Power fears unfounded: climate report

(AAP) - Fears that petrol and electricity prices will soar when a carbon tax is introduced are unfounded, according to a new report.

In 2010 Australia will enter the bold new world of an emissions trading scheme (ETS), which will put a price on greenhouse gas emissions to tackle climate change.
There are concerns the scheme will leave people struggling to pay their bills.

But the report by CSIRO and the Australian National University has found people will
hardly notice the price rises - because incomes will rise much more quickly.

"There's nothing to be afraid of," said report co-author Steve Hatfield-Dodds,
senior policy economist with the CSIRO.

"In the long-run perspective we can be reasonably relaxed about it."
Professor Hatfield-Dodds said the ETS would increase energy prices relatively
slowly, over a long period of time.
Incomes would rise more quickly, as they have been doing for some time, outstripping
energy price rises.

So, "almost despite" the ETS, households will spend less of their income on energy.

The report commissioned by the Climate Institute lobby group modelled the impact of
the carbon price.

Electricity prices would rise by 18 per cent by 2025 if a low carbon price was set,
and by 67 per cent if a high price was set.

The scheme would add eight per cent to petrol prices by 2025 at the lower level, and
36 per cent at the highest.

While the report found incomes would generally outstrip that growth, it did warn
low-income households could be worse off in the short term.

The report recommended the government make an "affordability payment" to poorer
households of $50-$185 a year to cover the gap.
This could be in the form of a direct payment, increases to social security or cuts
to income tax.

The federal government is tipped to rake in billions of dollars a year from the sale
of emissions permits. The report advocates spending the money on the greenhouse
payments, energy efficiency measures and better public transport.
Climate Change Minister Penny Wong said the government would help families cope with the ETS.

"We will ensure also that there are measures to assist Australian households to
adjust to the impact of a carbon price," Senator Wong told Sky News.
She would not be drawn on how much households would have to pay under the ETS,
saying the government would release a green paper in about a month.
Coalition climate change spokesman Greg Hunt said he was concerned the ETS would
have "huge implications" for consumers.

He called on the government to make it clear what the impact would be on petrol and
electricity prices, and said petrol could rise by 25 cents a litre in the short
term.

Prime Minister Kevin Rudd said the former Howard government had planned to include transport in emissions trading.

"(The coalition has) now signalled quite plainly that they are committed to running
a scare campaign on climate change," Mr Rudd told parliament.
Australian Greens leader Bob Brown said it was a good idea to compensate people on
low incomes for higher prices under the ETS, as the report recommended.

He said the government needed to change its spending to help people cut their energy
use, for example by redirecting funding from roads to public transport.