Aurizon

Mar 29, 2023

Share Pacific National, one of the country’s largest freight companies, says Labor’s safeguard mechanism will drive up carbon emissions in the sector by penalising freight transport but leaving trucking operators unaffected. The company expects an annual $12 million cost to meet its obligations under the pollution reduction scheme agreed this week with the Greens, and has joined its rail freight rival Pacific National in warning of a “perverse” rise in congestion and emissions. Pacific National CEO Paul Scurrah says the safeguard mechanism will favour heavy trucks over rail freight. Louie Douvis The two groups – which represent 65 per cent of the country’s rail freight – are among the 215 companies with annual emissions of more than 100,000 tonnes of carbon dioxide equivalent captured under the government’s scheme. Both Pacific National and Aurizon have warned that extra costs will be imposed on rail freight and passed on to customers, making it more difficult to compete against thousands of smaller trucking groups. Pacific National chief executive Paul Scurrah said the practical outcome of the safeguard mechanism for the transport industry would be to tilt the playing field towards trucks, which would deliver a worse outcome for emissions. “If changes aren’t made to current settings of the safeguard mechanism, then within the decade rail will become less price competitive with road freight operations, resulting in the perverse outcome in the nation’s transport network of increased traffic congestion, vehicle emissions and road trauma incidents,” he said. Advertisement Pacific National’s own modelling had calculated the cost of buying carbon credit units at $12 million by 2030 even after it had made substantial investments in new locomotives and rolling stock, Mr Scurrah said. Pacific National was investing hundreds of millions of dollars in a series of major projects to help achieve emissions reduction targets mandated in the safeguard mechanism over the next five years, he added. But he noted there were technology constraints in both rail rolling stock and track infrastructure, beyond the control of Pacific National. “This will result in rail freight operators having to purchase significant numbers of carbon credit units each year,” Mr Scurrah said. This would bring an extra cost burden for the rail freight sector, which would be felt by consumers at the end of the supply chain. Aurizon chief executive Andrew Harding said the company had been raising its concerns about the unintended consequences of the safeguard mechanism for months in an attempt to avoid a situation where more trucks would eventually be on the road. “Aurizon and the rail industry are disappointed that no substantive changes have been made, despite acknowledgement from many stakeholders of the unintended consequences for rail freight operators,” Mr Harding said. He added that 75 per cent less greenhouse gas emissions were generated by rail per tonne of freight compared with road transport, given one train can carry a load equivalent to 150 semi-trailers. Advertisement Aurizon is listed on the ASX and has a sharemarket capitalisation of $6.3 billion. Pacific National is owned by a consortium that includes Global Infrastructure Partners, CPP Investment Board, the China Investment Corporation, and the Singaporean sovereign wealth fund. They bought the rail freight business in 2016 from Asciano. Mr Scurrah said Pacific National’s investments in coming years included spending $330 million to buy 50 new fuel-efficient locomotives, to be used in long-distance operations, and the purchase of wagons able to haul a more productive payload of double-stacked containers. Solar generation was also being installed at many depots and terminals in Australia. The safeguard mechanism is only applied to Australia’s largest 215 emitters, with thousands of small-to-medium trucking companies being spared. Mr Scurrah said the rail freight sector is further boxed in because electrification of the rail network nationally is cost-prohibitive and emissions intensity is influenced by the condition and alignment of track infrastructure, which is not owned or controlled by operators like Pacific National. “Australian rail freight companies have no control over the condition of the track infrastructure they operate on or global technological developments in locomotives and rolling stock,” he said. Mr Scurrah said alternative fuels for locomotives, capable of long-distance haulage operations, such as hydrogen fuel cells, were still more than a decade away from commercial availability. Simon Evans writes on business specialising in retail, manufacturing, beverages, mining and M&A. He is based in Adelaide. Connect with Simon on Twitter . Email Simon at simon.evans@afr.com Save