The Product Stewardship for Oil (PSO) program

The PSO program, formerly known as the Product Stewardship for Oil scheme, has its origins in the Government’s decision in the late 1990s to reduce the excise on diesel fuel. Concern was expressed in the Senate Committee report, Inquiry into the GST and A New Tax System, that a potential negative effect of the excise changes would be to reduce the incentive to recycle oil. For example, the reduction in the excise would make diesel extender (a product of recycled oil) less competitive with conventional diesel.

As part of the Measures for a Better Environment (MBE) package agreed between the Government and the Australian Democrats in 1999, the Prime Minister announced the policy setting for the treatment of waste oil on 31 May 1999. The Government subsequently introduced what was to become the Product Stewardship (Oil) Act 2000 and related customs and excise legislation, to ensure the environmentally sustainable management and re-refining of waste oil and its reuse.

The PSO program consists of several components, including:

• the imposition of a fixed and non-hypothecated levy on oil producers and importers, and

• the payment of a variable rebate (‘stewardship benefit’) to oil recyclers.

The levy component was introduced in the Excise Tariff Amendment (Product Stewardship for Waste Oil) Act 2000. Certain petroleum-based oils and greases and their synthetic equivalents (hereafter simply called oils) that are produced in Australia or imported for domestic consumption are subject to a 5.449 cent a litre (or a kilo) excise or customs duty. The 2003-04 Department of Environment and Heritage annual report states that in 2003-04 the total revenue collected from the PSO levy was $28 million. This comprised $23.9 million in excise collection on domestic production and $4.1 million in Customs duty on imported oils. An amount of $2.3 million was paid back to clients in the form of drawbacks (where the oils were exported) and refunds, bringing the balance of revenue from the levy to $25.7 million.

Under the stewardship benefit component, once the oil is used and subsequently recycled, recyclers may claim a stewardship benefit according to the type of product the oil is recycled into. There are nine levels of benefit (called categories 1-9). At the high end, re-refining waste oil to such a standard that it could reused as a lubricant attracts a benefit of 50 cpl. Towards the lower end, if the recycled product is suitable only to be reused as a low-grade industrial burning oil, the benefit would be 3 cpl.

Rebates

The rates are given in the table below:

2003-04 product stewardship benefit rates

Category

$m

Million litres

Benefit
(cpl)

1:

Re-refined base oil (for use as a lubricant or a hydraulic or transformer oil) that meets the prescribed criteria *

2.8

5.5

50

2:

Other re-refined base oils (for example, chain bar oil)

Nil

Nil

10

3:

Diesel fuels to which the Excise Tariff Act 1921 applies

1.6

23.1

7

4:

Diesel extenders (filtered, de-watered and de-mineralised)

Nil

Nil

5

5:

High-grade industrial burning oils (filtered, de-watered and de-mineralised)

4.9

98.2

5

6:

Low-grade industrial burning oils (filtered and de-watered)

3.2

106.4

3

Industrial process oils and process lubricants, including hydraulic and transformer oils (re-processed or filtered, but not re-refined)

Nil

no data

0

8:

Gazetted oil consumed in Australia for a gazetted use

0.5

9.5

5.449

9:

Recycled oil mentioned in item 5 or 6 that has been blended with a petroleum product that meets the criteria mentioned in Schedule 2.

0.2

3.9

9.557

Total

13.2

246.7

* The Regulations specify a health, safety and environment standard for re-refined lubricants that is consistent with the current requirements for ‘virgin’ products. The basic requirement of this standard is to produce a non-carcinogenic product.

15 Goods as follows, other than goods for use as a fuel, or exempt oils and hydraulic fluids described in subsection 3(6):

(A) petroleum based oils (including lubricant base oils; prepared lubricant additives containing carrier oils; lubricants for engines, gear sets, pumps and bearings; hydraulic fluids; brake fluids; transmission oils; and transformer and heat transfer oils) and their synthetic equivalents but not including greases;

$0.05449 per litre

(B) petroleum based oils (including lubricant base oils; prepared lubricant additives containing carrier oils; lubricants for engines, gear sets, pumps and bearings; greases; hydraulic fluids; brake fluids; transmission oils; and transformer and heat transfer oils) and their synthetic equivalents, recycled for use as oils (including lubricant base oils; prepared lubricant additives containing carrier oils; lubricants for engines, gear sets, pumps and bearings; hydraulic fluids; brake fluids; transmission oils; and transformer and heat transfer oils) but not including greases;

$0.05449 per litre

(C) petroleum based greases and their synthetic equivalents;

$0.05449 per kilogram

(D) petroleum based oils (including lubricant base oils; prepared lubricant additives containing carrier oils; lubricants for engines, gear sets, pumps and bearings; greases; hydraulic fluids; brake fluids; transmission oils; and transformer and heat transfer oils) and their synthetic equivalents, recycled for use as greases;

$0.05449 per kilogram