Prime Minister Kevin Rudd revealed on Sunday he would move the start date of the emissions trading scheme to July 2014, a year ahead of schedule.
Prime Minister Kevin Rudd revealed on Sunday he would move the start date of the emissions trading scheme to July 2014, a year ahead of schedule. Mireille Merlet-Shaw

Carbon tax change will see drop in power prices

A FALL in power prices, leading to possible cuts to subsidies for renewable energy projects, could be the main effect of proposed changes to the carbon tax, a leading climate policy expert said on Monday.

Prime Minister Kevin Rudd revealed on Sunday he would move the start date of the emissions trading scheme to July 2014, a year ahead of schedule.

While the change will hit Opposition Leader Tony Abbott's campaign to scrap the carbon tax, it involves very little change to government policy.

But University of Melbourne climate policy researcher Associate Professor Peter Christoff said the change would have an impact.

Prof Christoff said the most immediate impact would be a likely fall in the carbon price from about $24 per tonne of emissions to between $6 and $10.

He said the fall would likely precipitate a drop in energy prices - and the price on average household power bills - as the price falls to levels similar to that in Europe.

"This will lead to a fall in costs for consumers and businesses on electricity prices, and possibly a change in compensation to industry," Prof Christoff said.

"But the Rudd government has not outlined any changes to the lower income compensation, so households are likely to be better off sooner, and industry will be better off too."

But he said the change to the ETS start date was unlikely to change the pace of carbon emissions, with most big industries already taking into account future price shifts, and reducing emissions commensurately.

"Without a doubt it's clever politics; it is burying the Coalition's arguments on the carbon tax, and makes them look a bit silly," Prof Christoff said.

"But in terms of policy, it's only good policy if one thinks of the ETS as one of a number of measures."

He said if there is a significant fall in the carbon price, it could lead to a fall in government revenues as high as $3 billion to $4 billion, and that budget shortfall "has to be met".

Prof Christoff said the government had already cut funding to the renewable energy sector due to falls in revenues, and if it fell further, more cuts could be on the way.

While such cuts would likely anger The Greens, he said the ETS was still a better environmental option than the Coalition's "direct action plan".

"There is no plan for an ETS under the Coalition, Tony Abbott has been clear hew will simply cut the carbon tax altogether, and even move to a double dissolution if he can't," Prof Christoff said.

"The alternative under the Coalition is a very voluntary measure which failed under the Howard Government.

"And now have the situation where the Opposition is arguing against a market-based measure which (John) Howard himself backed before he left government."


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