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We must act now on emissions: Swan

Treasurer Wayne Swan has warned the nation that any delay in taking action on cutting emissions will come at a greater cost and will make it more difficult to transition to a clean energy economy.

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The government on Sunday released details of its long-awaited climate change package, which has an initial carbon price of $23 a tonne, and revenue raised from it will be directed to households as compensation and as support to industry.

Mr Swan said the cost of pricing carbon was small, particularly if the country acts now.

“The longer we delay, the greater the cost and the more difficult the transition,” Mr Swan told reporters in Canberra.

“Under a carbon price we can see strong growth in the economy, we can see strong jobs growth, we see strong growth in incomes, and we can do all of that while making deep cuts in carbon pollution.”

Under the package, Australia will cut 159 million tonnes a year of carbon pollution from the atmosphere by 2020.

“That is the equivalent of taking over 45 million cars off the road,” Prime Minister Julia Gillard said.

The introduction of a carbon price will add just 0.7 per cent to the consumer price index (CPI) in its first year, according to Treasury modelling released with the package.

The impact is smaller than the 2.5 per cent increase that was generated by the introduction of the GST in 2000.

The government confirmed a carbon price would start from July 1, 2012, and would remain fixed until July 1, 2015, when it would move to an emissions trading scheme.

In 2013-14, the carbon price will rise to $24.15 a tonne and then to $24.50 in 2014-15 based on a 2.5 per cent increase each year plus inflation.

Consumer price inflation is assumed to be 2.5 per cent, the mid-point of the Reserve Bank’s two to three per cent target band.

Treasury estimates that the price of most goods will increase by less than one half of one per cent as a result of a carbon price, or less than half a cent in every dollar.

“That is a modest price increase from a scheme that applies to the 500 largest polluters,” Mr Swan said.

The Reserve Bank has already indicated that it would look through the impact of a carbon price on inflation when considering interest rates, as it did in the first year of the GST.

Treasury modelling also shows incomes would continue to increase substantially under a carbon tax, rising by 16 per cent by 2020, to be about $9000 higher in today’s dollars.

It also shows that national employment is projected to increase by 1.6 million jobs by the end of the decade.

Mr Swan says the government remains on track to bring the budget back to surplus in 2012-13.

“The reforms have a net cost of $4.3 billion over the next four years, but the bulk of this, $2.9 billion, is in the first year as you would expect with a reform of this magnitude,” he said.

“Once the scheme is up and running, the impacts are broadly budget neutral and only have a modest impact on budget surpluses.”

Opposition treasury spokesman Joe Hockey was unimpressed, saying the financial year was only 10 days on and the budget was already worse off.

“It’s going to be costly, it’s going to be complex and it is relying heavily on a `trust me’ factor,” Mr Hockey said.

“There is nothing in here for what is an amazingly complex new regulatory system for every business, and it’s going to have an impact on confidence, it is going to have an impact on sovereign risk.”

 

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