- Scott Murdoch
- July 16, 2008 - 12:50PM
Australian households will receive either tax cuts or increased family payments to offset higher electricity and fuel prices, as the government admits its climate change plan will drive up inflation.
The framework of Labor's Carbon Pollution Reduction Scheme has been released in Canberra, detailing the government's plan to meet its target of bringing down greenhouse emissions by 60% by 2050.
The higher family assistance may start before the trading system begins on July 1, 2010, possibly ahead of the next election.
Climate Change Minister Penny Wong said Australia faced economic and environmental risks if it ignored the threat of climate change caused by man-made carbon emissions.
"It is about taking responsibility for what we are doing to our planet,'' Senator Wong said. "It is about taking responsibility and preparing for the future.
"We confront a daunting reality: we cannot continue to pour carbon pollution into the atmosphere as if there is no cost.''
Senator Wong said the government believed the Australian economy was now well-positioned to cope with a reform as significant as the start of an emissions trading scheme.
"The tough economic reforms of the past - opening up the economy and floating the dollar - mean Australia is now well placed to undertake this tough new reform.''
The so-called Green Paper reveals plans to cut the excise on fuel on a cent-by-cent basis to shield drivers from the effect of higher petrol prices after Cabinet agreed there should be not a ''net increase'' for motorists.
The excise cut will be a floating measure that counters the retail cost at the bowser as the result of the trading scheme. The move may cost the government as much as $1 billion and the reduction will be fixed for three years.
The government's paper has estimated, based on preliminary economic modelling, that a carbon price of $20 a tonne would add 0.9 percentage points to Australia's inflation rate.
The inflation spike is expected to be a once-off and will depend on the carbon price which will be set by the market when the permits are auctioned.
"This effect takes account of the government's decision to offset the impact on the price of fuel early in the scheme,'' the paper said.
"It is likely that the impact on the CPI from the introduction of the scheme will be largely a one-off. It is not a 0.9 (percentage point increase) each year.''