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Cheaper, greener motoring: carbon tax is part of the solution - by Prof Ray Wills

There is little doubt that the ‘Noughties’ was the Decade of Talking the Talk on climate change. It’s time to put the talk into action and make 2011 the start of the Decade of Walking the Talk. It’s time to get on with it.

As Julia Gillard once again commits Australia to act on global warming, one key factor is managing Australia’s transport greenhouse gas emissions, a measure that will also reduce our reliance on imported fossil fuels for transportation.

Australia talks and talks and talks about responses to global warming with very little substantive, whole of economy action to manage Australia’s greenhouse gas emissions. We need practical solutions to reduce our energy consumption. It has now been 14 years since the Kyoto Protocol and 13 years since emissions trading legislation was first drafted (but of course not implemented) by the Howard Government. It is now three and a half years since the 2007 elected Labor Government promised action on climate change.

While there is some room for argument to exclude agriculture for the time being from a carbon tax due to the complexity of the question of carbon emissions in agricultural systems, that argument cannot be applied to transport emissions from fuel. The amount of CO2 in transport fuel is simple math.

It is easy to understand the political concern the Prime Minister may have, but the reality is paying the price of carbon emissions on fuel is likely to be less than five cents a litre – the equivalent of $25 a tonne price for carbon – five cents is less than half the fluctuation in the weekly pump price cycle.

The Federal Government gains roughly $1.5 billion of revenue annually from the GST on the 38 cents per litre excise component on fuel sales – coincidentally just a little less than would be raised by a $25 per tonne carbon tax on fuel.

Reducing excise by the difference of a carbon tax on petrol would be bad policy – the same bad policy proposed by Kevin Rudd in June 2008 when the price of petrol was to be impacted by the CPRS.

Exempting fuel from a carbon price would simply be using smoke and mirrors to say this was a measure about greenhouse gas emissions when in fact it would not have any direct impact on carbon.

Australian Bureau of Statistics shows the rate of fuel consumption averaged for all motor vehicles on Australian roads was 13.8 litres per 100 kilometres, one of the worst performances for national average fuel consumption of OECD countries apart from the USA and Canada. Not surprisingly that performance correlates to the price of petrol - Australia has the fourth lowest level of petrol taxation (and consequently the fourth lowest petrol prices) in the OECD.

Over the past decade, Australia has ignored many opportunities to improve national energy efficiency standards in our transport fleet.

We need both regulatory measures and market signals to improve energy efficiency and reduce greenhouse gas emissions in Australian vehicles. The Federal Government must implement a raft of measures, such as mandating levels of fuel efficiency of the national vehicle fleet, appropriate taxation relief and rebates for fuel-efficient cars and commercial vehicles, and not be distracted by short-term measures on fuel pricing that will simply disappear as we watch the price of oil continue to rise in a global market.

The Federal Government must take stronger measures on National Average Fuel Consumption numbers for new passenger vehicles and introduce rolling three-year targets on maximum fuel consumption. The Federal Government has been dragging its feet on setting mandated energy efficiency targets for the national vehicle fleet. Separate targets should impact on transport/ commercial vehicles – measures such as this will reduce running costs of Australian vehicles on imported fuels and reduce inflationary pressure on transported goods.

A carbon tax on petrol need not disadvantage motorists: incentivising Australians to get out of gas-guzzlers into new fuel efficient vehicles, which are easily twice or three times more efficient than older cars, will do more than any other measure to ease the price pain at the petrol pump.

The writer, Prof. Ray Wills, is chief executive of The Sustainable Energy Association of Australia (SEA) and Adjunct Professor with The University of Western Australia.

The Sustainable Energy Association of Australia (SEA) is an industry chamber of enterprises supporting market-based solutions to grow sustainable energy.

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