Petrol prices will not rise under the new carbon tax after the multi-party committee accepted the federal government’s argument it must narrow the cost of living impact of its climate policy in the face of relentless attacks by the Coalition.
As the committee met yesterday to prepare for final deal-crunching on the design of a carbon tax, the Herald learnt it is working on the assumption that the carbon tax will not initially be passed on to prices at the bowser.
But Labor and the Greens have very different starting positions on the initial price of a carbon tax and the amount by which it should rise each year.
The Greens and the independents are demanding add-on policies, including assistance for large-scale renewable projects, the removal of fossil fuel subsidies, incentives for land-use carbon storage and new fuel-efficiency rules in return for supporting a scheme, accepting a lower starting price and shielding petrol from the tax.
Advice to the government from Deloittes and a special Investor Reference Group, revealed in the Herald yesterday, says a carbon price would need to reach $40 a tonne relatively quickly to force a switch from coal to new investment in gas-fired power generation and drive down greenhouse emissions.
The Climate Change Minister, Greg Combet, said there were ”differing views” in the energy market about the price needed to trigger new investments in gas, but pledged the carbon price would be ”well south” of $40 a tonne when it starts in July next year.
The carbon price is expected to start at between $20 and $30 a tonne - which preliminary Treasury modelling said would add between $8 and $12 a week to household bills before the promised government compensation.
But the Greens said the calculation that $40 a tonne was needed to force a switch was ”about right” and pointed out that an Australian price would need to be in line with an expected European price of about $40 when the tax switched to a market-driven trading scheme in three to five years.
The Prime Minister, Julia Gillard, said differences over the initial price just meant ”we’ve got some work to do” before the announcement of a final policy at the start of July.
The independent MP Tony Windsor said he was advocating add-on policies to run alongside a tax because it was obvious that ”early on in any pricing arrangement, the price will not be enough to drive some of the renewables”.
”I am not interested in something that does nothing … that’s going to be the sticking point for me. Will this policy drive anything anywhere?” Mr Windsor said.
The Coalition leader, Tony Abbott, said whatever the starting price, ”the point of the tax is … it’s going to go up and up and up”.
Visiting a car plant in Victoria, Mr Abbott claimed it would increase the price of a car.
Ms Gillard accused him of ”plucking figures out of the air”.
The ”framework agreement” for multi-party negotiation left open the question of whether the carbon price would hit petrol, but the government has always argued for a repeat of the Rudd government’s emissions trading scheme design to fully offset the effect of the tax on petrol prices for the first three years.
The Greens’ initial preference was for transport to be included, but it is understood that they are now arguing for other measures to reduce emissions in the transport sector.
