Clean Energy Future

Households, on-road business use of light vehicles and the agriculture, forestry and fishery industries will not face a carbon price on the fuel they use.

Some businesses which effectively pay no fuel excise will face an effective carbon price, through changes to the current fuel tax regime. Eligible businesses may choose, however to have their liquid transport fuel emissions come under the carbon pricing mechanism rather than the fuel tax system.  See factsheet on the Opt-In scheme.

Heavy on-road vehicles will not face a carbon price from the commencement of the scheme. The Government intends to apply a carbon price on heavy on-road vehicles from 1 July 2014, but notes this measure was not agreed to by all members of the Multi-Party Climate Change Committee.

On-road use by households and light commercial vehicles

Households and on-road commercial vehicles 4.5 tonnes and under currently pay the full rate of excise. They will continue to pay excise under current arrangements but will not also pay a carbon price on top of this.

Off-road business use

Some businesses effectively pay no excise on the fuel they use off-road, as their excise is offset under the fuel tax credits scheme. An effective carbon price will be imposed on some businesses through reduced fuel tax credit entitlements and reductions to the automatic remission of excise on gaseous fuel used for non-transport purposes.

The current fuel tax regime provides fuel tax credits that remove or reduce the incidence of fuel tax from business inputs so that fuel tax falls primarily on non-business consumers and light commercial vehicles. By reducing existing fuel tax credits by an amount equal to the carbon price, the Government will impose an effective carbon price on businesses liquid and gaseous fuel emissions through the existing fuel tax regime.

Fuel tax credits will not be reduced for the agriculture, forestry and fishery industries. Therefore, these industries will not pay an effective carbon price. The fuel tax credits will remain at 100 per cent of the effective fuel tax for these industries. Fuel tax credits will also not be reduced for businesses that have opted-in to the carbon pricing mechanism.

Calculating the fuel tax credit reductions

As different fuels emit different amounts of carbon when they burn, the fuel tax credit changes for petrol and diesel will be determined according to their specific level of emissions. Fuel tax credit changes for liquid fossil fuels other than petrol and diesel will be based on the diesel emission rate. Fuel tax credits changes for gaseous fuels (such as Liquefied Petroleum Gas (LPG), Liquefied Natural Gas (LNG) and Compressed Natural Gas (CNG)) will reflect the effective carbon price, based on their specific emission rates. Fuel tax credits for businesses will be reduced for fuels acquired after 1 Jul 2012 by the amount of the fixed carbon price as set at the beginning of each of the fixed price years from 2012-13 to 2014-15. When Australia moves to an emissions trading scheme in 2015-16, the fuel tax credit changes will be determined on a six-monthly basis, based on the average carbon price over the previous six-months. Table 1 lists the relevant fuel tax credit reductions per fuel type over the three year transitional assistance period. Figures are in cents per litre except for CNG and LNG which are in cents per kilogram.

On-road business use: heavy vehicles

Heavy on-road vehicles (over 4.5 tonne gross vehicle mass) will not face a carbon price from the commencement of the scheme. The Government intends to apply a carbon price on heavy on-road vehicles from 1 July 2014, but notes this measure was not agreed to by all members of the Multi-Party Climate Change Committee.

Gaseous fuels such as LPG, LNG and CNG used for on-road transport will not be subject to an effective carbon price as their eligibility for a fuel tax credit is reduced to zero due to the Road User Charge.

Non-transport use of gaseous fuels

Non-transport LPG and LNG receive a remission, and non-transport CNG receives an exemption from the excise and excise equivalent customs duty imposed on gaseous fuels so that effective tax only falls on gaseous fuels for transport use.

To ensure consistent coverage of non-transport use of gaseous fuels, such as emissions from bottled LPG and reticulated gas, an effective carbon price will apply through a reduction in the automatic remission or exemption of excise.

Under the Government’s plan for a clean energy future, the fuel tax remission or exemption for the non-transport LPG, LNG and CNG will be adjusted on a ‘cent-for-cent’ basis equivalent to the carbon content price on the fuels, had the gaseous fuels been subject to carbon pricing.

Aviation, marine and rail transport

As aviation fuels do not receive fuel tax credits, domestic aviation fuel excise will be increased by an amount equivalent to the carbon price on an annual basis over the fixed price period to provide an effective carbon price for aviation. From 1 July 2015, aviation excise will be increased on a six-monthly basis, based on the average carbon price over the previous six months. Businesses that have opted-into the carbon pricing mechanism will be entitled to a fuel tax credit equal to the excise increase equivalent to the carbon price. International aviation fuel use is not subject to fuel tax and will therefore not be subject to an effective carbon price.

Note: impact based on emissions of the fuel only, does not include impact from other refining based emissions or energy costs.

The current rate of excise on aviation (both aviation kerosene and aviation gasoline) is 3.556 cents per litre. Over the period the excise rate for aviation kerosene would rise by 6.604 cents per litre to 10.16 cents per litre in 2014-15, and the excise rate for aviation gasoline would rise by 5.588 cents per litre to 9.144 cents per litre. The vast majority of fuel used in aviation is aviation kerosene.

Marine and rail transport effectively pay no excise on the fuel they use, as their excise is offset under the fuel tax credits scheme. An effective carbon price will be put on those activities through reduced fuel tax credit entitlements in the same way that it applies to off-road business use.

Other fuels

Due to their zero-rating for carbon emissions, renewable fuels such as ethanol, biodiesel and renewable diesel will not be subject to a carbon price. Similarly, non-combustion fuels such as solvents and lubricants will not face a carbon price.

Supporting new fuel efficient vehicles

A new wave of vehicles are becoming available that are cleaner and cheaper to run. Under new standards being introduced from 2015, all car companies will be required to reduce emission levels from vehicles they sell by introducing better technologies and adjusting the range of models they sell in Australia. The Government is working with the automotive industry to set the emission levels that will apply under the new standards. In addition to helping make a reduction to Australia’s carbon pollution from transport, this initiative will deliver real cost savings for motorists through improved fuel efficiency in new vehicles.

The Green Vehicle Guide and the Fuel Consumption Label are two other initiatives supporting Australians to make better informed decisions and help consumers choose vehicles that use less fuel and have lower emissions.

Cutting transport emissions

The Government is also working to cut pollution by improving our transport systems. Since late 2007, the Government has committed over $7.3 billion to modernise and extend urban passenger rail infrastructure to provide genuine alternatives to private car travel.

The $60 million national smart managed motorways trial will help improve congestion, lower pollution, and expand the capacity of existing road infrastructure networks. Managed motorways use new technologies to create a more consistent level of motorway performance, resulting in lower greenhouse gas emissions. The Government will continue working with the aviation industry to reduce its emissions.

Further information

For further information, call 1800 057 590.