Managing transport emissions through a carbon pollution reduction scheme: a comparative analysis

Transport is a challenging sector for the Australian Government as it is one of the strongest sources of emissions growth and has the lowest rate of abatement of greenhouse gas emissions. The Carbon Pollution Reduction Scheme (CPRS) is the Australian Government’s preferred mechanism of reducing greenhouse gas emissions for all sectors. It is projected that the CPRS will address the market failure of not factoring the cost of greenhouse gas emissions into the price of goods and services, by employing a ‘cap and trade’ emission trading scheme (ETS) to limit greenhouse gas emissions. The Carbon Pollution Reduction Scheme (CPRS) is the Australian Government preferred instrument in reducing greenhouse gas emissions for all sectors. It is projected that the CPRS will address the market failure of not factoring the cost of greenhouse gas emissions into the price of goods and services. In terms of road transport, it is proposed that a CPRS would be applied to fuel producers on the basis of their fuel sales, increasing fuel prices and providing the necessary price signal for behavioural change and encourage the use of renewable energy in road transport and investment in fuel efficiency technology. While in the European Union (EU) transport was not included in their Emission Trading Scheme. The paper examines whether the scheme would be effective in encouraging behavioural change in reducing the growth of road transport emissions, and comparatively examines how the European Union ETS model treats the transport sector compared to the Australian CPRS. The paper critically evaluates the challenges of applying a CPRS to the transport sector, and whether the CPRS can be a ‘one fit for all’ fiscal measure that can apply to all sectors.