Scrapping carbon tax would save 10% on power bills: AIG

SCRAPPING the carbon tax would save Australian businesses and households 10% on soaring electricity bills, a manufacturing lobby group claims.

Australian Industry Group chief executive Innes Willox has called for the immediate removal of the fixed price on carbon emissions, which currently sits at $23 per tonne, claiming it was "way too high" and imposed an "uncompetitive burden" on Australian industry.

The carbon tax will increase by 2.5% on July 1 and again next year before moving to a floating price in 2015.

Removing the carbon tax in favour of emissions trading would reduce "carbon costs" by 75%, Mr Willox said, while still allowing Australia to reduce its carbon emissions by 5% below 2000 levels by 2020, the target of both parties.

He was also equally scathing of the Coalition's incentive-based Direct Action policy.

"Electricity prices would drop by about 1.5 cents per kilowatt hour, an average cut of around 10% for businesses and around the same for households," Mr Willox said.

"Full emissions trading without the carbon tax element would slash the uncompetitive burden that has been imposed on Australian industry and the Australian community and which is dampening jobs growth.

"At the same time, the alternative approach from the opposition would only permit domestic abatement without international linkage and, even on the most optimistic assumptions, would see abatement prices more than double international levels."

The government and the opposition were both quick to pounce on Mr Willox's statement, with each claiming it vindicated their respective policies.

Opposition climate change spokesman Greg Hunt said Mr Willox had confirmed the carbon tax was doing "direct damage to Australia".

"Things are so bad in Australian manufacturing that the carbon tax is in need of immediate renovation or abolition," Mr Hunt said.

Not surprisingly he ignored the AIG's criticism of the Coalition's plan to reduce carbon emissions.

Climate Change Minister Greg Combet issued a statement claiming the AIG statement showed it "supported carbon pricing as the most effective and least cost way of cutting carbon pollution".

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