The Labor Government’s plans for a carbon tax on the sale of new cars will raise the cost of the most popular Australian car models by $9000.
The Government claims that its tax is similar to a scheme in the United States and that the US scheme has not increased car prices there. But the devil is in the detail. The impact of the Australian Government’s car tax will be determined by the size of the tax, not the type of tax that it is.
So, to the detail. The Government plans to set “new vehicle efficiency standards”. Under these standards, car manufacturers will have to make sure their cars fall below a carbon dioxide limit. If they are over that limit they have to pay a fine, or buy credits from car manufacturers that are below the limit.
Obviously, the impact of this will depend on how aggressively the carbon dioxide limits are set and how large the fine is for exceeding the limits. This is where the Government’s blunt comparison to the United States falls down.
Over the last six years the efficiency limits in the US have reduced by a quarter. The Australian Labor Party plans to reduce Australia’s efficiency limits by 60 per cent over the five next years. The Government could not explain in Senate estimates this week how they could use the US experience as a useful comparison when their proposed reductions are more than double the size of that in the US.
It was also revealed in Senate estimates that the penalty in the US for exceeding limits has been just a third of that which will apply in Australia. Under the Labor Government’s plan, a car manufacturer will be fined $100 for every gram of carbon dioxide that is over the limit. It was only last year the United States increased their penalties to a level about this, but the impact of that is not yet evident.
General Motors has already had to pay over $500 million in fines. And the US car industry is warning that these fines will increase car prices by around $45,000 a car if they are kept at this level.
So despite the Government reassuring everyone about the US experience, they are planning a new car tax plan that would double the obligation to increase efficiency and a tax rate triple that of the US.
Some simple calculations show what the impacts of the Australian Government’s plans will be. The most popular car sold in Australia last year was the Ford Ranger. According to the Government’s figures it produces 182g of carbon dioxide per kilometre driven. In 2029, the Government’s emission limit for light commercial vehicles (which is the Ford Ranger’s car type) will be 81g of carbon dioxide.
So today’s Ford Ranger would be 101g over the limit and at a tax rate of $100 per gram, Ford will face a tax of $10,000, which will be passed on to you.
Of course, it is likely that Ford’s engines and cars will become more fuel efficient. But even if you use the Government’s assumptions of a 1.5 per cent efficiency improvement a year, the Ford Ranger will still be 90g over the limit, and face a tax of $9000 per year.
The impacts on the cost of other popular cars are similar. Toyota HiLuxes, Mazda CX-5s, Hyundai i30s and Mitsubishi Outlanders will cost about $9000 extra. Even smaller, popular cars like the Toyota RAV4 and the Toyota Corolla face increased costs of over $3000. Larger cars like a LandCruiser will cost $14,000 more.
The Government has refused to release to the Senate its modelling or calculations of the impact of its car tax. So if it disputes my calculations it could simply release its own sums. Instead, the Government is relying on the need to keep “cabinet deliberations” secret to stop you from seeing the impacts of its tax.
Under questioning in the Senate, Government officials revealed what this really is about. They said that car manufacturers could simply “adjust” the cars sold, which, of course, means you will have to adjust the cars you buy. So you will have to buy an electric vehicle even though you won’t be getting anything like a Ford Ranger in electric form, at an affordable price, anytime soon.
The world was a lot simpler when governments did not try to tell us what we should drive or eat or even how we should power our homes. Australians are already paying enough for the food, their energy and their home loans. The answer to our cost of living crisis is not to put taxes on our cars too.
