Alison, what do you think is missing from the argument that we don't actually need renewable gases and that our report overstates the importance of these as decarbonization solutions?

There are some consumers of gas who are not interested in the energy content, they're interested in the chemical content, and you can't substitute an electron for a molecule in that context.

So if you're, for example, a plastics maker, a chemicals factory, an explosive maker, you're consuming gas at the moment because you want the chemicals that are in it, not for the energy content.

So for those people, there is a need for an alternative to fossil fuel-based gas, which might be biomethane or might be hydrogen or might be both.

There are also some large industrial players where you need very high temperature heat.

For example, if you're melting iron ore to make iron.

Now, there are ways that people are experimenting with doing that through electricity, but at the moment, the pathway that a lot of the companies see there is that they want something that is burnable.

Can you give us a sense of how this demand-side obligation could work in practice?

And so those factories who do have to keep using gas, what are they gonna do? Considering we know we need to move to this very low gas future.

So this is where the renewable gas story comes in.

We need something that behaves like a gas for those people, but doesn't have that, that climate change impact.

So there's sort of two types of renewable gases that we could look at here.

There's hydrogen, and then there's biomethane.

I talked a little bit before about the difference between those two gases.

The thing is that both of those industries are really small.

What do you see as being the biggest risk here?

One slight concern around it is there's not a huge amount of transparency here about how much commercial risk is being transferred onto the government

governmentAll of these businesses live with price risk all the time, and that's actually something that keeps the supply chain efficient and functioning well.

On the second one, the national fuel reserve, we haven't seen the design for this yet.

The amount of detail that we've got is that there's gonna be some sort of new entity that's gonna buy and sell fuel.

This is basically a shift to a mixed market in fuel, which is not something that we've had before.

And so I'm really gonna be watching to see whether we have some safeguards there, both to stop it from profiteering, you don't want the government to be buying fuel when it's cheap and selling it to Australians when prices are higher.

But also, we don't want this reserve to start to be used for political purposes.

Alison, what stood out to you as missing from this budget?

Mm-hmm

... it's actually not a large amount.

Now, large doesn't mean that it's not important.

Um, you know, one of the things that Victoria has been looking at is potential, what are called peak day shortages, which are on those really, really cold gray days in Victoria, where, you know, you've just got really, really high demand.

And having, like, this, you know, a little bit of extra gas available at those times is definitely something that's good for energy security for Victoria.

Wow.

Um, and you know, one of the things that we, we know is that gas plays an increasingly important role as a backup, um, in grids that have high levels of renewables in it, and that's particularly the case when we've got lots of people, you know, who've put rooftop solar in, which is, is great for them, but it doesn't sort of run, you know, all the time.

Um, and so, you know, just because, I mean, when I say important, you know, one of the things we've gotta remember is important doesn't have to mean massive.

Oh, okay

... it's actually not a large amount.

Now, large doesn't mean that it's not important.

Um, you know, one of the things that Victoria has been looking at is potential what are called peak day shortages, which are on those really, really cold gray days in Victoria where, you know, you've just got really, really high demand and having like this, you know, a little bit of extra gas available at those times is definitely something that's good for energy security for Victoria.

That's good

... yeah, well, I mean, what some...

Well if you think high prices are good.

I mean, Victorian gas does tend to be cheaper than the gas that comes down from Queensland 'cause the get, the extraction costs are a little bit lower and you don't have to pay for the pipeline.

Do these numbers surprise you, and is this good government policy, do you think?

It didn't surprise me, really, because we've always known that that sort of salary packaging is a lot more attractive to people who earn more than it is to people who earn less, and that's because of that fringe benefits tax.

If you're in one of the lower tax brackets, like, say, the 30% tax bracket, it's not really worth salary packaging a car or something like that because the FBT that you have to pay is at 47%.

And so that means it doesn't really work out financially, but it has always worked out for people who are in that tops tax bracket.

top tax bracket because they're paying 47% anyway.

In terms of whether it's good policy, it's not very well targeted and that's really what's showing up here.

It is definitely the wealthier tax brackets who are taking advantage of it a lot more.

Is there a better way of doing this, do you think?

How much more would they have to hand over if a gas exports levy or a windfall profit tax was introduced, and can they afford it?

It very much depends on how that tax was designed and what exactly you were taxing.

If it was a windfall profits tax, ideally they would end up paying no extra tax because the whole point of a windfall profits tax is that you set it at such a level that their profits never go above that, and so they would not actually pay any extra tax.This is I think why a windfall profits tax is a good idea because it would mean that, yes, they didn't make enormous profits during times like the present fuel crisis, but it would mean that prices stayed down here, and it would also mean that prices stayed down in destination markets as well.

Because don't forget that when they do make those super profits, it is actually people in the destination markets who pay for that.

Why has it been so drawn out?

I think partly because we did go through that big period in sort of the 2010s when there was a large amount of investment coming in, and so when we talked about the way that the tax a- system around this was designed, so things like the petroleum resource rent tax, what people were worried about is how that would impact any future investment.

And so that meant we ended up with a very elaborate tax design, and the thing about an elaborate tax design is that it means it will have all sorts of unknown loopholes and things in it.

And so there's been this perpetual process, which Ken is referring to there, of trying to patch that up, and that's dragged on for a long time.

Mm-hmm

... which is, like, buy, basically buying yourself an electric car or using electricity for some of the off-road things we use diesel for.

The disruption, I think- Changes a little bit because Australia is a, an, an economy that trades with people.

When we-- if we wanna buy electric cars, those are manufactured overseas.

The ships that bring them here use oil-based fuel.

So we could expect that those would be, you know, a little bit disrupted in terms of how many cars we can bring and how quickly.

The thing is, though, that the cars we already have in the country, once they, you know, once the electric car is in the country, it starts saving you fuel, and no one can disrupt that.

But [sighs] is the answer to all of that drill baby drill, or are we on the better path, in your view, which is, of course, electrification?