Gillard gives budget carbon assurance

29 Aug 2012, 4:08 pm   -   Source: AAP
Climate Change Minister Greg Combet is convinced there won't be a budget black hole down the track and is standing by Treasury modelling based on an international carbon price of $29 a tonne in 2015/16. (AAP)

Climate Change Minister Greg Combet is convinced there won't be a budget black hole down the track and is standing by Treasury modelling based on an international carbon price of $29 a tonne in 2015/16. (AAP)

Prime Minister Julia Gillard says she's confidence Treasury forecasts for a surplus and carbon price revenue can be met.

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Prime Minister Julia Gillard says Labor can deliver its spending promises and a budget surplus despite concerns its plans to join Australia to the European carbon market could dent revenues.

The government on Tuesday announced plans to scrap a proposed $15-per-tonne floor price when Australia moves to a market-based emissions trading scheme (ETS) in three years.

The domestic scheme will be linked to the European Union carbon market from July 1, 2015.

But there are concerns the budget bottom line could be affected if the international carbon price remains low - it's currently just under $10 a tonne - because of the potential impact on revenues.

Ms Gillard said all markets, including the carbon market, had been volatile across Europe as a result of the eurozone crisis.

But the EU was taking steps to bolster the price in its carbon market and she had confidence in Treasury's forecasts.

"We rely on Treasury modelling and forecasts, as we do for every other area of the budget, and we will on climate pricing forecasts as well," Ms Gillard told reporters in the Cook Islands where she is attending the Pacific Island Forum.

Treasury modelling says the carbon price will reach $29 a tonne in 2015/16.

Opposition Leader Tony Abbott, visiting Townsville to talk about the carbon tax's impact on business, said it was wrong to link with Europe.

"This idea we somehow secure our economic future by tying up with Europe, when Europe is going backwards and Asia is going forwards, just shows how wrong-headed this government is," he said.

He said the government had given up on a budget surplus for 2012/13, as the carbon tax would now deliver less revenue than expected and the government was making big spending programs in education, immigration and dental health.

Australian Industry Group chief executive Innes Willox said linking the scheme to Europe was a good move in the long term.

But he said the carbon price in Europe was $9 and it was "fanciful" to see it getting up to $29 a tonne.

Sustainable Business Australia chief Andrew Petersen said linking with Europe, and eventually with other markets in China, South Korea, New Zealand, Japan and California, would reduce the risk of the ETS and send a strong signal to investors.

"I believe that progressive Australian business will be looking to the opportunities that will emerge with the creation of a new inter-linked international carbon market," he said.

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