Taxes to Promote Alternative Energy

Abstract

The transport sector accounts for 92.5 megatonnes (Mt), or 17.1%, of Australia’s annual GHG emissions. Within the transport sector, 83.8% of GHG emissions can be attributed to road transport activities. In 2014, the Climate Change Authority reported that transport emissions increased by 46% between 1990 and 2012. It is the responsibility of the Australian Government to be aware of the energy use in transportation that causes increased GHG emissions and also the negative transport externalities it causes such as congestion, safety and health, energy security and economic prosperity. This paper examines the current tax policy and its impact on increased emissions. Some of the current taxes such as the Luxury Car Tax can be singled out as a tax that has passed its ‘use-by’ date. The paper explores how the Australian Government can use targeted taxation measures in order to encourage the purchase of low-emission vehicles, reduce the number of registered cars on Australian roads, control the use of cars as a means of personal transportation, and increase public transport infrastructure and public transport patronage and use of other modes of transport, such as cycling. The current design of the Australian tax laws, especially the Fringe Benefits Tax provides little or no tax concessions for the use of other modes of transport, such as public transport or bicycles. The design of our tax laws should consider energy use in transportation as a luxury and tax it appropriately.