Govt scraps $15 carbon floor price

THE Federal Government could risk a budget black hole after yesterday scraping the proposed $15-a-tonne floor price for the nation's carbon trading floating market from 2015.

Announcing major changes to the carbon tax scheme, Climate Change Minister Greg Combet said the government was removing the floor price from 2015, as well as creating a one-way market with Europe, which currently has a carbon price floating between EU$3 and EU$10.

This market, he said, would mean Australian businesses could buy European carbon credits from now until 2015, but Europeans would not be able to buy Australia-provided credits until after 2018, when he expected negotiations with the European Union to be complete.

Treasury modelling of the carbon price in the 2012-13 budget was based on an average price of $23 a tonne, expecting to raise about $24billion in government revenue over the forward estimates, far above the current EU price that will be linked to the Australian market.

If the international price falls below the Treasury estimates, it could create a budget hole, due to household and business sector compensation to make up for the cost.

But Mr Combet said he was confident there would be no budget blow-out as a result if the European price did not rise to the figures Treasury put in to their economic modelling for the budget.

He said the government would not be deserting its plans for household assistance, even if the price did not reach Treasury estimates.

Instead, he said, new access to the world's largest carbon market in Europe would present more opportunities for Australian businesses, which were under risk due to the floor price.

As part of the European agreement, a new limit on Kyoto international credits will be created, with Australian business only able to access up to half of their "carbon liabilities" from the international market and only 12.5% able to be met by Kyoto-registered units.

Topics:  carbon price carbon tax greg combet

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