Product stewardship benefits
The Product Stewardship for Oil Program (PSO) encourages increased collection and recycling of used oil in Australia by providing oil recyclers with product stewardship benefits. These volume-based benefits support existing appropriate recycling activities, and provide incentives to maintain a diverse range of recycling options for used oil.
In order to be eligible for benefits, a recycling operation must:
- have an ABN or provide evidence of having applied for an ABN;
- have an excise manufacturing licence under the Excise Act 1901; and
- comply with relevant Australian and State/Territory legislation and requirements (particularly environmental criteria).
Recycling operations claiming benefits must be both:
- recycling used oil; and
- either directly using the recycled product, or selling that recycled product for end use.
To be considered for benefits, the recycler must undertake the final processing (recycling) stage prior to end use and the product must be used by that recycler or sold for end use (ie not just processed and stockpiled).
Further information on the PSO benefits is available from the Australian Taxation Office .
The recycling benefits are set out in the Product Stewardship (Oil) Regulations 2000 (the Regulations) and are designed to engender an increase in the collection and reprocessing of used oil. The benefits will contribute to:
- an increase in total used oil collection and recycling, and
- where appropriate and practicable, an increase in recycling activity within each category
This reduces the environmental risks posed by this potentially serious pollutant and ensures a long term future for oil recycling in Australia. The Benefit rates are shown in Table 1.
|1. re-refined base oil (for use as a lubricant or a hydraulic or transformer oil) that meets the specified criteria *||50 #|
|2. other re-refined base-oils (eg chain bar oil, oils incorporated into manufactured products)||10 #|
|3. Diesel fuels that comply with the Fuel Standard (Automotive Diesel) Determination 2001, as in force from time to time||7|
|4. Diesel extenders:
|5. high grade industrial burning oils (filtered, de-watered and de-mineralised)||5|
|6. low grade industrial burning oils (filtered and de-watered)||3|
|7. industrial process oils and lubricants, including hydraulic and transformer oils (reprocessed or filtered, but not re-refined)||0|
|8. Gazetted oil consumed in Australia for a gazetted use||8.5 †|
* The Regulations specify a health, safety and environment standard for re-refined lubricants that is comparable with the current requirements for similar 'virgin' products. The purpose of this standard is to protect users of re-refined oil products from exposure to carcinogenic components.
# Products in these categories will be subject to the PSO levy.
† The Category 8 benefit increased from 5.449 cents per litre to 8.5 cents per litre from 1 July 2014.
During 2006-07, the Government announced an additional $40.7 million for used oil recycling. This measure will ensure that the oil recycling industry will have time to adapt to the changes arising from the Federal Government's Fuel Excise Reform by adding an additional benefit for three years to the current product stewardship benefit arrangements.
The additional benefit is separate from the table of benefit categories and set out in regulation 4A of the Regulations. All Category 5 and 6 claimants will be eligible to claim the additional benefit. The additional benefit is the only benefit payment that may be claimed if another category of benefit payment (categories 5 or 6 only) has been claimed for on the same recycled used oil.
Eligible recyclers will receive:
- 10.057 cents per litre from 1 July 2006 to 30 June 2007
- 6.7 cents per litre from 1 July 2007 to 30 June 2008, and
- 3.3 cents per litre from 1 July 2008 to 30 June 2009
The additional benefit will cease after 30 June 2009.
The basis for the different PSO benefit rates
The regulations set out seven main types of used oil products that may receive benefits. The categories are designed to cover known current and likely future uses of used oil.
The benefits paid for each recycled product have been determined by identifying the level of incentive required for each form of recycling or increase in volume. Other factors considered in determining the benefit rates include environmental and economic considerations and the likely available revenue.
Payment for the first category (lube-to-lube) is significantly higher than for others in order to encourage full re-refining of used oil and thereby more sustainable management of the resource. The higher benefit reflects the very substantial industrial and marketing investment that is needed to make lube-to-lube viable and the environmental and sustainability benefits that accrue.
It should be noted that recycled used oil products in Categories 1 and 2 will be liable for the oil stewardship levy as they enter the market again.
The benefit table (Table 1) is arranged in a descending hierarchy. This hierarchy broadly reflects the recycling effort and investment required to make products of better quality and with improved environmental outcomes. In determining appropriate benefit categories the key principle is that benefits should only be paid where they might serve as an incentive for increased recycling activity - that is, not be simply rewarding existing good practice.
Category 1 is the highest level of processing. It provides the maximum reward for the highest quality product - that is, a non-carcinogenic re-refined base-oil used as engine lubricant, transformer or hydraulic oil. It must comply with health, safety and environment standards comparable to those for similar 'virgin' products.
Category 2 is for oils re-refined from used oil that are not suitable for use as lubricants in engines. They are usually produced by thin- or wiped-film evaporation, or propane de-asphalting. They are typically used in applications such as chain saw bar oil or in the manufacture of other products such as plastics, but they are not sufficiently 'clean' to meet the non-carcinogenic requirements of a high quality motor lubricant.
Categories 3 and 4 are diesel fuels and diesel extenders (respectively) made from used oil. From 1 January 2006, the sulfur content in automotive diesel is capped at 50ppm. The full specifications for diesel can be found in the Fuel Standard (Automotive Diesel) Determination 2001 . Supply of fuel that does not comply with appropriate standards can attract substantial penalties under the Fuel Quality Standards Act 2000. Categories 3 and 4 are expected to be declining sectors of the used oil recycling industry over time.
Products in Category 5 (high grade industrial burning oils) are filtered, dewatered, and demineralised. The higher benefit paid (compared to Category 6 products) reflects the higher level of recycling performed and the consequent lower level of contaminants associated with the product.
Products in Category 6 are typically low-grade fuel oils that have been filtered and de-watered. Because of their minimal recycling they are more likely to contain undesirable contaminants but can be burnt in appropriate (ie EPA-approved) applications such as (some) cement kilns and nickel smelters. When used in high temperature furnaces, toxic materials in the oil are destroyed and the emissions from the smokestack are able to comply with State and Territory regulations. Such high temperature furnaces are valuable sinks for used oil, and additionally provide cheap thermal value to industrial processes. This is particularly important in remote areas (eg WA Goldfields, Tasmania) where more sophisticated recycling operations may not be readily accessible.
In 2008-09 approximately 85% of the recycled oil products made in Australia fell into either categories 5 or 6. These categories are under increasing pressure from cleaner, 'turn the tap' fuels such as gas, plus higher emission standards increasingly required by State and Territory EPAs. Community pressure on emissions and odours is also a factor in some cases.
Products in Category 7 will not receive any benefit as this type of recycling is already occurring as part of existing sound business practices and is unlikely to increase if a benefit is paid, ie there is no substantial policy outcome to be obtained. Recyclers who carry out this type of recycling typically filter the oil, often
on-site. The oil is not what most would class as waste, and is not re-refined before being topped up and returned to the equipment. The process is analogous in many ways to an oil filter on an engine. Paying benefits on this type of recycling is not likely to increase the amount of used oil being brought to account, even acknowledging that this service has sustainability benefits. Additionally, if a benefit was paid on this product, the recycled product, when returned or sold back to the user, would attract the oil levy.
While the PSO levy is paid on all new petroleum-based oils and their synthetic equivalents, there are some uses of these oils that do not create a recyclable used oil stream and are a low risk to the environment. These specific uses of oil were never intended to be caught by the Product Stewardship for Oil programme. An example of this is naphthenic process oil incorporated into inks for printing newspapers. Category 8 benefits are paid to producers of eligible uses of specific oils. These were declared by the Minister for the Environment and Heritage. The benefit rate is equivalent to the PSO levy.