If I've got it right they're saying handing back carbon revenue on petrol while fares go up will discourage public transport. Yes, no, maybe since there are a lot of complex effects going on that are hard to predict.

For starters if they cut petrol excise by 5c to bring the bowser price down to say $2 a litre the bus may still be attactive. BTW the daily return bus fare on a commute I used to do in NSW is now $28.80. If they left the 5c on petrol (corresponding to $20 per tonne of CO2) and gave it to bus subsidies there would be some balancing point whereby x% drivers were subsidising (100-x)% of new bus passengers. The value of x is anybody's guess, say 50% will give up cars.

Sticking with 5c a litre on petrol which might raise say $2.5bn they could abolish the means test on solar gadgets. That might lower electricity bills so people had more cash to spend on petrol. But petrol is effectively capped unless they want to cut coal or gas or some other form of carbon. That would drive up the price of petrol (more demand, fixed supply) in a rebound or Jevons effect, so again taking the bus looks like a good option.

These I think are the kinds of economic modelling scenarios that will take Treasury until October to work out, assuming their models can cope with these intricacies.