By Online parliamentary correspondent Emma Rodgers
ABC News Online, Posted 2 hours 23 minutes ago
Updated 1 hour 34 minutes ago
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Treasury modelling released by the Federal Government today shows there would be a minimal reduction of growth under an emissions trading scheme.
But it also shows that households will spend around $5 a week extra on electricity and $2 a week on gas, and lower-income households will be more affected.
The modelling says annual growth would slow by 0.1 per cent and early action is key to keeping costs low.
It also says the introduction of a scheme would be likely to produce a one-off spike in inflation of around 1 to 1.5 per cent, but there would be minimal impacts on future levels of inflation.
It is expected that rural and metropolitan households will incur roughly the same rise in costs.
Releasing the modelling today, Treasurer Wayne Swan said real household incomes would stay strong but will be around 0.2 per cent less under a scheme.
"The Government is of course committed to helping households adjust to the scheme by compensating them for the impact," he said.
The Government has already promised to offset fuel price rises under the scheme for the first three years.
The modelling also says that, based on international action to cap greenhouse gas concentrations at 550 parts per million (ppm), an initial carbon price could be set at $23 per tonne in 2010.
But if Australia were to adopt a more ambitious target of 450 ppm, the cost of carbon per tonne would more than double.
It also says that the costs to trade-exposed industries would not be substantial enough to cause them to move offshore, and industries such as coal, iron and still will continue to grow but at a slower rate than they would without a carbon scheme.
Mr Swan says the trade-exposed industries will be able to sustain demand because they will be polluting less than their global competitors.
But the modelling does says that the introduction of a scheme could lead to the closure of some coal-fired electricity generators.
However Mr Swan says by 2050 the alternative energy sector will grow by around 3,000 per cent due to the introduction of a carbon price.
"Low emissions technologies and production processes will become more competitive and low emission goods will become more attractive to consumers," he said.
Mr Swan says the figures also show that it will be cheaper to act now to reduce carbon emissions.
The modelling suggests that costs to economies that act now would be 15 per cent less by 2050 than those who wait to act.
The report says early global reduction of carbon pollution will bring down long-term costs.
However, the modelling works on the assumption that the drought will be over and dams full in two years' time, and that carbon capture storage technology will be available in 10 years.
It also does not include the impact of the global economic crisis.
The Government will release a white paper with the final details of the scheme by the end of the year and wants to introduce the scheme in 2010.
The Opposition has labelled the start-up date of 2010 as "grossly irresponsible" and has demanded the effects of the global financial crisis be factored into the white paper.