Product Stewardship Arrangements for Waste Oil - Report for the Period 1 January 2001 to 30 June 2001

Environment Australia, 2001
ISBN 0 642 548 188
ISSN 1446 6422

Financial Information

The Product Stewardship Levy
Product Stewardship Benefits
Financial Analysis

Financial Information

This chapter reports on the financial arrangements for the PSO, including levy collections and benefit payments. While this report relates to the 2000-01 financial year, the delay in the implementation of the program (to 1 January 2001) means that this information covers the 6 month period from implementation to 30 June 2001.

Information on Transitional Assistance expenditure is set out in Chapter 4.

The Product Stewardship Levy

In 2000-01 total revenue collections from the PSO levy were $13.3 million. This comprised $11.9 million¹ in excise collection on domestic production and $1.4 million in customs duty on imported oils. The following graph shows levy collections by month.

Figure 2.1: PSO levy collections by month 2000-01²

PSO levy collections by month 2000-01

Levy collections are recorded against a number of categories based on the type of oil, and customs duty is recorded under international customs classifications. The following tables show excise and customs tariff collections for 2000-01 by category.

Table 2.1: PSO levy collection (excise) by category 2000-01 ($)

Item No.	Category
1501	Lubricant base oil	2,724,928
1502	Prepared lubricant additives	580,938
1503	Engine lubricant	4,139,967
1504	Gear, transmission, transformer and heat transfer oils	1,851,024
1505	Hydraulic and brake fluids	1,291,919
1506	Metal working and process oils	954,094
1511	Recycled hydraulic fluids and brake fluids *	298
1513	Greases	405,590
	Total	11,948,758

* to be refunded - collected in error

Table 2.2: PSO levy collection (customs tariff) by category 2000-01 ($)

Item No.	Category
2710.00.91	Petroleum based oils including lubricants, hydraulic fluids and transformer oils	531,356
2710.00.92	Greases	38,281
3403.11.10	Preparations for the treatment of textiles, containing petroleum oils, solid or semi-solid	1,886
3403.11.90	Preparations for the treatment of textiles, containing petroleum oils, other	15,140
3403.19.10	Other preparations containing petroleum oils, solid or semi-solid	8,539
3403.19.90	Other preparations containing petroleum oils, other	91,767
3403.91.10	Preparations for the treatment of textiles, not containing petroleum oils, solid or semi-solid	3,473
3403.91.90	Preparations for the treatment of textiles, not containing petroleum oils, other	11,084
3403.99.10	Other preparations not containing petroleum oils, solid or semi-solid	56,655
3403.99.90	Other preparations not containing petroleum oils, other	114,839
3811.21.10	Additives for lubricating oil, containing petroleum oils, solid or semi-solid	2,428
3811.21.90	Additives for lubricating oil, containing petroleum oils, other	484,962
3819.00.00	Hydraulic brake fluids	26,695
	Total	1,387,102

Product Stewardship Benefits

A total of $2.8 million was paid as product stewardship benefits to recyclers in 2000-01. As at 30 June 2001, there were still a number of claims for the financial year which were outstanding, so the final payment figure for the year may end up being slightly higher.

The following graph shows PSO benefit payments by month, and Table 2.3 provides a breakdown of payments by product category (from the Product Stewardship (Oil) Regulations 2000).

Figure 2.2: PSO benefit payments by month 2000-01

PSO benefit payments by month 2000-01

Table 2.3: PSO benefit payments by category 2000-01 ($)

Category
Re-refined base oil (for use as a lubricant or a hydraulic or transformer oil) which meet the specified criteria	nil
Other re-refined base oils	102
Diesel fuels to which the Excise Tariff Act 1921 applies	585,538
Diesel extenders (filtered, de-watered and de-mineralised)	73,093
High grade industrial burning oils (filtered, de-watered and de-mineralised)	1,205,793
Low grade industrial burning oils (filtered and de-watered)	977,349
Total	2,841,876

Financial Analysis

The data above clearly show that revenue collected under the levy for 2000-01 was higher than benefits paid. While this situation is far from ideal, it is a necessary consequence of setting the arrangements so that they could be stable whilst still allowing for longer term change within the industry.

The excess of revenue over payments is largely attributed to several key factors.

Pre-implementation modelling on the program indicated that a lower levy rate would be required in the early years of the program, and a higher rate would be required for the later years once the quantity and quality of recycling increased. In order to avoid ongoing adjustments to the levy rate, a mid-range rate was set which could remain constant for the first 4-5 years and still raise sufficient funds to cover likely payments in later years (using the transitional assistance funds as a back-up).
It was necessary to set the levy rate such that adequate funds would be available to provide a sufficiently high incentive for operations to establish lube-to-lube recycling. As the capital investment required for such recycling is very high, the benefit rate was set at 50 cents/litre - significantly higher than the next highest rate of 10 cents/litre. It is expected that some lube-to-lube operations will be established within the second or third financial year of the PSO, hence absorbing most, if not all, of the excess revenue.
It is possible that benefit payments were unusually low over the period due to program start-up effects. As with any new program, a period of time is required for information to flow to the affected sections of the industry and community. Additionally potential beneficiaries may take time to consider and meet the eligibility requirements and to determine whether it is financially worth their while to take up registration. It is expected that the number of recyclers claiming benefits, and the total benefits claimed by each, will increase in future years.

The balance between benefits and revenue will be monitored over the transitional period of the arrangements and adjustments will be made to the program if required. [See also Section 5.]

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