Australia CO2 price to have small impact on GNP, jobs: gov't

CANBERRA (Reuters) - Australia's government played down the impact of its planned carbon tax on jobs and incomes on Tuesday as it stepped up its sales pitch for a policy that has struggled to win political and public support.

The government wants to set a carbon tax on 1,000 of the biggest polluting companies from July 2012 in order to fight global warming, with a move to an emissions trading scheme three to five years later.

The resources sector and opposition have warned the carbon price will slash jobs and push up prices. Treasurer Wayne Swan hit back on Tuesday, saying the need to act was clear and the carbon price would have only a marginal impact on the economy.

"The science is convincing, the threat is real, the economic and environmental benefits are tangible, the need for action imperative," Swan, Australia's finance minister, said in a televised speech to the National Press Club.

The carbon price is a key policy that could make or break Prime Minister Julia Gillard's minority government, which relies on support from the Greens and three independents for its one-seat parliamentary majority.

Details of the tax, including a starting price and levels of compensation to business and households, is being worked out by a multi-party committee. The government wants details announced by early July, and laws passed later this year.

Swan said modeling by Treasury officials, based on a A$20 a tonne carbon price, found aggregate employment levels would remain much the same with or without a price on carbon emissions.

"Employment continues to grow just as strongly after we put a price on pollution," Swan said, adding employment was projected to grow by 1.6 million jobs by 2020.

VOTERS SCEPTICAL

He also said the Treasury modeling found the carbon price would have only a small impact on economic growth and incomes.

"Our economy will continue to grow solidly while making deep cuts in carbon pollution," Swan said.

"The modeling will show real national income growing strongly under a carbon price, at an average annual rate per person of around 1.1 percent until 2050, instead of 1.2 percent.

"This means a carbon price would only reduce annual growth in GNI per person by about one tenth of one percentage point."

Australia has one of the world's highest per capita levels of greenhouse gas emissions because of reliance on aging coal-fired power stations for 80 percent of its electricity.

But the government is facing a tough fight to win over voters, with a Galaxy poll on Monday showing 58 percent of Australians opposed emissions pricing and 64 percent wanted new elections to be fought on climate policy.

Only 24 percent of respondents believed Gillard had a mandate from a dead-heat election last year to introduce a carbon price, while 73 percent expected to be financially worse off under the scheme.

Swan has already promoted the benefits of a carbon price on the switch from coal-fired electricity to cleaner gas-fired electricity for Australia.

He said Treasury modeling shows a carbon price would see gas-fired electricity generation expand by between 150 and 300 percent over the period to 2050.

Australia is a major producer and exporter of thermal coal, but is also expected to see gas production soar with a series of massive coal-seam gas projects in the works.

(Additional reporting by Rob Taylor; Editing by Alex Richardson)