By Pip Hinman

A report commissioned by the federal environment department in 1994 has revealed that taxpayers are subsidising industries that damage the environment to the tune of $5.7 billion a year.

Subsidies to the Use of Natural Resources sheds valuable light on the extent of government handouts to some of Australia's most polluting and wasteful industries. It reveals that total subsidies, financial and environmental, for which quantified estimates have been made amount to $13.7-$14.8 billion -- approximately 3.2% of GDP, or about 83% of the total budget deficits of federal and state governments.

It estimates that "government payments and revenue foregone, through financial subsidies to the use of natural resources, totalled at least $5.7 billion in 1993-94, equal to 4.4% of the total revenue of Australian governments".

The study was produced by the National Institute of Economic and Industry Research, whose clients in recent years have included the electricity industry, Wapet Oil, BHP's gas division, the Victorian government and the Gas Association. It reviewed the economic and environmental costs of industries involved in electricity, water supply, sewerage, solid-waste disposal, forestry, tourism, agricultural chemicals and fishing.

The report notes that the financial subsidies -- which include the non-recovery of public management costs, favourable tax treatment, direct contributions and lower than normal rates of return -- decrease costs to industries and increases their activity levels.

The biggest financial subsidy was $3.3 billion to the water supply industry; the second highest -- $1.2 billion -- went to road transport. The biggest environment subsidy ($3.5 billion) -- the costs of environmental damage that the industry did not pay for -- went to the sewerage industry.

The report found that the forestry industry is subsidised by $100 million a year. This is despite polls which consistently show that a majority of people want native forests protected and disagree that export quotas should be lifted. Environmental subsidies to the forestry industry are widespread and include soil erosion, loss of biodiversity, reduction in water catchments and loss of tourism.

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