NEWS ARTICLE: Carbon laws ‘to drive top cars away’ Packham, Ben; Varga, Remy . T
ID: 1136473 • Letter: N
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NEWS ARTICLE:
Carbon laws ‘to drive top cars away’
Packham, Ben; Varga, Remy . The Australian ; Canberra, A.C.T. [Canberra, A.C.T]31 May 2018: 1.
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The car industry has warned that some of Australia’s most popular cars will be taken off the market, or face
significant price hikes, under tough carbon-emissions standards being actively considered by the Turnbull
government.
The Federal Chamber of Automotive Industries said the Toyota Hilux and Ford Ranger, the nation’s top-selling cars
last year, would be among those at risk under proposed emissions rules, similar to those abandoned by US
President Donald Trump.
The Australian can reveal a 105gCO2/km emissions target, which only two of Australia’s top 20 cars come close to
meeting, remains a live option for the government, which plans to sell the policy as a win for motorists.
Cities Minister Paul Fletcher, who is leading the government’s Ministerial Forum on Vehicle Emissions with Energy
Minister Josh Frydenberg, said the government was yet to finalise the policy, but “any decision will place savings
for Australians front and centre”.
“Under a fuel efficiency standard, the average motorist in Australia could save up to $500 a year in fuel costs,” he
said.
The savings will be made by consumers only if they switch to newer, more economical vehicles.
Ford Ranger driver Callum Partridge, whose father and three brothers also own the oversized American-style utes,
said it would be “ridiculous” if the cars were taken off the market.
“If you look at other countries, they are everywhere. I don’t understand why Australia would have a problem,” Mr
Partridge said. “The price of cars is already above what people in other countries are paying ...You can get the
same car in America, but here you’re paying almost double.” The mooted saving is modelled on the 105gCO2/km
target, which motoring organisations have previously branded a “carbon tax on cars” that would add up to $5000
to the price of some vehicles.
Carmakers would be forced to meet the target as the average emission level of all vehicles they sell in Australia, or
face fines for breaching the limit.
To sell cars such as the Hilux and Ranger, which typically emit more than 260gCO2/km, manufacturers would have
to sell more electric vehicles and hybrids.
The Toyota Corolla, which is leading vehicle sales this year, emits 96gCO2/km in its hybrid electric form, while the
1.8-litre petrol version emits 159gCO2/km, the Green Vehicle Guide says.
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It’s understood energy bureaucrats are continuing to model the 105gCO2/km target under different EV uptake
scenarios to come up with a policy that will have no theoretical impact on prices and won’t force drivers to switch
cars.
The new standard was proposed for 2025, but could be deferred until 2027. FCAI chief executive Tony Weber said
manufacturers would be unable to meet the target while continuing to sell the cars Australians wanted to buy at
prices they were willing to pay.
“If such a scheme was put in place, manufacturers will either have to restrict the supply of vehicles with higher
CO2 outputs, or pay fines which ultimately will be borne by consumers,” he said.
“If you look at the UK market, the biggest selling car in recent years has been the Ford Fiesta.
“In Australia, the biggest selling cars in the past two years have been the Toyota Hilux and the Ford Ranger.”
Nationals senator John Williams said he would resist any new standard that affected the ability of rural and
regional Australians to buy their vehicle of choice.
“This might be all well and good to save the planet in someone’s eyes, but to me an electric vehicle out on a
station, on a farm, would be totally useless,” he said.
The Ministerial Forum on Vehicle Emissions has to come up with a policy to address carbon emissions in the
transport fleet, which must fall by 26-28 per cent of 2005 levels by 2030, under the government’s Paris Agreement
climate change commitments. It is yet to unveil its final proposal, despite working on the issue for more than 212
years.
Information released to stakeholders last year said the 105gCO2/km target “offers the highest net benefit and
highest practical contribution to the 2030 target”.
At the time, Mr Frydenberg said there was “as much chance of a carbon tax on cars as Elvis making a comeback”.
He has since predicted an electric vehicle “revolution” in Australia, saying there will be more that one million EVs
on Australian roads by 2030, up from the current 4000.
The International Energy Agency, in a report released yesterday, warned that motorists needed financial incentives
to switch to EVs.The US Environment Protection Authority announced last month that planned Obama-era car
emissions standards of about 100gCO2/km were “too stringent” and would punish consumers.
WITH POLICY GRAPH:
7.1. If the policy is implemented, what is the price-quantity combination determined by the market?
A. P4, Q2
B. P2, Q2
C. P3, Q3
D. P3, Q1
If the policy is implemented, what is the price that buyers pay?
A. P1
B. P2
C. P3
D. P4
If the policy is implemented, what is the price that sellers receive?
A. P1
B. P2
C. P3
D. P4
If the policy is implemented, what is deadweight loss generated by the externality?
A. A+B+C+D
B. C+D
C. C
D. Zero
Given the stylised representation provided in the graph above, which of the following sentences is more accurate about the burden of the policy?
A. the burden of the policy falls more heavily on buyers of high-emission cars
B. the burden of the policy falls more heavily on sellers of high-emission cars
C. the burden of the policy is equally shared between buyers and sellers of high emission cars
D. the burden of the policy is equal to zero because the externality is fully internalised
Explanation / Answer
Answer 7.1:
a) A - P4, Q2
Reason: Supply curve has shifted fromS1 to S2 but the demand curve remains same. Hence new equlibrium point is P4, Q2.
b) D -P4
Reason: New market clearing price is P4.
c) D -P4
Reason: New market clearing price is P4.
d) D- Zero
Reason: the burden of the policy is equal to zero because the externality is fully internalized.
e) D. the burden of the policy is equal to zero because the externality is fully internalised.
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