Calls to float carbon price

 

A collapse in the European carbon price has prompted business groups to call on the Gillard government to immediately drop the carbon tax and move to a floating carbon price.

As The Australian Financial Review reports, a European Parliament vote which blocked efforts to bolster its carbon market caused Europe's carbon price to drop to $3.23, with predictions it could fall as low as $1.25.

Business leaders believe that, if the government does not act on these events in Europe, Australian industry will be disadvantaged. They claim that an immediate carbon price float would save local industry from paying an artificially high figure of $23 per tonne fixed price until 2015.

According to the AFR chief executive of the Australian Industry Group, Innes Willox, said, “The EU Parliament’s vote to keep carbon prices low highlights how far out of kilter Australia’s high fixed carbon prices are.”

“It shows how much Australia will gain by immediately abolishing the fixed carbon tax and moving straight away to emissions trading linked to low European prices.’’

However, the government has not altered its plan to maintain the tax until 2015. At that time, an emission trading scheme will be introduced and the Australian price will be linked to the European price.

There will be new estimates in the May budget, but the government maintains that it is too early to predict the budgetary impact two years into the future.

As the AFR has reported, Prime Minister Gillard said, ““We are doing what we said we would when we legislated for carbon pricing.’’