Gillard faces hard carbon sell

Treasurer Wayne Swan, Australian Prime Minister Julia Gillard and the Minister for Climate Change and Energy Efficiency Greg Combet. Photo / Getty Images

Australia appears to be locked into carbon taxation under a scheme that will directly slug the nation's 500 biggest polluters, shut down its dirtiest coal-fired electricity generators and compensate business and millions of households for the ensuing rises in living costs.

Within four years the tax will be rolled into a carbon emissions trading scheme that Prime Minister Julia Gillard said would plug into a widening international market and which will almost certainly affect New Zealand.

Gillard and Prime Minister John Key have said the two nations' emissions trading schemes should work as closely as possible together, and last month agreed to set up a senior officials group to determine how this could be achieved.

The new tax, announced yesterday by Gillard, Treasurer Wayne Swan and Climate Change Minister Greg Combet, is now certain to pass through Parliament after Lower House endorsement by Greens MP Adam Bandt and independents Tony Windsor, Rob Oakeshott and Andrew Wilkie.

This gives Gillard the votes she needs to pass the legislation to the Senate, where the Greens hold the balance of power.

"The Greens promised to deliver a climate action package which was a platform for stronger action rather than a ceiling which held Australia back and we have done just that," Greens climate change spokeswoman and deputy leader Christine Milne said.

The new tax also has the powerful backing of the union movement, mine workers, environmentalists and welfare groups.

"Now we've got the detail it's time to tell the truth," Construction, Forestry, Mining and Energy Union national president Tony Maher said. "It's time to stop playing politics and start planning for our future."

But polls continue to hammer the Government and reflect voters' rejection of a carbon tax. At the weekend a new Morgan poll showed the Coalition would easily beat Labor if an election was held now, and said only 37 per cent supported the tax.

Backed by a promised anti-tax blitz by miners and business groups, Opposition leader Tony Abbott said that despite Gillard's apparent guarantee of success in Parliament, the Coalition would continue to fight it.

He said the next election would be a referendum on the tax - which would be repealed if the Opposition won power - and challenged Gillard to go the polls.

Abbott said there was little point in the tax because while millions of Australians would be worse off, the nation's greenhouse emissions would not be reduced: "It's all economic pain for no environmental gain."

Gillard and her ministers will now start a huge hard-sell to convince voters that Abbott, miners, big business and climate change sceptics are wrong, arguing that Australia needs to act now or face much higher costs later.

She said the tax would remove 159 million tonnes of carbon pollution from the atmosphere by 2020, equivalent to taking 45 million cars off the road.

Gillard will be counting heavily on the huge compensation package tied to the tax to counter Abbott's scare campaign about claimed blows to struggling households, employment and the economy.

The compensation package will cost A$4.2 billion ($5.3 billion) more than it earns over the next four years.

Under the plan Australia's 500 biggest polluters will pay A$23 a tonne for carbon emissions, rising by 2.5 per cent above the rate of inflation to about $24.15 in 2013 and $25.40 the following year, before an emissions trading scheme starts in 2015.

But A$9.2 billion in assistance will be provided to support jobs and industries hit by the tax, including compensation for industries such as liquefied natural gas, aluminium and zinc smelting, steel and glass manufacturers, and pulp and paper companies.

More than A$1 billion in assistance will be provided to the coal sector.Gillard's most compelling argument for voters will be the A$15 billion compensation package of increased benefits and tax cuts that she said would benefit millions of suburban households.

She said four million households would be better off after compensation, six million would be no worse off, and eight million would receive partial compensation for the price rises.

Only 700,000 would receive nothing.

Pensions, family tax payments, the dole, student allowances and other benefits will increase by 1.7 per cent a year, with the first payment made as a lump sum next year, followed by fortnightly payments from 2013.

This will be supported by tax cuts for all taxpayers with incomes below A$80,000 - most by about $300 a year - and an increase in the tax-free threshold from the current $6000 to $19,400 by July 2015, cutting about one million people from the tax system Petrol prices will be exempt, and A$13 billion has been earmarked for clean and renewable energy programmes, including low and zero emission technologies, energy efficiency, and a new biodiversity fund to protect native species from climate change.

THE GLOVES COME OFF

* Just 500 major polluters will pay the A$23-a-tonne tax, but living costs will rise.
* Nine out of 10 households will be compensated.
* More than A$9 billion will be spent on assistance to help industries and jobs damaged by the new tax.
* Australia's worst coal-fired electricity generators will be axed and replaced by gas-fired plants by 2020, when a targeted 20 per cent of all energy will come from renewable sources.
* But the Opposition says the tax will hit millions of Australians without benefiting the environment.
* Coalition leader Tony Abbott pledges to oppose it all the way, fight the next election as a referendum on the tax, and repeal the legislation if the Opposition wins.Greg Ansley