Car carbon tax proposal knocked on head

THE federal government might have promised to kill off a bureaucratic proposal for a vehicle carbon tax to cut fuel consumption, but Australia still appears to be headed for compulsory fuel economy standards by 2022.

In denying that the government was considering a penalty of $100 for every gram of carbon-dioxide over a proposed limit of 105 grams per kilometre on new light vehicles, prime minister Malcolm Turnbull reiterated his government’s stance on vehicle fuel consumption reductions.

“We will encourage more efficient vehicles, which reduce fuel use and emissions,” he said. “We are still consulting with industry and have a long way to go.” Under the proposed model issued by the Department of Infrastructure and Regional Development for discussion with the motor industry, car companies would be required to meet a fleet-wide average target of 105g/km through a credit and debit offset scheme over three years.

The emissions target would apply from 2022 when 65 per cent of light vehicle sales would have to comply, rising annually to 100 per cent in 2025.

Fuel-efficient vehicles could accrue credits to be offset against less efficient vehicles.

“If the distributor’s debits exceed their credits at the end of the calendar year, they will need to offset this debit (by accruing credits) within the next three calendar years,” the document states.

The motor vehicle industry rose as one to condemn the proposed tax penalty model. The Federal Chamber of Automotive Industries (FCAI) claimed that such a move could increase the price of some of Australia’s most popular vehicles by thousands of dollars.

On the other side of the fence, supporters of the move pointed to annual fuel cost savings of about $519 a year per vehicle and net economic benefits of $13.9 billion to 2040.

Although the figure of $100 per gram appears to be new, the idea of a financial penalty on vehicles that exceed government-mandated targets is not.

Such a scenario was presented as a “possibly option” in the department’s draft regulation impact statement discussion paper released in December last year.

That paper invited comments from interested parties by March 10, 2017.

It is interesting that the option has been revisited with further detail, including the $100 penalty figure, in a new departmental discussion paper issued on Monday, months after responses closed.

In its December paper, the department made it clear that it did not believe the current voluntary fuel consumption reduction regime was sufficient to meet government CO2 reduction targets.

According to the National Transport Commission, the national average CO2 emissions average for new passenger and light-commercial vehicles has decreased 28 per cent since 2002, from about 250g/km to 182g/km in 2016.

Last year, the reduction was 1.1 per cent. According to the department, vehicular CO2 emissions continue to go up because of the ever-expanding national vehicle fleet and the growth in popularity of less-efficient vehicles, such as one-tonne pick-ups with CO2 emissions well above 200g/km, despite the preponderance of diesel engines.

In its discussion paper, the department proposed a choice of three different targets –105g/km, 119g/km and 135g/km – to be phased in between 2020 and 2025.

The most stringent 105g/km target would bring Australia broadly into line with European Union targets for 2020-21 and overall United States targets for 2025, although the latter is now under reappraisal by the Trump administration.

The department also indicated that Australia was out of step with other markets in not having a compulsory target, saying 80 per cent of the global light vehicle market, including the EU, US, Japan, Canada, South Korea, China and India, all have mandatory fuel efficiency standards.

In its response to the paper, the FCAI called for an integrated approach encompassing a variety of measures such as improved fuel quality, improved infrastructure and incentives to reduce the age of the vehicle fleet.