Climate change expert Ross Garnaut says he expects the federal government to adopt his recommendation to provide income tax cuts under a carbon price.
The government's economic adviser on climate change has told SBS television that the government was committed to providing compensation to householders.
"I'm sure that income tax cuts will be part of it," Professor Garnaut said.
"Of the revenue that the government gets from the price on carbon ... the money doesn't disappear."
Prime Minister Julia Gillard has said tax cuts are a "live option", but has otherwise stopped short of detailing a specific compensation package.
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Professor Garnaut says he believes 50 per cent of revenue should go towards compensating low- and middle-income families, which could be forking out an extra $608 a year under a $30-a-tonne carbon price.
That should be done through personal tax cuts and welfare reform modelled on the Henry review, he said.
Professor Garnaut faced criticism over his recommendation to provide electricity generators with commonwealth-backed loans if they hit financial trouble under a carbon tax.
He said it was a safety net, should other measures fail.
"Electricity markets can solve harder problems than this," Professor Garnaut said.
"I have got these transitional loans in there as a back-up."
