Incentive to develop standards Government: Government developed standards seek to balance economic, environmental and social welfare outcomes. Where welfare optimising outcomes are not achieved there is an incentive for the Australian Government to develop standards. Industry: There is limited incentive for industry to develop standards that balance economic, environmental and social welfare outcomes. Industry incentives are maximising financial returns linked to maintaining competitive advantage and minimising capital development costs. Prior to the fuel quality standards legislation being introduced standards focused on ‘vehicle operability’ issues and did not consider environmental and health considerations. ● Regulatory impact assessment requirements stipulate that economic, environmental and social welfare outcomes are robustly assessed. ● Regulatory impact assessment requirements stipulate that economic, environmental and social welfare outcomes are robustly assessed. ● A balanced (industry, consumer and societal) decision-making body would need to be established. There is no market incentive for this entity to be formed, although the co-regulatory framework could require this. Maintenance of existing standards “frozen in time” may be preferred by domestic refineries because it supports existing competitive advantage, because no capital development would be required. ● A balanced (industry, consumer and societal) decision-making body would need to be established. There is no market incentive for this entity to be formed. Elevated fuel quality standards will increase costs of production. Maintenance of existing standards “frozen in time” may be preferred by domestic refineries because it supports existing competitive advantage, because no capital development would be required. However, some fuel importers may see a competitive advantage in importing lower priced ‘dirty’ fuels.
Incentive to participate/ free-ride Discussions with stakeholders identified that the major fuel industry companies have an incentive to participate. Small organisations may have a reduced incentive to participate as there is there may be opportunities to make financial returns. ● Compliance and enforcement arrangements create an incentive for participation. ● Compliance and enforcement arrangements create an incentive for participation. ● Major fuel industry companies have indicated that they would participate. Co-regulatory arrangements would also provide an incentive to participate. ● Major fuel industry companies have indicated that they would participate. However, it is uncertain whether all of the industry would participate, or whether they would seek to exploit financial arbitrage opportunities. Objectives and arrangement Where fuel quality is concerned key points are: Products are not homogenous. Assurance is challenging because there are many retail outlets and linking fuel quality issues with a specific retail outlet is difficult. Balanced representation would be hard to achieve. ● Government regulation can deal with heterogeneity, assurance and representation. Noting that all of these issues can increase regulatory cost. ● Government regulation can deal with heterogeneity, assurance and representation. Noting that all of these issues can increase regulatory cost. ● Co-regulation can support the management of heterogeneity, assurance and representation. However, the national organisation will need to navigate these issues and that could be challenging. ● Gaining industry-wide coverage will be very challenging, particularly given product heterogeneity. Reliance on industry to provide assurance arrangements will be difficult, because assurance costs reduce financial margins. Achieving balanced representation across all stakeholder groups will be challenging to achieve.
Regulatory consistency Regulatory consistency is important for vehicle emission and operability efficiency to be achieved. Key considerations include domestic harmonisation with Motor Vehicle Standards Act 1989 and international harmonisation with fuel and emissions standards. ● Regulatory consistency should be achievable, but consultation has confirmed that harmonisation has thus far not been achieved between domestic regulations. Establishing clear links between different regulatory frameworks could facilitate consistency. ● Regulatory consistency would be difficult to achieve, across Australian Government and State and Territory governments. ● Regulatory consistency is achievable but is not assured. ● Regulatory consistency would be difficult to achieve, because of differing incentives (discussed above). Risk How do risks to stakeholders compare under the regulatory alternatives? ● Government needs to balance the risks to all stakeholders. ● Refinery industry stakeholders could argue that they have elevated risks because standards are likely to be strengthened into the future. ● Government needs to balance the risks to all stakeholders. However, Mutual Recognition legislation could present risks. ● Refinery industry stakeholders could argue that they have elevated risks because standards are likely to be strengthened into the future. ● Elevated risks emerge for stakeholders with reduced market power. Government would face high risks of societal criticism if fuel quality doesn’t align with international trends. ● Major refiners and importers could utilise their market power and information asymmetries to reduce risk. ● Elevated risks emerge for stakeholders with reduced market power. Government would face high risks of societal backlash if air quality standards decline or if contaminants in fuel affect engine operability. ● Major refiners and importers could utilise their market power and information asymmetries to reduce risk.
Daily mortality cardiovascular disease All ages 68 76 77 77 78 79 89 91 Hospital Admissions Cardiac disease 65+ 1241 1407 1408 1408 780 789 894 906 Hospital admissions respiratory disease 65+ years 635 720 720 721 637 644 730 741 Hospital admissions cardiovascular disease 65+ years 1058 1224 1224 1225 351 354 402 407 Hospital admissions pneumonia and bronchitis 65+ years 294 323 323 320 1326 1340 1519 1540 Hospital admissions respiratory disease 15-64 years 588 644 652 653 1524 1540 1746 1770 Emergency Department visits asthma 1-14 years 119 102 102 102 106 107 122 123 Carbon Monoxide The change in health outcomes attributable to exposure to carbon monoxide are shown in . In summary: There is little or no change in health outcomes assessed for Scenario A between 2020 and 2030 in Melbourne. There are small increases observed in Sydney. Similarly, there is little or no change in health outcomes assessed for Scenario B/C between 2020 and 2030 in Melbourne. There are small increases observed in Sydney There is no significant difference between Scenario A and B/C for health outcomes for carbon monoxide. Table 54: Number of attributable health outcomes for CO Health Outcome Melbourne Sydney 2020 Scenario A 2020 Scenario B/C/D 2030 Scenario A/D 2030 Scenario B/C 2020 Scenario A 2020 Scenario B/C/D 2030 Scenario A/D 2030 Scenario B/C Daily Mortality all cause All ages 5 4 4 4 5 5 6 6 Hospital Admissions Cardiovascular Disease 65+ years 14 13 14 14 17 17 20 20 Hospital Admissions Cardiac Disease 65+ years 21 20 20 20 25 25 29 29 Air toxics – diesel particles The change in cancer risk attributable to exposure to diesel particles is shown in . In summary:
Standardising provision with Regulatory Powers (Standard Provisions) Act 2014 59 Section 59 sets out the provisions with respect to monitoring warrants. Subsection 59(4) sets out what the warrant must do. Currently subsection 59(4) is not completely consistent with section 32 of the Regulatory Powers (Standard Provisions) Act 2014. Consideration could be given to amending section 59 so that the warrant describes the premises to which the warrant relates; states that the warrant is issued under section 59; and state the purpose for which the warrant is issued. Definition of infringement notice offence 65L Section 65L sets out when an infringement notice may be given. The section does not define what is an infringement notice offence with the implication that in theory an infringement notice could be issues for an offence that is not one of strict liability. Consideration could be given limiting the issue of an infringement notice to offences of strict (and absolute) liability (as well as contraventions of civil penalty provisions). Reference to prescribed penalty 65M(3) Subsection 65M(3) states that in an infringement notice for a civil penalty provision the penalty should not exceed an amount equal to one-fifth of the maximum penalty prescribed for contravening the provision. The use of the word “prescribed” has caused uncertainty as to whether the amount needs to be prescribed in the Regulations. Consideration could be given to replacing the word “prescribed” with “that a court could impose” or something similar. Annual Statements 67 Annual Statements Information is also collected by the Bureau of Resource and Energy Economics Consideration could be given to repealing this provision to prevent industry having to supply the same data twice. Aggregate of Data 67A Section 67A places restrictions on the disclosure of information obtained under the Act. There is confusion about whether section 67A prevents the publication of aggregated material that has been de-personalised. There is uncertainty as to whether information obtained under the Act can be disclosed to government agencies. Consideration could be given to inserting a note saying that this does not prevent the publication of aggregated data. Consideration cold also be given to amending section 67A to allow disclosure of fuel quality testing results to government agencies that administer environmental protection laws – subject to that information not being passed on to a third party.