Australia's challenge in abating road transport emissions: a focus on environmental taxes

Australia is failing to make significant progress in reducing its road transport emissions. The Australian National Transport Commission report showed that in 2011, 62 per cent of Australian consumers did not consider fuel efficiency when buying a new vehicle where vehicles chosen had emissions greater than 177gram of CO2/kilometre. Nor were they interested in hybrid vehicles where the growth of hybrids has remained less than 1% of new vehicle sales for the past three years, purchased mostly by fleet buyers. The new electric car only attracted 49 buyers in 2011. It was projected that if consumers had acquired vehicles with the "best in class emission in 2011" (excluding electric vehicles), the national average CO2 emissions would have reduced from 206.6grams/kilometre to 128grams/kilometre (a reduction of 38 percent). The National Transport Commission explained that emissions from new vehicles in the European countries were lower than Australia because of higher fuel prices, lower diesel taxes, regulation, cash incentives and consumer information on vehicles. Environmental taxes were not mentioned. Australia has no effective environmental policy measure to reduce emissions from new vehicles. The Australian Government's Climate Change Plan of introducing a price on carbon from greenhouse gases on 1 July 2012 was to apply to transport fuels. However due to political pressure, road vehicles were excluded from the carbon tax. The $400 million Cash for Clunkers program announced in 2010 was abandoned, and the Green Car Fund of $1.3 billion, which was subsidizing the local car industry's research and development, and commercialization of low emission vehicle technology was abandoned in January 2011. The various studies commissioned by the Federal Government to advise on environmental policy measures, have not supported the introduction of environmental taxes and incentives. The 2010 Henry Report on Australia's Future Tax System stated that environmental taxes should only be introduced when the relative costs and benefits of introducing a tax can be estimated with some degree of accuracy. The report claimed that environmental taxes and tax incentives encouraged more expensive abatement and did not affect the environmental outcome. The paper discusses the difficulties Australia is facing in achieving its climate change goals of reducing road transport emissions and addresses the barriers to the uptake of low emission and cleaner car technology. The analysis is mostly limited to the role environmental taxes and incentives can play in influencing vehicle choice and reducing greenhouse gas emissions. The paper addresses the above claims and any indirect consequences from a change in policy to consumers, lobby groups and to the Australian Government.