The move is unlikely to win Caltex any friends. The company is Australia’s largest refiner, with a 30 percent share of Australia’s transportation fuels market.

Last month, Australia released a report from the Prime Ministerial Task Group on Emissions Trading that is short on specifics, but supports the need to take action. In a search for the lowest cost mechanism for carbon abatement by Australian industry, the report advocates an approach reminiscent of the European cap-and-trade scheme set up under the Kyoto Protocol. This is ironic for a number of reasons. To begin with, Australia refused to ratify the Kyoto accord and, until very recently, the Prime Minister was the country’s leading greenhouse gas skeptic (and, political expediency aside, probably still is).

Second, the trial European trading scheme was poorly designed and did not work.

Third, climate is one of those “commons” issues that requires a unified global response, both for the short and long term, and international consensus on the scale of the problem. Longer-term targets are of interest to scientists, while shorter-term targets are of immediate interest to investors. By 2020, the U.K. plans to reduce its emissions to about 30 percent below the levels emitted in 1990 en route to a 60 percent reduction by 2050. California has an 80 percent reduction target by 2050, but will keep 2020 emissions at 1990 levels. In Australia, where the arguments center on preserving Australia’s competitiveness as a supplier of raw materials, the influential Business Council of Australia recently concluded that cutting greenhouse emissions 60 percent by 2050 will have minimal effect on Australia’s economy, and the National Business Leaders Forum on Sustainable Development is promoting 20 percent reductions by 2020.

The government won’t set a timetable or targets for the introduction of emissions trading, until after the next election. But in the meantime these targets are a reasonable guess at what the government will try to do, probably by 2012, regardless of which party is in power after November.

So back to Caltex, which believes that since ultimately the cost of reducing emissions will be borne by consumers anyway, why not just apply the cost burden directly to that end of the value chain as a tax? The company claims that a carbon tax on transport would avoid the huge financial risk of having to buy billions of dollars worth of emissions permits on behalf of customers, and then recovering that cost through the market. Caltex believes that under an emissions trading scheme, carbon prices would fluctuate wildly. Since refiners will simply pass their costs on to customers, emissions trading will exacerbate the sort of extreme volatility in gasoline prices that make consumers cranky. Better to apply an across-the-board 10 cents-per-liter carbon tax that will serve to dampen price fluctuations, and which will send a clear conservation signal to consumers. It would also add $4 billion per year to Australia’s general revenue, which could then be spent on other conservation initiatives and energy efficiency measures.