Treatment of fuel used for transport and non-transport purposes

Carbon pricing mechanism repeal

The Clean Energy Act 2011 has been repealed. This abolishes the carbon pricing mechanism from 1 July 2014. Liable entities must still meet their carbon price obligations for the 2013-14 financial year.

Content on the Clean Energy Regulator website will be progressively updated to reflect these changes. More information can be found on the carbon pricing mechanism repeal page.

Fuel covered by the carbon pricing mechanism

Fuels used by direct emitters that attract excise or customs duty are not subject to liability under the carbon pricing mechanism. For some fuels, these are subject to an equivalent carbon price under fuel tax legislation.

Households and on-road users of light commercial vehicles do not pay a carbon price on the fuel they use for transport. In addition, the agriculture, forestry and fishing industries do not pay a carbon price on their fuel use. Heavy on-road vehicles are currently not subject to a carbon price.

Changes to fuel tax credits and excise apply to fuels used in domestic aviation, marine and rail transport.

Adjustments to fuel tax credits and excise apply when transport fuels are used for other purposes, such as running diesel generators on a mine site.

The changes in fuel tax credits and excise are calculated to have the same effect as directly applying a carbon price. The changes to fuel tax credits or excise will be adjusted to ensure the carbon price on fuels used for transport purposes is in step with the carbon price applying to the rest of the economy.

For further information on the treatment of CNG please refer to the compressed natural gas and liability under the Clean Energy Act 2011 guideline.

Fuels used for non-transport purposes subject to excise or customs

CNG combusted for non-transport use is not covered by excise or customs duty from 2012/13, while LPG and LNG will not be covered by excise or customs duty from 2013/14.

Where liquid petroleum fuel, liquefied petroleum gas (LPG), liquefied natural gas (LNG) or compressed natural gas (CNG) are combusted in the operation of a facility, and are subject to excise or customs duty, the resulting emissions are not covered under the carbon pricing mechanism. This ensures fuels subject to an equivalent carbon price under fuel tax legislation are not also subject to liability twice.

Manufacturers who are supplied natural gas to produce LPG, LNG or CNG can quote an OTN to their natural gas supplier for those supplies under the carbon pricing mechanism. This ensures the manufacturer has a capability to manage its carbon liability associated with use of natural gas to manufacture LPG, LNG or CNG.

Fuels used for non-transport purposes not subject to excise or customs

Where liquid petroleum fuel, LPG, LNG or CNG are combusted in the operation of a facility, and are not subject to excise or customs duty, the resulting emissions count as covered emissions. For example, certain fuels are combusted at petroleum refineries and are exempt from excise. The emissions from the combustion of these fuels are covered emissions.

CNG used for non-transport uses is generally not subject to excise or customs duty and is therefore covered by the carbon pricing mechanism.

Liquid Fuel Opt-in Scheme

Large users of specified liquid fuels may, in certain circumstances, choose to opt into the carbon pricing mechanism via the Opt-in Scheme. The opportunity to opt-in will be available from 1 July 2013. By opting-in, fuel users will have their fuel emissions directly covered by the carbon pricing mechanism and will not face an equivalent carbon price through the fuel tax system.

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