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Economy comes to the fore

The Age

Thursday February 3, 2011

MICHELLE GRATTAN

THE government is changing its sales pitch as it shapes up for probably its most difficult policy challenge ahead clinching a carbon price.It will market pricing carbon less as a part of the wider United Nations environmental effort, and more as an inevitable domestic reform vital to Australia's economy.This approach both reflects and chimes in with the economic and practical bent of Climate Change Minister Greg Combet.It contrasts with the broad moral sweep of former prime minister Kevin Rudd, which shaped the line of the first-term Labor government.With Tony Abbott condemning a carbon price as a great big new tax, the government has to show it is an economic necessity.It will counter Abbott by arguing Australia must reduce emissions if it doesn't want to be disadvantaged internationally as the world puts increasing constraints on carbon and that the carbon price is the best option to minimise the cost to the economy and households.The government's emphasis will be on getting a mechanism in place, rather than on the international debate. But the approach will test the relationship with the Greens, who are focused on international targets and believe Australia's are too weak.Although the government hasn't decided on the form of its carbon price, Combet has firmly signalled he is attracted to a hybrid starting with a fixed price and then moving to a trading market.The government believes business accepts that a carbon price can't be avoided corporations everywhere are factoring it into their investment decisions and that it is better to be part of the process. But big battles lie ahead with sectors hit directly, especially the electricity generators, and a tough argument with the Greens about how much compensation the polluters should be given.The government remains determined to do everything possible to reach a deal with the Greens this year, so a scheme can be started well before the election. It has invested so much political capital in achieving its objective, it can't afford to contemplate failure.

© 2011 The Age

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