The transport sector was included in the government's Green Paper on the Carbon Pollution Reduction Scheme released this week.

At the heart of the scheme is emissions trading, in which the government sets a limit on how much carbon pollution industry can produce, and then the government sells permits up to that limit, creating an incentive to look for cleaner energy options.

"Companies can buy and sell permits from each other depending on how much they value them, thereby enabling the market to find the most efficient ways to reduce carbon pollution," said Minister for Climate Change and Water, Senator Penny Wong.

Wong said the Carbon Pollution Reduction Scheme will cover stationary energy, transport, fugitive emissions, industrial processes, the waste and forestry sectors, and all six greenhouse gases counted under the Kyoto Protocol from the time the scheme begins.

"To offset the initial price impact on fuel associated with the introduction of the Carbon Pollution Reduction Scheme, the government will cut fuel taxes on a cent-for-cent basis.

"We will periodically assess the adequacy of this adjustment measure for three years and adjust this offset accordingly. At the end of the three year period, the measure will be reviewed."

For heavy vehicle road users, who transport goods across the country, fuel taxes will be cut on a cent-for-cent basis to offset the initial price impact on fuel associated with the impact of the Carbon Pollution Reduction Scheme. The government will review this measure after one year.

The government will establish the Climate Change Action Fund (CCAF) to help business transition to a cleaner economy, by providing in-partnership funding for a range of activities, including:
* Capital investment in innovative new low emissions processes
* Industrial energy efficiency projects with long payback periods
* Dissemination of best and innovative practice among small to medium sized enterprises.

Canberra will provide transitional assistance in the form of a share of free permits to the most emissions intensive trade exposed activities.

The government also proposes to provide a limited amount of direct assistance to existing coal-fired electricity generators.

A report by the Total Environment Centre (TEC) earlier this week revealed that without a comprehensive plan, freight emissions could rise to more than 13% of national carbon pollution by 2020.

Executive director Jeff Angle says this is a major problem for the freight industry because business and individual consumers are becoming increasingly aware of the carbon footprint of products.

The biggest contributor is road transport (87%) and the largest emitters per tonne of product carried are air transport and light commercial vehicles.