The federal government and electricity generators will hold negotiations over a carbon tax in coming weeks.
Climate Change Minister Greg Combet has also flagged having a separate approach for the energy sector under an eventual emissions trading scheme.
Power generation accounts for 40 per cent of Australia’s greenhouse gas emissions.
“The government will be engaging with the major players in the energy sector in coming weeks … to discuss the way in which that sector will be treated,” Mr Combet told reporters on Monday.
He added that the government was considering applying an “emissions intensity approach” to electricity.
Without going into detail, Mr Combet said this would require reviewing wholesale electricity prices and considering whether to apply a different kind of emissions trading scheme to electricity.
“This is essentially a way of trying to … achieve the emissions reductions that we’re seeking but looking at dealing with the issue … a little bit differently than a straightforward cap-and-trade scheme,” Mr Combet said.
In negotiating a carbon price, the government and the Greens are yet to work out appropriate compensation measures for industry.
Rio Tinto managing director David Peever believes more generous compensation should be offered to industry than that proposed by the Rudd government’s ditched emissions trading scheme in 2009.
The Greens want a lower level than 2009.
“The government and the Greens have different views about the level of that assistance and the government and some industry players may have different views about the level of that assistance,” Mr Combet said.
While compensation measures for low-income earners and pensioners are yet to be worked out, Mr Combet said a carbon price would be likely to only have a modest effect on inflation.
“I don’t expect any significant impact on the overall cost of living out of our carbon price mechanism once we’ve done all our final work but we will ensure that whatever that may be, we will assist households cope with that price impact,” he said.
