Australia will cut fuel excise to offset new carbon tax

The Australian government will move to protect motorists from gasoline price increases arising from its proposed emissions trading scheme by cutting federal excise by the same amount. A local paper reported in mid-July that the federal excise, which now adds A$0.38 (US$0.33) a liter to petrol, will be reduced on a cent-for-cent basis to cover any increases in fuel prices associated with the new scheme. The decision, which reflects intense political heat regarding this issue, means motorists will be shielded from extra price increases over and above those imposed by high oil prices and other international factors. Climate Change Minister Penny Wong will formally release a green paper committing the government to introduce a form of cap and trade scheme in 2010. The amount of the petrol offset will be set initially for three years and reviewed periodically after that. Under the government’s preferred model of emissions trading scheme, carbon will be priced per ton by the market and that cost will be passed on to all products producing carbon. Without the offset, a relatively low price of A$20 (US$17.36) per ton for carbon would add nearly A$0.06 (US$0.05) a liter to petrol prices. (July 16, 2008)