So petrol is out of the carbon price:
…And I’m in a position today to say to you petrol prices will not be touched by carbon pricing. Families, tradies, small business people do not have to worry about a petrol price increase.
So let’s have a debate on the facts about carbon pricing right now.
BARRIE CASSIDY: And is that forever, including when it transfers on to an ETS?
JULIA GILLARD: The design of this scheme is that petrol pricing, petrol will be out now and out for the future.
So – what does this mean?
As discussed on this earlier thread, the effects of any plausible carbon price on emissions from the transport sector in the first few years of operation would have been negligible.
The concern is, instead, for the long term – one way or the other, emissions from the transport sector have to be reduced and eliminated over time. If carbon pricing is not implemented eventually, some other approach – let’s call it “direct action on vehicle emissions” – will be required. By delaying action now, the pain down the track – be it from a huge whack to fuel prices, or draconian fuel economy regulations – might be even worse.
As Bob Brown has pointed out this evening, forever is a very long time in politics.
I would certainly prefer it if petrol had been included in the scheme, or that the exclusion was for a finite period of time. But it’s hardly the worst compromise in the world.
Firstly, there are several other factors that are likely to push down vehicle emissions over the next few years. Not least, continuing high oil prices, combined with economy regulations in Europe and North America, are actually encouraging substantial improvements in passenger vehicle fuel economy.
Furthermore, “real” electric cars and pluggable hybrids will be on the market, in increasingly large quantities, over the next decade or so. At some point it is likely that that their owners will start arguing that it’s unfair that the “fuel” for their vehicles is subject to carbon pricing, while petrol vehicles are not.
And, in the meantime, there are other fudges on offer, now and in the future. According to the ABC, Senator Brown
…says the Government has agreed to get the Productivity Commission to investigate if the fuel excise could be changed to increase the tax on higher polluting fuels.
There’s also the politics. I could be wrong on how it’s perceived more broadly, but Tony Abbott’s reaction to this sounded like a deflating balloon.
Never say never.
In politics forever just means until the next election….
Gillard would have been more convincing if she had treated us like adults and said that the reason fuel prices are not being included is that, historically fuel price has had very little effect on the fuel consumption of of the car fleet. (See for example here.) This meta study found that a 10% increase in the price of fuel would give a 2.5% reduction in fuel consumption in the first year rising to 6% over a number of years. These figures correspond to a price rise rise per tonne CO2 abatement of about $2000 and $900/tonne respectively.
The impression Gillard is giving at the moment is that the only reason the carbon tax won’t be applied to petrol is fear of political consequences. Hardly makes her sound convincing.
Abbott saying “the govt can’t be trusted” to exempt petrol is basically an admission that he can’t fault the substance of it. It’s also a dumb move, given that the govt is in a position to prove him wrong very soon.
So. . . I drive very efficient twin turbo diesel.
I thought the idea of this tax system was to get us to substitute for more efficient things. Am I supposed to ditch the diesel for petrol?
This all simply proves why blood-for-oil wars are a vote winner!!
War is a vote-winner and none can prove me wrong: THE FLAW OF DEMOCRACY IS GROUPTHINK!!!
Voting Green is an evolutionary step out of the dark ages!!!!
Razor, unless I’ve misunderstood things, diesel will also be exempt. (Disclaimer: I also drive a diesel vehicle.)
I think it’s unfortunate that fuel has been excluded, but the combination of fuel excise and rocketing prices as we run out of the stuff will probably have more effect than putting a carbon price on it.
John, money taken in tax doesn’t disappear.
The actual costs of abatement under a carbon price includes a) the cost of collection, and b) the costs incurred to avoid paying the tax.
If we are in fact close to peak oil then increased scarcity will drive oil prices up anyway – won’t it?
Doug@9, yes.
But the nightmare scenario is that the world switches holus-bolus to coal-derived synfuels, without any sequestration of the process CO2.
In Australia, the process CO2 will almost certainly be covered by this scheme, even if the emissions from burning the fuel remain exempt. However, if China, India or the United States start making synfuel on a large scale without sequestration, we are well and truly screwed. That’s buy-your-floaties time.
There is already a number of taxes on petroleum and the wholesale price will continue to increase due to peak, so the price signals in the tax system are already there. If they put a carbon tax on petrol, tere would be a very good argument for reducing the excise the equivalent amount unless you beleive in driving the transport system and economy into the ground in the short term to deliver a purer environmental outcome.
Like almost all Greens, I am bitterly disappointed that fuel seems to be out of the scheme. Simon Birmingham — right wing tub-thumper though he is — was right when he said that leaving fuel out meant that other sectors would have to bear a bigger share of the emissions reduction burden. Notwithstanding the grandiose talk this morning about “billions for renewables” it’s hard to imagine that The Greens can have got anything equivalent in the deal to compensate for this gaping hole in the carbon pricing system. Yes the Productivity Commission is going to be looking at this matter, and doubtless it will tell the government that it makes more sense to price fuel for its energy content rather than by type, but the government will likely ignore that, as Milne noted herself. I’m hoping that the diesel fuel rebate will go, because that’s a significant revenue flow, and the bulk of it goes into subsidising the mining of coal. Some of it goes into shipping and mustering live cattle about and in the north, as we know, these cattle are very destructive of the environment. Again, one suspects that the politics of this will be decisive from the regime’s POV.
It probably makes a lot more sense to cost vehicle usage by pricing the roads they drive on. Dollar for dollar, this seems a lot more likely to change user behaviour than anything one could plausibly imagine an ALP regime implementing. Even if one began merely by pricing the usage of the major connecting roads** (as opposed to minor roads within suburbs) or in country towns, both the economics and the politics might be plausible. Many vehicles now have “e-tags” and “NAVMAN” type devices, and it would be possible to do a calculus by vehicle type and have an app that allowed data about the cost of each trip and the cumulative total to display. Getting this into people’s heads is the beginning of the important cultural message that we all have a footprint and we need to make it smaller. If a system such as this were set up and the profile calculus included tailpipe emissions and TARE and contention variables, I’d not be bothered nearly so much by the absence of a carbon price on fuels. Indeed, a case could be made for removing existing fuel excises and other taxes on fuel and roads entirely.
It would be unfortunate if I didn’t make some remark on the way Brown has handled himself through what must surely have been difficult negotiations. I watched Sky from the comfort of my serviced apartment near QUT yesterday (it’s nice to get a taste of how really rich folk live once in a while) and Brown was just so good with the media. He could have shown irritation when responding to the defeat on fuel, but instead he turned a vice into a virtue by handing the win to the Independents, Windsor and Oakeshott, who have been the target of so much demonisation within the Murdochracy. This was a very snappy move IMO, because it simultaneously subverted the claim that the government was some sort of Green sockpuppet and underpinned the integrity of the negotiation process, and the political failure of the LNP entailed in staying outside the tent. Windsor and Oakeshott will be able to say that they, rather than the Nationals, secured this win. That freebie and Browns generous observations about the pair tightens the bonds between The Greens and the Indies and strenghtens the salience of The Greens in future negotiations.
Brown very wisely refused to make announcements on behalf of the government, and when asked about whether his remarks about the possible future inclusion of fuel in a carbon pricing regime was helpful to the government pointed out that he was answering for The Greens and not the government. I don’t always agree with Brown, but he always comes across as someone with a vision of how much better the world could be explaining how it might be so. You always have a fair idea of what he will say, and even how he will justify it and that sets him apart from pretty much every senior politician outside The Greens and perhaps Windsor and now Wilkie and Oakeshott in the place. How much more pleasant would the politics of this country be if our most politically objectionable folk were like Brown? I suspect that all about the world, people would speak of this country as an island of sanity and progress. I might even wink at a touch of patriotism in such circumstances! I might start sentences with people from other places with a note about how we do things around these parts …
* I’d prefer that it be priced according to its net CO2e-intensity plus its total other emissions and footprint which would obviously assist well-conceived and implemented biofuels, but I can live with the imprecision here for consistency’s sake. The likelihood of biofuels with a serious net ecosystem service advantage doing very much at industrial scale in the market is low at least in the short-to-medium-term, and if they do ever get there, a rebate/credit system at the producer end could rebalance the game
** these could be defined by a flow threshhold (e.g. peak 900 vehicles per hour in either direction on at least 200 days each year)
Robert M @ 10, the US has chosen the road to perdition by increasingly relying on Canadian tar sands.
As far as I know, there is still a coal-to-fuel plant planned at Felton on the Darling Downs. I would hope that this becomes unviable for some reason. I’d simply ban it.
Including petrol was always a bridge too far politically, and the Independents could never agree to it.
Similarly, whatever the Productivity Commission comes up with Gillard will never agree to anything that can be twisted into her breaking her word.
I think buyer resistance and behavioural change should cut in when petrol reaches $2 per litre at the pump. We are currently protected by our rising dollar.
Also there is scope for the government to reduce emissions by regulation on the energy efficiency of new cars.
John D, I think you’re somewhat confused. A 10% price increase leading to a 6% consumption reduction sounds reasonably elastic, not inelastic as you say.
A $25/tonne carbon price is estimated to have a bowser impact of 6c/litre, or about 4%.
John D, a long run elasticity of -0.6 aint small. Double the price (which is surely going to happen over the next couple of decades, regardless of carbon pricing) and you lower consumption by ~32%; not trivial. Further, if good substitutes become available (eg electric cars, high speed rail) demand will become more elastic. Plus of course double the price and biofuels get really viable anyway.
OTOH, IIRC transport is responsible for roughly a third of man made emissions so doubling the price worldwide only drops total emissions by about 10%. I reckon you can get better bang for carbon buck elsewhere.
I watched then PM on Insiders and she said “Petrol” not fuel – no mention of diesel or LPG.
Even the title of this thread is “Petrol”
OBR – In news reports today on radio I’ve heard they’ve been saying both diesel and LPG are both included in the exemption (which is what I’d expect). Probably just loose language by Gillard in saying petrol.
dd, it’s while since I looked at sectors, but a quick google puts transport about 13-14% world-wide.
This graph from 2000 puts road transport at about 10%. I doubt that has changed much.
2006 data from Australia shows 13% also. I doubt that has changed much either. Stationary energy is the big one.
Razor I saw the AFR this morning on its front page said that it “believed” that all liquid fuels were excluded from the carbon tax and that big businesses would be losing some fuel credits they get.
Tony Windsor talked this morning about Petrol.
You would think by now that the ALP would have worked out that they need to have a grip on the detail before going public.
This from Andrew Bolt’s website:
“Another loophole.
Julia Gillard said the carbon dioxide tax wouldn’t apply to “petrol”.
Our MTR 1377 producer asked her office if this meant the tax would still apply to diesel and gas. A spokesman was unsure and promised to check.
We were then told, no, diesel and gas would also be exempt from the tax.
Then we spoke on air to Mark Dreyfus, Parliamentary Secretary for Climate Change and Energy, who insisted yesterday’s exemption applied strictly to petrol.
We told him Gillard’s office said it applied to other fuels as well.
Well, then it does, he said. (Transcript to come when the audio is up.)
Is diesel exempt or not? A definitive statement is needed.”
Unbelievable.
OBR said:
Strictly speaking — you are correct. Here in Australia, the term “petrol” is used much as “gas” (i.e. “gasoline”) is used in the US. OTOH, most people I know who operate diesel vehicles still speak of putting “petrol in the car”. The bowsers are side by side. The usage of the fuel is the same. It’s produced in the same places from the same feedstock. So for all practical purposes diesel is petrol the chemical differences and the combustion arrangement differences in vehicles notwithstanding.
LPG (liquid petroleum gas) is also a form of “petrol” on the same grounds. As with deciding whether a tomato is a fruit or a vegetable depends on whether the question is botanical or culinary, so too whether diesel and LPG are petrol or something else depends on whether the question is stoichiometrically derived or based on retail usage considerations. CNG/LNG is probably also petrol on this basis.
The term “petrol” derives of course from petra (Latin for “rock”) plus oleum (Latin for “oil”). What this means is that the decisive meaning for petrol lies within contemporary culture. It would be absurd is, for example, the fact that various jurisdictions had different names for fuels used in vehicles (e.g gasoline) that they were treated differently. That would be policy chaos*.
*I couldn’t resist the pun here. Gas, probably derives from the word for “chaos” meaning “empty space”. Interestingly, the term kerosene comes from keros for “wax” the paraffin in which was used as a combustible agent in candles. These days it too is an oil distillate used principally in marine and jet engines. It too should count as petrol as it’s clearly a “rock oil”.
Doesn’t “forever” mean “until 2015″, when fuel would be included in the new emissions trading scheme?
Razor, if you’re going to take anything Blot says seriously, I have no sympathy for your self-inflicted confusion. You’ve forgotten the first rule of blogging, which is that Bolt is either a liar or a fool (categories not mutually exclusive).
Razor, on the substantive issue, diesel and LPG will be out – you can bet on it. There may be cases round the edges where those fuels are used for non-transport purposes (same as with fuel excise) but in broad terms it would be crazy to exempt petrol and not the other major fossil transport fuel.
my missus still talks about getting petrol. I’ve given up on correcting her, suggesting that petrol in our skoda diesel would be ruinous. I don’t think she’s alone here, for a large number of people ‘petrol’ merely means the liquid that gets pumped into their personal transport.
But this is a trivial derail. Everybody know that all common domestic transport fuels will be outside the scheme, even Andrew Bolt, who’s pretending to be too thick to know that.
I would have liked in principle for a carbon tax to be placed on petrol, with an equivalent reduction in the excise. So no net change in price, but a valuable signal.
Well, we wait for clarification, again.
Fran – the Queen of “it’s not a tax” pedantry – I thought you at least would have understood the need for precise terminology.
The political definition of Forever – is “an undefined time period that ends when it is politically expedient to do so.”
Why on earth did the PM use the term “forever”? Another rod for her back is made. There are so many other ways to rule it out for a long time without using the word forever.
On the other hand, the media themselves do nothing to clarify anything:
http://www.brisbanetimes.com.au/environment/windsor-throws-doubts-on-petrol-exemption-20110704-1gxz6.html
I heard this interview. Windsor was right of course in equivocating that no-one can ever guarantee what any future government might do. And he was also just stating the bleeding obvious when he said that no formal agreement is yet reached even if he expected one soon. He did absolutely not – in any way – throw “doubts on petrol exemption” as that article lazily states. I mean, fuck … our public discourse is completely broken. Journalism fail.
OBR said:
Oh very much so. I’d much have preferred that she had said something like “road transport fuels” (assuming shipping and aviation are in, which is not yet clear AIUI) or “fossil hydrocarbon transport fuels” or something equivalent. She on the other hand has been saying that terminology isn’t important, (I disagree, obviously — things ought to be called by adequately descriptive identifiers) but she is being consistent and I suspect most know what she means. On this occasion, defining “petrol” broadly helps the government’s political position rather than subverting it. Distinguishing tax from cap and trade is not pedantry, but as I’ve done that one adequately here, let’s move on.
The language was extravagant, unwise and as Milne correctly noted, “never ever” was used in relation to the GST without that deterring Howard. It was utterly stupid, given the previous playing out by the Murdochracy of the “no carbon tax” claims by Gillard on 16/8/10 and her failure to offer a cogent defence from February 2010, for her to open a new front on “petrol”. She ought perhaps to have noted simply that she saw no pressing need to include it, that it might not stack up in cost-benefit terms, that the advance of fuel-efficient and electric vehicles might render it moot but that the Productivity Commission would be taking a long hard look at it and be reporting back and unless and until a compelling case was made for such a thing, she wouldn’t be considering it. At least, were I her spin doctor (perish the thought) and were it clear that she was opposed to including it, that would be my advice.
It is settled that sovereign states can’t be bound by the actions of their predecessors and so the post 2013 regime could indeed include petrol in the carbon pricing mechanism.
@wilful
You ought to be able to see the obvious paradox in that claim. It can’t be a valuable signal if it’s imperceptible. Few care why their “petrol” costs what it does. They only care how much it costs. If there was to be a signal, then it had to be reflected in a higher price to the consumer. Biofuels aren’t going to compete with fossil HC at the difference the carbon price makes. Really, you’d need prices in 2011 dollars up around $2 per litre or more. If there had been a trajectory — to steadily increase the price to that point by 2020, (about the length of turnover of the bulk of the fleet, then you’d get a real signal. I don’t see this regime as having that kind of nerve.
* that are not already reserved words in the local environment if one is not to run the risk of parsing or compilation or run time errors (couldn’t resist the sotware design allusion here)
OBR – “from Andrew Bolt’s website” – there’s your problem there – cheek a more reliable source (almost anything, back of a public dunny door, but aiming a bit higher AFR is much better)
http://www.abc.net.au/rural/news/content/201107/s3260319.htm
duh, cheek=check
FRan, re road pricing, wouldn’t it be better if we took the cost of registering a car nearly to zero and instead added the amount forgone onto the price of petrol/fuel? Simple, and would encourage people to drive less.
Fran said
‘Getting this into people’s heads is the beginning of the important cultural message that we all have a footprint and we need to make it smaller’
Am I alone in finding that comment extremely frightening? There we se the millinerian green extremist viewpoint writ large. It’s a case of Fran’s fairy dust dreams are more important than your freedom of movement. The totalitarian urge really dies hard with lefties doesn’t it?
You ought to be able to see the obvious paradox in that claim. It can’t be a valuable signal if it’s imperceptible.
No Fran, signal ≠ price signal. I would have said price signal if I’d meant it.
Finally! Shorten just confirmed no tax on petrol, diesel and LPG. So the next thing is to define small commercial versus large commercial and how is the tax differential going to be administered? Does this mean another admin impost on small business having to claim back tax paid? Or is there going to be some ingenous system for the difference between domestic/commercial/small/heavy at the Service Station?
OCB @ 36 – I suspect to distinguish small vs large commercial they’ll have to do it based on who buys petrol in bulk versus those who buy via petrol stations. Besides on the small scale how would stop people filling up their cars and transferring the petrol to commercial vehicles?
Finally!
What, a two day wait (not even business days), 18 months before the scheme is due to start?
Will the RFDS and Careflight helos be paying it on AvGas?
Actually I suspect the difference will be administered in the carbon reporting scheme. The big 1000 emitters are already reporting their emissions (and this includes transport fuels).
Wilful @14: Assuming a base price of $1.50/litre, a $25/tonne CO2 tax would reduce tailpipe emissions by 1.2 rising to 2.8%. Hardly worth the political effort.
By contrast, consider the use of a offset credit emission trading scheme to lower the average fuel consumption of new cars. The fuel consumption of new cars could be driven down as far as a government was willing without any need for an increase in the price of fuel. It is a no brainer to this dumb engineer.
Robert it is the size of the price increases that is giving Abbott traction at the moment and motivating business to seek compensation. Artificial price increases should be the last resort, not the lazy first choice.
The latest catch cry is ‘Double Dissolution’
and make it happen now!
I would be all for another election right now if I could see a clear leader with backbone and integrity. Once upon a time – in a Galaxy Far Far Away – nope that’s the wrong introduction, so sorry – let me try again. Once upon a time (yes this is still a fairy story) I really believed the Liberal’s might be the right party for Australia, considering the damage the Labor Party has and is and will be doing for the foreseeable future.
Then I grew up! You see it matters not which party is in power currently, they all have the exact same agenda, albeit under different posh names. There is the Carbon Tax, the Emissions Trading Scheme and the Direct Action Plan.
http://justmeint.wordpress.com/2011/07/04/understand-the-meaning-of/
“Forever” is not forever! In this context it is really just the life of this and probably the next parliament. Forever is just a neat way of not having to have meaningless exchanges with the media and or Abbott over the issue in the near future. Transport’s inclusion will be progressively reconsidered over the next decade. But with fuel excise already implying a much higher implicit carbon price than for other fossil fuel sources, any inclusion within the next decade will probably come with excise offsets anyway.
JohnD – are you ever going to understand that price is not economic cost and that your alternative schemes, also have an economic cost and will indirectly lead to higher prices? Really, you sound like a dumb engineer when you can’t grasp the basic fact that CAC responses are not costless!!
Russell said:
Fran, re road pricing, wouldn’t it be better if we took the cost of registering a car nearly to zero and instead added the amount forgone onto the price of petrol/fuel? Simple, and would encourage people to drive less.
Not entirely implausible as it seeks to increase the relative salience of daily operating costs as against sunk costs. However, the measure takes little or no account of road contention and can’t factor in CTP which though not strictly a registration cost is bundled. There would be substantial cross subsidies in your model as well. Country folk who have to drive long distances and have limited scope for trip consolidation would pay much more heavily than us city folk. A road usage charge would be fairer on them. Yes they’d still drive more distance, but the rate per unit of distance would be much lower since the contention and alternative transport options would be low.
It’s probably worth noting that whereas registration is collected by the states, excise goes to the Commonwealth. I don’t suppose the states would object! You’d probably need some agreement on dividing funds — and wouldn’t that be a bunfight!
rococco liberal asked in response to:
from me …
I find the term ‘extremist’ vacuous. It says nothing more than that you find my opinion objectionable in that exceeds the bounds within which non-taboo opinion can exist without specifying the range or its warrant. It’s supposed to make people recoil in horror because surely all people imagine others as extremist, right? Don’t do that. It sounds positively baroque.
The idea that people should understand the impacts of their acts and seek to avoid impositions on others is scacely millenarian (NTTAWWT)*. I’d call it “playing nicely with others”.
This is simply a flight of fancy. Understanding one’s footprint is one thing for people to consider when considering how to play nicely with others. It has nothing at all to do with totalitarianism — quite the opposite. It’s very much about individual choice.
* defined as an ideal state of peace and happiness in the world
What is the point of not taxing petrol when transport emissions account for 14% of our countries emissions? If the tax is so necessary, how can this government, which didn’t want the tax until the greens twisted their arm, justify this? What on earth is she talking about, of course the price is going to rise. We are not being given anything but a load of crap.
Given the hysterics, particularly from Fran about what is a tax and what is not a tax, I fully expect that his government will tax, sorry, extract a price, for emissions from those who run oil refineries who will then pass the cost down the line, so petrol will be taxed, just at a different point in the chain and Gillard can then state that petrol is exempt, which it is, but unbelievably the price will go up.
Gillard is about as dishonest as prime ministers come. She couldn’t help herself in using the word “forever” when she clearly could not mean it but thought that it would sound better. She needs help.
Bring on Stephen Smith.
Tiny – you are really revealing your ignorance here. Exclusion of petrol does not mean taxing at a different point in the supply chain but excluding all parts of the supply chain. If petrol had been included it would almost certainly have been done at the upstream refinery level, but it has been excluded. How hard is it for you to understand?
Is contention the same as congestion?
LO @44: You say:
I do understand the difference between price and cost but despair that you seem unable to grasp that all the heat in the current debate is being driven by the price increases, not the net cost.
The use of offset credit trading will actually lead to a lower price for fuel misers since, in effect, they get a subsidy from the higher price of gas guzzlers. A lower price for gas misers doesn’t seem all that bad a thing to me.
Sorry but this dumb engineer doesn’t understand was CAC is so this makes it hard to comment.
LO – so you are privy to what is being discussed int he committee. Don’t think so. What I do think is that no matter how poorly implemented this tax is, you will defend it to the death.
It is indefensible to exclude petrol.
It must be very difficult for you when the left has become so incompetent.
I doubt she is telling the truth. Bring on Stephen Smith.
Petrol is out forever.
There will be no Carbon Tax
L-A-W Tax Cuts
There’ll never ever be a GST. They tossed their children overboard. Iraq has Weapons of Mass Destruction (TM).
We have bipartisan liars, Razor, if you like. Yours are probably worse than ours.
Well Dave,
is that the best you can do? Back to Howard. Not much of a defence of her disinformation about petrol is it? They haven’t even finished on the details, she makes the big announcement and then she doesn’t know whats going on.
of course tiny dancer, because changing your position on a fixed-price period of a carbon pricing scheme in the face of a tricky parliamentary postion that you have to negotiate your way through is morally equivalent to barefaced lying about reasons to invade a foreign country and kill people.
“disinformation about petrol”? stop sniffing the stuff and maybe reality will become visible to you.
BTW, I didn’t mean to imply that Gillard lied, but I have to concede the L-A-W law taxes.
And one might add Tyro, that varying your ostensible position on carbon pricing is not ethically inferior to
a) rorting the regional partnerships scheme
b) flogging off Telstra as a monopoly enterprise
c) excising parts of the country to evade longstanding treaty obligations towards refugees
d) subverting an ostensible ally by bribing its enemy to evade trade sanctions to which you pay lipservice in order to porkbarrell rural constituencies
e) signing up for hundreds of millions of dollars omilitary hardware that is nearly useless, or useful only as an adjunct to US military action outside our theatre
I want a government that is willing to respond to changing conditions, political or otherwise. While I don’t happen to agree with what Gillard is doing re climate action I don’t want possibilities ignored because of something she or any other leader said at some point in the past.
Beta males everywhere
Is that it?