Stern in his 2006 report concluded that the economic, social and environmental cost of doing nothing is much higher than reducing greenhouse gas emissions.
Reducing greenhouse gases, especially carbon dioxide is a hot topic for transport policy professionals.
Australia’s transport contributes about 14% of all greenhouse gas and can be expected to grow in line with travel growth predictions.
Transport emissions can be controlled by reducing travel, making travel less emitting by imposing emission limits and regulation of emission standards, or by a carbon tax or market based emissions trading or carbon offsets. Most likely a combination of these.
Under the just signed Kyoto Protocol Australia will cap greenhouse gas emissions, but the means of control has not yet been announced.
The transport sector presents challenges in emission control, because it comprises millions of small mobile emitters and the various modes use different energy sources with different emission characteristics.
In addition, almost half of the current retail price of petrol is a federal general revenue tax. And significant crude oil price increases in the past has shown that travel demand is highly inelastic to the price of fuel (ie not greatly affected).
A carbon tax aimed at reducing the demand for products and services with higher greenhouse gas emissions, would be relatively simple to administer, although there is no guarantee that the general revenue generated will be applied to carbon emission reduction.
Emissions trading schemes, while of growing interest have yet to be applied to transport. They involve allocating permits or rights to emitters up to a target cap and allow trading (buying or selling) permits, plus penalties for exceeding the cap.
Hence the market sets the price of emissions, such as carbon dioxide, providing financial incentives to reduce emissions. Efficient and reasonable allocation of the initial permits is problematic.
Application of carbon emission trading in Australia is expected to be applied to ‘upstream’ fuel suppliers, such as refineries and importers. However it is difficult to see how emissions trading could be effective in the Australian context.
The price of carbon dioxide permits in Europe have reached as high as A$50 per tonne which translates to only $0.10 per litre of petrol to the consumer. This is insignificant in the context of weekly variations in petrol prices, so even at much higher trading permit prices it would be expected to have no impact on the reduction of carbon emissions.
The likely impact could well be greater for rail transport which uses coal-based electricity generation, resulting in significant cost increases for the transport mode with lower emissions per person (or tonne) kilometre.
Maybe more consideration should be given to carbon offsets, in combination with reducing travel demand and increasing less greenhouse damaging travel, such as high occupancy travel and transit.