CANBERRA (Reuters) - Australia's minority Labor government will unveil plans for the biggest national emissions trading scheme outside Europe on Sunday, with Prime Minister Julia Gillard staking her future on a carbon price already worrying voters and business.
Gillard said on Monday her cabinet, and a committee of government, Greens and independent lawmakers who have been working on the scheme, would finalize remaining details of the carbon tax later this week.
Concerns the plans to tackle climate change will push up prices have been hurting the minority government's popularity, but Gillard said she was determined to push ahead with the plan, which is a make or break issue for her government.
"A carbon price is an important reform that will create incentives to lower Australia's carbon pollution at the lowest cost to the economy," Gillard said in a statement, adding she would introduce the laws to parliament later this year.
Uncertainty over the policy, which would tax emissions from next year and is tipped to have at its heart a A$20 a metric ton carbon price, has also begun to frustrate investment decisions, particularly in the coal-fired power industry and in renewable energy and plantation forestry.
The minority Labor government wants to impose a tax on carbon emissions from mid-2012 before transitioning to a carbon-trading system three to five years later, under which the nation's 1,000 biggest polluters will need to buy carbon permits on an open market.
Negotiations have been underway for months on the scheme with two independent lawmakers, who back Gillard in the lower house, and the influential Greens, who could help pass laws opposed by the conservative opposition.
A plan to cut carbon emissions foundered in 2009 in the face of Senate obstruction by the Greens, who argued a targeted emissions cut of 5 percent by 2020 was too weak.
Gillard, whose popularity has fallen to record lows amid public fears of a carbon cost driving up prices, has promised petrol will be exempt for motorists, hoping to lance a major worry for voters who mostly oppose the scheme.
The conservatives have enjoyed a political resurgence in the absence of details about the government's plans, warning a carbon price of around A$20 a metric ton, and perhaps as high as A$25, will knock economic growth and force up energy costs.
Although elections are not due until 2013, political analysts say the government must release details of its scheme as fast as possible to allow passage through parliament, and then give Gillard time to win back disgruntled voters.
Tony Windsor, one of the kingmaker independents backing Gillard, said he would not have supported a carbon price that increased petrol costs for people living in country areas such as his own rural electorate.
The Sydney Morning Herald newspaper said on Monday that the Greens had negotiated a fund to invest in renewable energy, which will be paid for from the proceeds of pricing carbon and worth up to A$2 billion a year.
"What we've said is there needs to be a package that has in it an emissions trading scheme, but also has a range of complementary measures, because we know that the carbon price won't be high enough to drive the roll-out of large-scale renewables in the time frame that we need them," said Milne.
The government is aiming to bring legislation for the scheme into the lower House of Representatives in August, with a vote in the Senate expected around October or November.
Additional reporting by James Grubel; Editing by Ed Davies and Yoko Nishikawa