Carbon tax on petrol has zero chance of cutting emissions

Emissions trading is back in the news and in national political debate, as is the related question of how it will affect Australian motorists.

Fair enough. This should receive attention because greenhouse gas emissions (nearly all in the form of carbon dioxide) from transport are so important.

Transport accounts for 14% of national greenhouse gas emissions, predominantly from motor vehicles on the road. That’s about 80 million tonnes of carbon dioxide—about four tonnes for each of us, every year.

Our federal government and the states and territories have set an emissions reduction target of 60% below the levels of the year 2000 by 2050, with some climate change experts calling for greater cuts. But rather than declining, our transport emissions continue to climb despite these political aspirations.

In looking at this issue, it’s useful to keep a few facts in mind. Transport energy is almost entirely provided by fossil fuels. Electricity generation on the mainland is mostly from fossil fuels, so mass switching to electric cars is no solution at present. Australia is now a net importer of oil, and increasingly so.

It’s also important to bear in mind that urban transport is dominated by private motor cars; no capital city has less than 75% of daily commuters using cars. And petrol prices in Australia are some of the cheapest in the developed world, primarily because of low imposed taxes.

Meanwhile, middle and outer suburbs of Australia’s major cities are plagued by poor public transport services and are also areas of social and economic disadvantage.

Clearly, to reduce transport emissions we have to reduce car use. Typically, strategies cover switching to less polluting modes (public transport, cycling, and walking), cleaner engines and fuels, trip reduction through land use planning, price signals and demand management, driver behaviour, and so on.

If emissions trading is going to reduce transport emissions it must make its mark in these sorts of areas. So will it?

There are three broad problems—political, practical, and theoretical—that emissions trading in transport will have to confront.

Politically, even before we’ve begun emissions trading, there have been concessions prompted by governments’ and bureaucrats’ not unreasonable concerns that the motoring public is alarmed at the prospect of more expensive motoring.

Such concessions were built into the proposed legislation for the Carbon Pollution Reduction Scheme for different user groups, some permanent and some temporary.

Under the Gillard government’s proposed carbon tax, we are already hearing calls for Australian motorists to be spared the impost of a carbon price on petrol. Resisting future demands will not get easier when the global price escalates as the laws of supply and demand respond to declining global production. So even applying emissions trading to transport is far from assured within emission trading schemes.

A further political problem is how an emissions trading scheme will reconcile increasing the costs of fuel with the protection of social welfare in the middle and outer suburbs of Australia’s larger cities.

Practically, despite the recent argy-bargy over the costs of the proposed carbon tax and the claims of the associated economic and social harms, we really have to know what the carbon tax will be before we can know exactly the size of this cost.

But if we take a much-discussed price point of $25 a tonne of carbon dioxide, it turns out that the cost at the pump will be around ten cents a litre, or possibly half this amount. With current fuel prices, ten cents is not much of a price signal.

So would most consumers even notice, let alone change their transport decisions? Of far greater importance will be the prevailing cost of oil: that does influence behaviour, as we have seen. Over time, the carbon price will rise under a trading scheme with increasing emission reduction targets, but so too will global oil prices.

Theoretically, problems arise because the world doesn’t work the way proponents of carbon trading assume it will. Economic incentives can only motivate people to choose transport options with lower greenhouse gas emissions if those transport options exist.

Let’s say it’s getting too expensive to run the car and you decide to use the bus. But if there is no bus service available or suitable for your needs, you have no choice and the transport market has failed you. It doesn’t matter where the price of petrol goes, this doesn’t make a bus service materialise out of thin air.

This problem, which is expressed in many ways, is a deal-breaker for emissions trading as a way to reduce transport emissions. Some goods and services can’t be provided by markets and we must rely on governments.

Most of the effective ways to reduce transport emissions—and we know pretty well what they are—arise from the work of governments using public policy and public funds and being accountable to electorates.

Public transport, land use planning and transit-oriented development, and facilities for walking and cycling, for instance, don’t arise from consumer sovereignty, but from public policy. Markets, despite their many virtues, are no substitute for governance when it comes to protecting the broader public and environmental interest.

We can depict the challenge of sustainable transport as that of moving down a ladder which has highly-polluting travel choices at the top and more sustainable choices at the bottom, based on measures such as the amount of greenhouse gas emitted per passenger for each kilometre travelled.

Private cars using fossil fuels are at the top of the ladder, then less-polluting cars, then public transport, then walking and cycling, and then avoided trips. And we need to concentrate on actions that produce emissions reductions quickly; we can’t afford to wait for emerging technologies.

What should be our priorities? Increasing the capacity and services from our existing public transport is essential, as is making our different services operate as unified systems. Public transport also needs to be extended so it services entire cities with sufficient frequency that it can substitute for private cars.

More effective transport and land use planning is essential to reduce the need and extent of private car use, such as by promoting transit-oriented design and servicing new developments with public transport. Walking and cycling need to be brought more effectively into urban and transport planning.

We need to arrest the decline in rail freight and begin a campaign to reduce the environmental costs of the freight and commercial transport sector. Greener cars have a role, but will take some time before they could comprise a large part of the national fleet and should probably be a comparatively lower priority for public funding as the global oil price will be an effective lever for change.

In the end, we’ll have to do all these things, and more, to achieve a sustainable transport system - whether or not we have emissions trading.