Ai Group CEO, Innes Willox, said today that the carbon price must be axed and move directly to an emissions trading scheme (ETS).
According to Willox, "axing the carbon price in favour of an internationally linked ETS would carbon costs by 75%, while electricity prices would drop by about 1.5 cents per kilowatt hour, an average cut of around 10% for businesses and around the same for households."

"Australia's emissions targets would still be met, with abatement happening wherever it is cheapest, including overseas," Willox added.

"Full emissions trading without the carbon tax element would slash the uncompetitive burden that has been imposed on Australian industry and the Australian community and which is dampening jobs growth.

The Ai Group has long argued that an ETS is the most flexible path to reducing greenhouse emissions at least cost. And have always advocated that the fixed carbon prices under the current regime are 'way too high'.

“Australian companies are paying $23 per tonne of carbon. This is set to rise on 1 July this year and again in 2015 when it is set to reach $25.40 a tonne. Our competitors in Europe are now paying around $6 a tonne and look set to stay at around this level for several years while United Nations CER permits are trading at less than $1," Willox added.

"Australian businesses could be taking advantage of these low international prices through emissions trading. Instead we are stuck with the Government's high fixed prices. At the same time, the alternative approach from the Opposition would only permit domestic abatement without international linkage and, even on the most optimistic assumptions, would see abatement prices more than double international levels.

"A sensible resolution is at hand through Ai Group's proposal that would be fully consistent with the targeted reductions in emissions shared by both the major political parties.

"The same environmental benefit can be achieved at a lower cost and it can be achieved simply by bringing forward by two years the date of Australia's already-legislated move to emissions trading.”

Combet's response
Minister for Climate Change Greg Combet replied to the AI Group in a statement today, “the carbon price is already embedded in our economy, as AI Group’s Innes Willox has noted, ‘the scheme has shaped forward and contracted prices for electricity, gas and other business inputs.”

"The carbon price has been carefully designed to cut pollution and support industry competitiveness. It will transition to an internationally linked ETS on 1 July 2015.

National Electricity Market, industry data indicates that in the first six months of the carbon price emissions are down 8.6% on the same period in 2011, a saving of 7.6 million tonnes of emissions.

“The fixed price period gives industry certainty and allows government to take into account expert advice from the Climate Change Authority about the pollution caps that will apply from 1 July 2015," Combet noted.

“It is important to note that the headline $23 a tonne carbon price is significantly lower when industry assistance is taken into account. For example, highly emissions-intensive trade-exposed companies currently pay less than $1.30 per tonne of emissions.

“As our economy continues to grow, the Federal Government stands by the legislation as the most effective way of beginning the transformation to a clean energy economy.

“Coalition policy has been in complete disarray this week with continued contradictions over the $5 billion a year of household assistance which Joe Hockey wants ripped from households.

“The reality is Tony Abbott can’t and won’t repeal the carbon price,” Combet concluded.