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Trucking better off under carbon tax than Abbott’s plan

Economic firm cites advantages of carbon tax and questions the worth of schemes similar to what Tony Abbott proposes

By Brad Gardner | July 1, 2011

An economic firm has cast doubt on the worth of Opposition leader Tony Abbott’s climate change policy amid claims a carbon tax will deliver certainty for trucking operators.

In a study released yesterday the Centre for International Economics criticises schemes that subsidise businesses for reducing emissions, which is what Abbott’s proposed ‘direct action’ policy will do.

The study, paid for by the Australian Trucking Association (ATA), says a carbon tax will give industry a direct and transparent signal about the cost of carbon.

“While there is currently substantial uncertainty around carbon policy in Australia, there is widespread acceptance that policies involving an explicit price of carbon provide the most transparent and cost effective means of implementing a carbon constraint within the economy,” the study says.

Conversely, it argues direct subsidies could be politicised and will shift the financial cost of dealing with climate change directly onto taxpayers.

“Where winners are chosen, there is additional risk that the decision to subsidise may be based on the possible political gains rather than economic or environmental imperatives,” the CIE says.

“The choice of product to subsidise also creates additional issues around governments ‘picking winners’ and deciding which products and processes should be promoted at the expense of others. There is no market mechanism involved in the choice.”

As a deal looms between the Federal Government, the Greens and independents on a carbon price, the CIE’s report rehashes the ATA’s argument that fuel should be included and the cost applied upstream.

“The most efficient design from the transport industry’s perspective would be the upstream imposition of a carbon price, for example at the refinery level, which is then passed down in terms of a carbon premium at the bowser,” the report says.

According to the report, governments might be tempted to directly regulate transport emissions if fuel is excluded from a carbon tax.

The CIE claims any increases are unlikely to differ beyond the price fluctuations the industry currently grapples with.

Based on a diesel price of $1.50 per litre, the report says a $25 carbon tax will increase prices by about 7 cents per litre.

“To put this in context, diesel prices fluctuate annually, and even quarterly and monthly, to a similar degree,” it says.

“Therefore, while the imposition of a carbon price on diesel fuels will be an additional cost to the industry, it should not be outside of the scale of price increases that are observed through the market.”

However, the report advocates help for operators to transition to a lower carbon economy.

It says the use of higher productivity vehicles capable of carrying more freight per load will cut emissions by reducing the number of trucks on the road.

“Should the use of these vehicles be inefficiently constrained by policy decisions, this will also constrain the industry’s ability to adjust to a lower carbon path at least cost,” the report says.

The CIE also suggests the adoption of lower carbon intensive fuel options and using different transport modes to reduce the freight task’s emissions.

In releasing the report, ATA Chairman David Simon trumpeted the need for greater use of larger vehicles.

“It takes 77 three-axle rigid trucks to move a thousand tonnes of freight, but only 26 B-doubles. In moving the freight, these 26 B-doubles would produce 25 percent less greenhouse gas emissions than the vast fleet of smaller trucks needed to do the job,” he says.

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