Carbon law may drive petrol up 7c

By Grant Bradley

Motorists face a probable 7c-a-litre price rise at the pump from 2011 when costs of the Emissions Trading Scheme are passed on, according to Government estimates based on projected carbon prices.

The Government's flagship climate change legislation passed into law last night by 63 votes to 57.

The trucking industry estimates fuel bills will climb close to $100 million a year, while airlines' voluntary carbon offset charges, now around $2.30 for a main trunk one-way domestic flight, are a clue to what will become compulsory.

Backers of the scheme point out this is relatively modest compared with the price swings which saw the pump price of 91-octane petrol leap from around $1.60 a litre in September last year to more than $2.10 in July, to less than $2 now.

Economic uncertainty and soaring world prices for oil driven by supply fears and market traders led the Government to put off for two years the inclusion of fuel in the scheme, in spite of Green Party objections.

Treasury analysis found the delay would cost $415 million, taking into account units the Government would not get under the ETS and units it would have to buy to meet Kyoto liability.

Automobile Association polling of a sample of its membership of 1.2 million motorists was evenly split.

"Half felt it was bollocks, and the other half thought it was important," head of research Peter King said.

The AA's main concern was over transparency relating to where oil companies bought carbon credits and how much they paid - but this seems to have been dealt with in the final legislation. There was a fear credits would be bought cheaply from former eastern bloc nations and savings not passed on, he said.

"If they are going to do it, at least they can make it transparent."

Mr King said that because of the even split in members' opinions, the AA did not have a strong view on the trading scheme.

The AA puts the pump impact on current prices at 10c a litre on petrol and 12c on diesel - or $686 million a year, most of which will be paid by oil companies using carbon credits.

The transport sector contributes around 18 per cent to greenhouse gases, but is the fastest-growing contributor. Just under half of that comes from private cars.

Diesel is levied at slightly higher rates than petrol and makes up about 30 per cent of transport fuel-use.

The Road Transport Forum's chief executive, Tony Friedlander, said the $5 billion industry was "grateful for the small mercy" of the scheme's delay but was still troubled by the uncertainty involved.

One calculation was 5c for every $15 of a tonne of carbon.

Climate Change Minister David Parker is assuming around $30 a tonne in 2010, while authoritative market analyst PointCarbon has a $50 figure.

The truck fleet's fuel bill is roughly $1 billion. A 15c rise for a litre of diesel would push total fuel bills up by more than $100 million.

"We simply pass those costs on - we have the ability to put prices up quite quickly," said Mr Friedlander.

Mainfreight group managing director Don Braid said: "Honestly, to me it's so complicated and so full of holes it's bloody hard to understand."

His firm's answer was to move more freight by rail and coastal shipping, very much in synch with the Government's aims but long a part Mainfreight's plan.

"The more we can move by rail the better - it's about 4.6 times more efficient, and that will at least get us started. Then somehow we will have to try and understand the emissions scheme for our road vehicles."

* At current prices motorists hit by an estimated 7c a litre.
* Domestic air passengers - fares will go up.
* Truckers - face up to $100 million a year in extra costs.

* International air travellers.
* The marine industry.

* The price of carbon.
* National's review of the system if it wins the election.

- NZ Herald

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