, because Green voters are a principled bunch. Indeed, many of them are former ALP voters disaffected with Labor’s rightwards drift.

Politically savvy and well-informed, some Green voters will see through flimsy arguments about Tony Abbott wanting to spend money on roads.

The risk for Milne is that her base will conclude that here she has taken a decision based on short-term political gain, rather than in the long-term interests of the environment.