Australia’s Labor Prime Minister Kevin Rudd has confirmed that moving early from a fixed carbon price will cost the federal budget $3.8 billion over the next four years.
Mr Rudd today released the details of his plan to switch to a market driven Emissions Trading Scheme (ETS) a year earlier than provided in Australia carbon price legislation.
Speaking in the northern Queensland city of Townsville accompanied by the Treasurer Chris Bowen, he said households would continue to receive financial assistance while businesses would pay less for carbon permits.
The cost will be offset by new savings measures, including $1.8 billion raised by changing the fringe benefits tax for employer-provided or salary-sacrificed cars.
Some environmental programs funded by the carbon price are also being scaled back, and new savings measures are being imposed on the public service.
“This is the fiscally responsible thing to do.
“The nation’s 370 biggest polluters will continue to pay for their carbon pollution but the cost will be reduced meaning less pressure on consumers.
“Households and pensioners will continue to receive payments calculated on a higher carbon price, providing additional support to meet cost-of-living pressures.”
Mr Rudd said the $380 annual saving for an average family would include cuts off $150 on electricity bills and $57 on gas.
He said that would equate to a contribution to the budget bottom line of $177 million over the next four years.
The government wants to move from a fixed carbon price of $24.15 a tonne to a floating price, suggested to be somewhere between $6 and $10 next July.
Australia’s ETS is planned to link with the European Union’s troubled ETS, which is currently hovering around the $4 mark, although the EU is taking steps to force the price upwards, eventually aiming for its to reach at least $20 a tonne.
Mr Rudd said Labor remains committed to cutting emissions despite the lower carbon price.
He said his policy would be more effective than the conservative Liberal-National opposition’s Direct Action plan, which he argued would cost households $1200 a year more.
Liberal –National opposition leader Tony Abbott disputed Mr Rudd’s claim that he was “terminating” the fixed carbon price, saying: “He is not the terminator, he is the exaggerator, he is the fabricator, not the terminator.
“What Mr Rudd has announced today is not the abolition of the carbon tax, all he has done is simply brought forward Julia Gillard’s carbon tax changes by 12 months.
“He has changed its name but he hasn’t abolished the tax. All he has done is given Australians one year only of very modest relief.”
Liberal shadow treasurer Joe Hockey also disputed the government’s figures.
“The government must release all the Treasury modelling on Labor’s Carbon Tax statement and his lies about our scheme immediately,” he wrote on Twitter.
What Labor plans to cuts to fund its new carbon price policy:
- Abolishing statutory formula for fringe benefits tax on cars, $1.8 billion over forward estimates
- Energy security fund: bringing forward free permits, then discontinuing program, $770 million over forward estimates
- Changes to coal sector jobs package to adjust value to new carbon price, $186 million
- Changes to clean technology program and carbon capture and storage program, $586 million over forward estimates
- Return unallocated funds from biodiversity fund to budget, $213 million over forward estimates
- Cuts to funding for carbon farming futures program, $143 million over forward estimates
- Changes to public service including one per cent cut in executive staff numbers, $248 million