The federal government is cautiously optimistic it will succeed in scrapping the carbon tax now the Palmer United Party has dropped its demand the repeal be retrospective.
Finance Minister Mathias Cormann says he will not disclose details of negotiations with PUP leader Clive Palmer.
"What I can say is that we are cautiously optimistic and we welcome the comments that were made by Clive Palmer earlier this week," he told Sky News on Saturday.
"We think it is absolutely in the national interest to get rid of the carbon tax."
Earlier this week, Mr Palmer acknowledged he was prepared to compromise.
"Our party policy was that if it's a bad tax, it should be repealed back to the day it was first introduced. But I mean, I guess on those sort of things we're prepared to compromise to a certain degree," he told ABC radio.
However, Mr Palmer still wants a requirement that savings be passed on to consumers.
The federal government will have to negotiate with Mr Palmer's party after July 1, when it and key independents will hold the balance of power in the Senate.
Shadow assistant treasurer Andrew Leigh said the government was pressing ahead with plans to get rid of the carbon tax in the face of evidence it was working at reducing emissions.
He said new figures showed a 0.8 per cent reduction in emissions for 2013.
"Now, that's nearly one per cent. If we can get one per cent on an annualised basis, we would comfortably meet the five per cent emissions reduction target by 2020," he told Sky News on Saturday.
Mr Leigh said this was the biggest fall in emissions in a quarter of a century and much of that was in the electricity sector.
"This is a policy which is working, which has reduced electricity emissions by 11 per cent since it came into effect, which is doing so while providing household assistance through increased allowances," he said.
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