It’s been looming on the horizon for some time and suddenly it’s almost here – a “great big carbon tax”.
The planets have aligned and realigned in recent years keeping carbon at the top of the Australian political agenda. First the Howard Government promised an emissions trading scheme (ETS) by 2012. Rudd also promised such a system, won the 2007 election, but saw a first ETS Bill defeated in the Senate. After negotiating support for a second Bill with then opposition leader Malcolm Turnbull, carbon pricing seemed inevitable.
Tony Abbott then took the Liberal leadership over the ETS issue and the second Bill was also defeated. Multilateral talks on an international carbon agreement broke down in Copenhagen and Rudd subsequently put the issue in the ‘too hard’ basket.
A severe poll backlash followed and Rudd was overthrown by factions within his own party. The Gillard leadership promised we would have no carbon tax and Labor very nearly lost the 2010 election. When the dust settled it was clear that the political landscape had changed dramatically. The Greens and right leaning independents found themselves in a powerful position, and surprisingly, in agreement on carbon.
Our major political parties have swung both ways on carbon, and judging by the poll reactions, so have we!
In-decision has placed our carbon future in the hands of a powerful few with narrow agendas. In the face of such pressure, the Gillard Government has broken its promise on carbon. With the support (or indeed insistence) of the Greens and Independents, the Government has now secured the numbers in both the upper and lower houses of Parliament to push this legislation (and any other legislation) through.
As the tax has been getting closer some of the detail has come into focus. It’s a complicated beast that involves an enormous money churn with some members of the community actually finding themselves better-off with a new tax in place.
The system will commence on 1 July 2012 as a $23 per tonne tax on our top 500 carbon polluters, but it will evolve into a broader ‘cap and trade’ system in 2015-16 that will require the Government to issue a limited number of ‘pollution permits’ that can be traded in a carbon market. If polluters cannot obtain enough permits at a reasonable price, they will need to limit or offset their emissions to avoid penalties.
Through the Australian Trucking Association the industry has lobbied hard for trucking to be exempted from the carbon tax.
On ‘Carbon Sunday’ it was announced that we had been successful (many others were not), but we didn’t get all of what we wanted. The tax won’t be applied to diesel for use in heavy vehicles until 2014, and the Government will do this through regulation at some point. We all know now that the Greens do not support this deferral.
It is envisaged that the tax will be applied by reducing the Fuel Tax Grant by the equivalent amount, depending on the price of carbon at the time. In 2014, this will translate into a fuel price increase of 6.858 cents per litre, which is expected to cost the industry and its customers $510 million in 2014-15 alone.
Users of diesel fuel will not be included in the ‘cap and trade’ part of the system and will continue to be taxed on the basis of the prevailing carbon price. Use of the existing fuel tax system is appealing in its simplicity, but this has an uncertain future once the fuel tax grant is exhausted and will deny operators the opportunity to take a lowest cost approach by purchasing carbon offsets.
In effect, our emissions will be uncapped and we will be forced to pay the prevailing carbon price – which will largely be influenced by the actions of ‘cap and trade’ polluters.
One thing is certain. When it is applied, we will face greater costs and will be under increasing financial pressure depending upon our ability to pass that cost on.
Whilst we are fortunate to have had a reprieve, we must collectively use this time to either prepare for the tax by informing our customers and planning for structural adjustment or, we must prepare ourselves for the fight of our lives to change government policy on this matter.
I have no doubt that carbon will again be a critical issue for the 2013 Federal Election. The Coalition will be making a lot of hay out of the tax side of the issue with the Government trying to get on the front foot spending billions on voters (I mean pensioners, low to middle income earners and select industries).
Whether we agree with the carbon tax or not, once it is in place, it will be extremely difficult to unwind. The reality of the Coalition removing the carbon tax and then undoing the pension increase, removing the additional family tax benefits and reducing the tax discounts for low income earners will be extremely unpalatable.
Indeed one might even say a potential election changer. The alternative of removing the carbon tax and not removing these ‘benefits’ will be extremely expensive, and require massive cuts elsewhere in the budget.
However, some minor changes around the edges, such as keeping the carbon tax off trucks for all the right reasons beyond 2014 may yet be winnable in an election environment. This will be difficult though.
One of the most frequently asked questions by NatRoad members is why don’t they get a reduction in the carbon tax because they run new cleaner Euro 3, 4 or 5 engines? The answer is simple and highlights the fundamental flaw when applying the carbon tax to diesel for heavy vehicles.
Euro emissions standards are applied to make diesel motors ‘cleaner’ reducing nitrogen oxide, hydrocarbons, carbon monoxide and particulate matter emissions. However, the Euro emissions do not reduce the amount of carbon dioxide produced. Therefore, even though the industry is paying millions of dollars to update the fleet and millions more because of the consequential increase in fuel burn as a result of the emissions standards, the carbon tax will be added on top of this.
Some may say that the combination of emissions standards and a carbon tax sends a mixed message to the trucking industry and short of a fundamental shift away from diesel (which ain’t going to happen any time soon) they are probably correct
NatRoad’s Industry Issues Committee is considering a preferred way forward for our industry on this issue and we would welcome your views.
Importantly though, if you want your view heard on this issue, it is critical that you contact your local member of Federal Parliament and talk to them about what the carbon tax means to your business. This contact will be the key to our future, particularly as we approach an election in 2013 (or thereabouts)…
Speaking of NatRoad, I have just completed my last term as President. It has been a wonderful three years for me and I have enjoyed every moment of the role – including writing my monthly Prime Mover article!
If you’re a person that wants to be involved in the lobbying effort that sets the future direction of our industry or you just want to have your say, I would encourage you to consider taking the next step from association member to association director.
Sure, it takes a commitment of time to do so, but the rewards are, in my view, worth every minute, from the life long relationships you build, to the leading edge understanding of what’s actually coming up in our industry.
I wish each of you every success for the future.
Rob McIntosh
President