How will the Carbon Tax affect pump prices?

The art of negotiation has a long and distinguished history. While in a political sense it gathers most attention during coalition formation talks, it does have the capacity to crop up at any time or place in most societies. The current negotiations and wrangling over the terms and conditions of a proposed carbon tax may (and most likely will) create a new chapter in Australian negotiation history. Fleet Managers will be well advised to stay updated on these developments as the prospect of a carbon tax on some or all fuel types is very much on the negotiating table.

**Update available at bottom of blog**

Perspective

While the issue of a carbon tax on fuel has, in the past week, been overshadowed by speculation on the carbon price per tonne, it is by no means a side issue. Any increase in the taxation of fuel will have direct knock on effects for Fleet Managers in ways that may force many back to their fuel management drawing boards. Fleet Managers (and anyone who has ever filled up at a fuel pump) will have their answers sometime during the month of July (should recent reports prove accurate). 

The story so far

The debate has seemingly moved on towards one where the specifics of any deal are now being discussed openly. The likelihood of a carbon tax (in some form) in the near future now seems inevitable and politicians have now moved on to debating the shape and size of the new initiative.

So far the topic of carbon tax on fuel has taken a backseat to the larger issues and only a handful of politicians have addressed the issue directly. Rob Oakeshott (Independent MP) seems to have commenced the debate by stating he would not favour an additional carbon tax on fuel. The impetus then switched to the Greens who rolled out Adam Bandt (MP) on ABC’s Lateline programme on Wednesday (24/05/2011). Bandt, in an intense interview, outlined a substantial amount in relation to the Green agenda going into the talks. Below are some notes taken from the interview;

• No other policies would be on the table to bargain with the Greens. This means that they do not hope to be bought off with concessions in other policy areas in an attempt to dull their position on a carbon tax.
• The diesel tax rebate is very definitely on the table (he did concede that the Greens do not intend to take the rebate away from farmers)
• Compensation for households has not been ruled out. Bandt noted that the Greens “accept that this is a negotiation” when pressed on compensation for households.

It has to be noted that there does seem to be broad consensus on the omission of an additional tax on petrol specifically. On the 18th of May the Sydney Morning Herald reported that a multiparty committee had agreed that “petrol prices will not rise under the new carbon tax after the multi-party committee accepted the federal government's argument it must narrow the cost of living impact of its climate policy in the face of relentless attacks by the Coalition.” This said it would not be prudent to consider this resolved until the tax takes full form.

What fleet managers should look out for;

• The final position on additional taxes (or compensation) for petrol or consumer fuel
• The diesel rebate
• Potential incentives which may be included for fuel efficient driving
• Potential incentives for more fuel efficient vehicle purchases
• As this is a scheme which will have implications for years to come Fleet Managers should also look out for changes which may come later. Some changes may not be introduced in year 1 so managers should look at the implications over the full life of the initiative.

Summary

Like any high level negotiation the results of this one have the capacity to provoke any and all human emotions. Despite all the comments so far it would not be unprecedented for an entirely unheard of solution to materialise. At this stage nothing is clear and for most of us the best we can do is sit back, watch and then prepare for whatever outcome appears after the talking stops. 

**Update Sunday 10th July 2011, On the announcement of the details of the carbon Tax  by Julia Gillards government the following impacts on fuel are to be expected;

• Fuel for small businesses (including farmers and truck drivers) will be exempted from the scheme. But heavy vehicles may pay a carbon price on fuel from 2014.
• Information on the plans for taxing fuel on heavy-vehicles (which will change in 3 years) is unclear.
• Shipping, rail and aviation fuel (on internal flights) are seemingly the only fuel types which will be directly targeted
• Petrol (for households) has not been directly targeted
• Diesel rebates will be cut back by 6c per litre
• Farming, fishing and forestry are to be exempted

Synopsis
Most if not all Australians will in some way be impacted by the carbon tax, however the immediate and direct impact on fuel is unlikely to be highly significant (for most road based fleet managers, small business owners and domestic users) for at least the first 3 years of the scheme. The changes to the tax system, if the scheme passes through parliament, will come into effect on the 1st of July 2012.**

Sources

1. ABC, Lateline, 24/05/2011
2. ABC News, Carbon tax needs to leave out fuel: Oakeshott,
www.abc.net.au/news/stories/2011/05/18/3220046.htm?section=business
3. Sydney Morning Herald, Carbon tax wont hit the price of petrol, www.smh.com.au/environment/energy-smart/carbon-tax-wont-hit-price-of-petrol-20110517-1erib.html#ixzz1NLRUgSwC

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