The Opposition’s climate action spokesperson Greg Hunt and the Minerals Council of Australia have made a basic error in their criticism of the Gillard Government’s carbon price.

Mr Hunt has today embraced the mining industry’s argument that the former Carbon Pollution Reduction Scheme (CPRS) would impose a greater cost on the economy than the European Union’s Emissions Trading Scheme because the CPRS would raise more revenue.

The Minerals Council attacked the carbon price as a measure designed to raise revenue, not reduce carbon pollution. This argument confuses the impacts of a carbon price on the economy with distributional issues.

The absurd implication of the Hunt-Minerals Council analysis is that a regulation immediately closing all mines in Australia would be a better way of reducing carbon pollution because it would raise no revenue. This is clearly a flawed approach to thinking about climate change policy.

The Minerals Council has also argued that higher industry assistance would reduce overall costs. Again, this thinking is fundamentally flawed.

Providing higher levels of mining industry assistance would redistribute wealth within the economy from households to assisted industries. It would also reduce the Government’s ability to assist households and other highly-affected regions and businesses.

The experience of the first phase of the EU ETS was clear – large permit allocations to industry lead to windfall gains to businesses in the electricity generation industry.  This is not a sound policy approach.
The truth is that broad coverage of the economy using a market mechanism like a carbon price or an emissions trading scheme is the cheapest way to reduce emissions.

This was confirmed by the Productivity Commission yesterday and no amount of desperate spinning by Mr Hunt will change the clear conclusions of the Commission’s report.

The Gillard Government will use every cent of the revenue raised by the carbon price to assist households, to support jobs and to invest in clean energy and climate change programs.