Greenhouse diesel price rise

The Garnaut Climate Change Review has recommended the price of diesel should rise by 5.4 cents per litre in 2010 as a result of the planned emissions trading scheme. But the Government plans to compensate the trucking industry for this initial price rise.

The Australian, state and territory governments commissioned the Garnaut Climate Change Review to examine the impacts, challenges and opportunities of climate change for Australia. Professor Garnaut released his draft report in July and his supplementary draft report today.

The supplementary report examines the emissions trading targets and trajectories that Australia could adopt to help deal with climate change.

The report recommends that the Government should start emissions trading in 2010 with a carbon price of $20 per tonne, rising each year by four per cent plus the increase in the consumer price index.

If the Government adopts the recommendation, the price of diesel will initially rise by 5.4 cents per litre; however, the Government has announced it will reduce the fuel tax paid by the industry on a cent for cent basis to offset the initial price increase.

The Government has announced it will review the offset after a year, but the Minister for Infrastructure, Anthony Albanese, has confirmed the initial cut in fuel tax will be permanent.

The report recommends that Australia should put its strongest possible efforts into securing a global agreement to limit emissions to no more than 550 parts per million of CO2. Australia’s share of the burden would need to be a 10 per cent reduction in greenhouse gas emissions by 2020.

To achieve this goal, the price of carbon in 2020 would need to be $34.50 per tonne, equivalent to an increase in the price of diesel of 9.3 cents per litre. In contrast, the price of diesel rose by more than 40 cents per litre between February and July this year before it started to fall.

The new report can be downloaded from here.