THE government has dramatically slashed the number of companies hit by its carbon tax from 1000 to about 500, in a scheme expected to have a $23 a tonne starting carbon price.
But the cost of the plan, which was to be broadly revenue neutral, has blown out to about $4 billion over four years from its start on July 1 next year. Most of the extra costs come upfront, from implementing the scheme.
As the government seeks to minimise the political damage, the exclusion of fuel has reduced the number of companies liable to pay the tax.
Companies that will be excluded include liquid fuel suppliers, small wholesale suppliers and importers of liquid fuels and suppliers and importers of synthetic greenhouse gases, including companies that service air conditioners. Only 0.02 per cent of businesses will be directly liable to pay the carbon tax.
Despite the deal having been done with the Greens and country independents Tony Windsor and Rob Oakeshott, the full cabinet has not yet seen the total package, although it agreed earlier in the week to its Sunday release. A cabinet meeting has been called for Saturday at 5pm, with ministers dialling in from interstate, to give final approval.
Opposition Leader Tony Abbott yesterday obliquely threatened a Coalition government would consider a double dissolution if the Senate blocked the repeal of the carbon tax.
He said if the Coalition won, he would not expect a demoralised Labor Party to stick with something that had cost it the election.
But if it did, "there are provisions under our constitution for deadlocks to be resolved . . . I hope it wouldn't come to that but nevertheless there are mechanisms and everyone is aware of them".
Ms Gillard told Parliament, "I will of course be speaking to Australians about any issue they want to raise with me". She expected one they would want to raise was what was said in the election campaign when she promised there would be no carbon tax.
The Age understands the scheme will cost more than the revenue it raises over its first four years, with most of the cost blow-out coming in the first two years. It is expected to become budget neutral later, but Treasury modelling to calculate the exact costs is still being finalised.
The government will make budget savings to cover the extra costs over the early years, including a reduction in the 38-cents-a-litre diesel fuel tax credit for some industries.
It is understood while mining companies will face the partial cut to the diesel rebate rumoured to be about six cents a litre a number of other sectors will be shielded from the rebate reduction, including the agriculture, fishing and forestry sectors.
Mining companies last year claimed $1.7 billion back in diesel rebates and accounted for about 30 per cent of all claims under the scheme.
Along with the package, the government is expected to reveal its plans to reduce carbon dioxide emissions from new vehicles, which have been simmering on the backburner for almost a year, since Ms Gillard foreshadowed them in last year's election campaign.
Labor floated a target to reduce average emissions of new cars, sports utility vehicles and light trucks from 213 grams per kilometre in 2010 to 190g/km by 2015 and 155g/km by 2024. But these targets were denounced as "weak" by Greens deputy leader Christine Milne, who pledged targets of 160g/km by 2015 and 95g/km by 2020.
A spokesman for Infrastructure Minister Anthony Albanese promised an announcement "very soon". The decision to exempt petrol from the tax, along with the reality that emissions are falling rapidly as buyers turn to smaller cars, could see the target tightened further.
The carbon deal comes as the head of the Australian Coal Association Ralph Hillman said yesterday the industry would fight the carbon price until the last minute it passes Parliament, claiming it will render Australia less attractive for investors and force the closure of some existing mines.
But Mr Hillman also conceded the coal industry would continue to grow under a carbon tax, adding "I think it is naive and blase to say 'oh we've got growth, it will just be a bit less' growth is precious."
Reports yesterday said Treasury modelling is expected to show that under an indicative $20 carbon price, coal exports and production would still double during the next 40 years, although will be lower than without a carbon price.
The government is expected to include a $1.275 billion compensation package for coal miners under the scheme. The Age understands some of the compensation roughly $70 million will be committed to research and development of technologies to reduce emissions from gassy coal mines.
Ms Gillard said: "I am very confident the coal industry has got a fantastic future in this nation - a future of growing jobs with $70 billion in the pipeline."
British entrepreneur and founder of the Virgin Group Sir Richard Branson, speaking in Brisbane, said any tax should ideally be on a global basis, rather than country by country.
