Combine carbon consensus with income tax cuts: study

A carbon pricing proposal can find consensus and would allow income tax cuts, as long as industry handouts can be kept in check, according to a new report from The Australian National University. Dr Frank Jotzo, Director of the Centre for Climate Economics and Policy at ANU Crawford School, says that a fixed price on carbon shifting to emissions trading later is the best approach given international uncertainties and the interests of different groups in Australia. His paper on the subject, Carbon pricing that builds consensus and reduces Australia's emissions , is released by the Centre today. ?Phased carbon pricing means we can be confident the economic impacts on introduction are manageable. And once Australia's emissions target is resolved and international carbon markets more developed, we can shift to market-based emissions trading which is the efficient long-term approach.' He added that the carbon price needs to start turning Australia's emissions trajectory downward, even in the face of strong underlying growth in the economy. So what matters for low-carbon investment is not the price in the first year of the scheme, but the expectation of medium-term prices. 'To turn the trend around, the carbon price will need to rise, and reach perhaps double the starting levels that people talk about now,' said Dr Jotzo.