Some 30 years ago more of the non-bulk freight task within Australia was performed by ships than road, and more of this freight was carried by rail than road. Today, road dominates transport of this class of freight, carrying more than the other two modes combined. The environmental costs have been considerable. The argument made in this paper is that changes are needed to Australia's taxation regime to encourage the domestic carriage of freight by more fuel-efficient modes, with the consequential benefit of reducing greenhouse gas emissions. The focus will in practice be on non-bulk freight, as it is accepted that the carriage of bulk freight, such as iron ore and coal, must necessarily be by the more fuel-efficient modes of rail and shipping. That rail and shipping are more fuel-efficient than the movement of freight by road is widely recognized. On one reckoning the amount of fuel oil used in moving a net tonne of freight over a kilometre by road, is 3.6 times greater than is required to move it by rail. Rail and shipping confer other environmental benefits also, of course, such as a lower accident rate, and an amelioration of traffic congestion. First, a sketch of Australia's social and physical geography, and its domestic freight task. Australia is an island continent, some 4000 kilometres across. Most human settlement, industry and ports are on the coast, or very near to it. Approximately 70% of the population lives in or very near a handful of major port cities, mainly on the east coast. Most of the remainder live in smaller port cities. The non-bulk freight is transported between these cities, mainly by road, and to a much lesser extent by rail, coastal shipping, and air. Bulk freight is carried by rail and coastal shipping between the major industrial centres (in practice, the port cities), and inland locations (for example, iron are mined in the north of Western Australia). Australia's international freight movements are necessarily by sea, with a small percentage also being by air. For historical reasons, road has tended to be favoured for the movement of domestic freight between the major centres. This bias has come to be entrenched in the taxation regime, and in other fiscal measures, such as the subsidization of the movement of freight by road by an inadequate road-user regime.