Julia Gillard has been told the two-speed economy has strengthened the case for “generous” carbon tax compensation to be given to the manufacturing sector but coal and gas should be given only “highly disciplined” assistance.
Government climate change adviser Ross Garnaut says the transitional assistance that may involve a degree of overcompensation, or subsidy, should be reviewed for the resources sector first, giving an advantage to sectors of the economy under pressure from the mining boom.
“For each new coalmine or gas plant that opens up, there must be a cut in jobs and investment in some combination of tourist hotels and restaurants, universities, steel mills, farms and other businesses producing exports and competing with imports,” Professor Garnaut says in his final report. “Prop up jobs in one area and even more have to go in others.”
Petrol would also be excluded from the first year of the scheme through a one-off cut in excise, which would be permanent for households, but he called for the fringe benefits tax on vehicles to be abolished.
In a budget distributed with the final report, Professor Garnaut calls for up to 10 per cent of carbon tax revenue to be devoted to “carbon farming”, with emitters able to buy offsets to their emissions.
He also calls for $400 million over four years to be set aside to enhance existing state energy-efficiency programs that have proven to be effective, but he says schemes such as the solar feed-in tariff and the renewable energy target should be phased out when a carbon tax is introduced. He also calls for a $1 billion structural adjustment fund to provide assistance for workers and communities hit by restructuring forced by the carbon price, such as coal-fired power station workers.
He says $2bn-$3bn a year should be set aside from the carbon tax revenue to fund the development and commercialisation of low-emissions technologies, although existing government programs, such as the $5.1bn clean energy initiative, should be used first before revenue is drawn from the carbon tax stream.
