The government is going to compensate households for the rise in petrol prices caused by emissions trading. The question is how best to compensate people for the price increase?The government could experiment tomorrow by giving anyone who purchases petrol a shopper docket that they can redeem if they spend the money received on infrastructure to reduce emissions. If they can’t use the shopper docket themselves they can sell it to someone who is willing to do so. The likely value of shopper dockets will be about 75% of the face value of the docket.
The Federal government (or the ACT government) could start small in Canberra by returning 10 cents per litre of the excise currently collected. The system would decrease the price of fuel while at the same time diverting money to infrastructure to produce renewables or ways of saving energy. The infrastructure to implement this would happen overnight for no cost to the government as every petrol station will want to give their customers a discount. Renewable infrastructure projects that will accept dockets will appear immediately and companies will pay to participate. The government will still get to spend some taxes on renewables but the spending will be market driven not government directed.
If it works as expected it will provide a mechanism for the distribution of some of the money obtained from emissions permits trading towards infrastructure for renewables.