In its report on reducing greenhouse gas emissions, the Productivity Commission says removing fuel tax credits will incentivise a move to lower emission technology
The Productivity Commission has released its report to the Australian government, called ‘Investing in cheaper, cleaner energy and the net zero transformation’, where it outlines its recommendations for reducing greenhouse gas emissions.
Amongst its recommendations, the Productivity Commission is calling for the lowering of the Safeguard Mechanism threshold and the phasing out of fuel tax credits for on-road heavy vehicle operators.
With 30 per cent of emissions coming from heavy industry, the Productivity Commission is recommending the expansion of the Safeguard Mechanism that covers emissions from industrial facilities that emit more than 100,000 tonnes of carbon dioxide a year. By reducing the threshold to 25,000 tonnes, it says this will incentivise smaller operations to reduce emissions as well continue to incentivise operations that drop below the current 100,000 tonne threshold.
With 19 per cent of emissions emanating from the transport sector, the Productivity Commission says there is currently a policy gap regarding emissions from heavy vehicles and recommends the introduction of an emissions-reduction incentive. The report puts forward five policy options to address this:
- including a carbon component in a future road user charging scheme
- applying the Safeguard Mechanism to fuel wholesalers’ downstream emissions
- increasing the rate of fuel excise paid by users of heavy vehicles
- a targeted policy for low-carbon liquid fuels
- a targeted policy for low-emissions vehicles.
“Considering the advantages and disadvantages of each option, the PC proposes a gradual increase in the rate of fuel excise paid by heavy vehicles (option 3),” the report says.
“This change would incentivise all emissions-reduction pathways and draw on existing regulatory architecture.”
The Australian Trucking Association hit back at the removal of fuel tax credits, saying that the tax on truck fuel would ‘more than double’.
“Under the fuel tax credits system, trucking operators pay an effective fuel tax rate of 32.4 cents per litre rather than the full rate, which will be 52.6 cents per litre from Monday 2 February,” ATA says.
“The commission’s own figures show its plan would more than double the effective fuel tax paid by trucking operators to 66.1 cents per litre by 2035.”
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ATA chair Mark Parry says removing FTCs will not achieve the decarbonisation required as it “would not address the real world barriers holding back the industry’s adoption of low emission solutions”, he says.
“It would not address the engineering reality that there is no single technology available to replace diesel engines.
“Many regional communities rely on trucking operators to move and deliver all their daily necessities. This requires diesel engines, so the commission’s approach would just be an unavoidable increase in tax.
“For those businesses that do have an alternative to diesel, the effective tax increase would reduce their financial capacity to invest in new vehicles and equipment.
“Instead of taking up the commission’s advice, the government should implement a voucher scheme to reduce the up-front cost of electrification or alternative fuel options, a low carbon fuel standard to encourage the use of renewable diesel and support high productivity and low emission vehicles.”
For the full report, visit: www.pc.gov.au/inquiries-and-research/net-zero/report/