As if further evidence was needed that the Government emissions trading scheme will be a dog, the Australian Conservation Foundation has worked out that, as currently drafted, motorists will actually receive a subsidy from the proposed fuel tax arrangements under the ETS.

Remember the petrol price hysteria of last year, complete with Brendan Nelson and the wheelchair-laden Taragos queuing up to buy petrol? Seems an awful long time ago now, but the Government was developing its ETS Green Paper then.

To head off another outbreak of petrol populism from the Opposition, it proposed that motorists receive a cent-for-cent offset from any impact of the ETS on fuel prices, via existing fuel excise levels. This would ensure the ETS had absolutely no effect on motorists’ behaviour, but it solved a political problem, and in any event it has since become clear that the Government doesn’t especially mind if the ETS is entirely ineffective.

But the problem is, the current draft legislation proposes to base the adjustment to fuel excise levels on the impact of the ETS on diesel. And because petrol has a lower carbon content level than diesel, petrol users would automatically be over-compensated. At a carbon price of $20 a tonne, motorists using petrol would receive 0.8 cents a litre more in compensation than they would be paying through the ETS.

In short, the Government’s ETS arrangements will actually subsidise motorists’ petrol use.

And there we were thinking the point was to put a price on carbon to change behaviour.

The ACF, which is doing some excellent work in counter-balancing the sort of rubbish modelling come from big polluters and rentseekers, has pointed out the subsidy to Treasury, which has called for submissions on the ETS fuel arrangements. There is at least an ostensible chance the drafting will be fixed by Treasury, if for no other reason than that it will cost $150m a year in lost excise.

Peter Fray

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