Gillard's future hangs on selling carbon tax

Gillard's proposed tax will be a compromise between struggling voters and climate change activists. Photo / Getty Images

Prime Minister Julia Gillard will tomorrow finally place the details of her planned carbon tax before the nation in a move that will bring new intensity to the bare-knuckled political brawling that has already been consuming Australia for weeks.

Gillard's proposed tax will be a compromise between struggling voters whose opposition to a new tax has consistently marked opinion polls, and climate change activists led by the Greens, whose support she will need to push the legislation through Parliament.

It will also attempt to mute the opposition of corporate Australia with a parcel of exemptions and compensation, with less than 1 per cent of the nation's businesses now being targeted.

Gillard has been guaranteed the Lower House support of Greens MP Adam Bandt and New South Wales independents Rob Oakeshott and Tony Windsor, with Tasmanian independent Andrew Wilkie expressing general support for carbon pricing if not yet for the planned legislation.

This is likely to see the tax passed to the Senate where the Greens hold the balance of power. Although disappointed with a number of measures, Greens senators will ensure its passage.

But it will still be a bruising fight and victory will not guarantee Gillard the momentum she desperately needs to claw back from record lows in the polls to a position sufficient to secure her survival at the next election in two years' time.

Gillard hopes that with carbon taxation behind her she will be able to move to safer and more popular ground. But if she is unable to gain that traction, her own future will be seriously in doubt as already-nervous MPs increasingly question her leadership.

The new tax - and Gillard's plan to use it as a transition to an emissions trading scheme - will give Opposition leader Tony Abbott a clear target for unrelenting attack. He has already promised to repeal carbon taxation if he wins power.

The next few months will become a key battleground. While Gillard "wears out shoe leather" with senior ministers on a blitz to sell the tax to the public - backed by taxpayer-funded advertising and targeted campaigning by local MPs - the Opposition will be blazing back with everything it has.

Pressure is already being applied to Oakeshott and Windsor, whose electorates were widely opposed to their support for Gillard after the last election, and which polls show are angered by their backing of the tax.

Business, environmental and other lobby groups from both sides will be adding to the battle.

From the details that have been leaked in the past few days, the tax will be far from the monster that opponents had been predicting. Its measures and impact have been diluted, levened by populist features that, for example, exclude petrol at the pumps while compensating households for cost-of-living increases.

The carbon price is expected to be set at A$23 ($28.40) a tonne, and will be paid by about 500 major polluters - half the originally-promised 1000 - including coal-fired electricity generators, miners, and steel and aluminium manufacturers.

Fuel for private motorists and small businesses will be excluded, extending the exemption to petrol refineries and distributors, and to companies emitting synthetic greenhouse gases such as fire extinguisher manufacturers and the air-conditioning and refrigeration industries. Gillard has also promised that seven of every 10 households will win full compensation for cost-of-living increases triggered by the new tax, with about 90 per cent receiving some
level of compensation.

Assistance will also be provided to the steel industry and other manufacturers to boost efficiency, and the Government yesterday announced a new A$3.2 billion renewable energy agency to consolidate research and development efforts.

But the decision to exempt petrol will create a A$4 billion shortfall in the first four years of the tax, forcing a sharp cutback in the present diesel fuel rebate, by about 6c a litre, although industries such as agriculture, forestry and fishing are expected to escape the move.

The coal industry will be hit and has promised to fight the tax tooth and nail to protect the thousands of jobs it claims will be lost - although new forecasts have disputed the industry's predictions.

Computer modelling by the Treasury said production and exports would still double over the next 40 years with a A$20 carbon tax, even if not to as high a level as they would without the tax.

Gillard is expected to announce a A$1.2 billion compensation package for coal miners, and loan guarantees for coal-fired power stations whose operations will be hit by the tax.

None of this will divert the opposing forces massing for the coming battle.

On one side miners and other companies are preparing a massive anti-tax campaign, and the Liberal-led states of Victoria, New South Wales and Western Australia are considering a joint assault.

On the other, environmental and other pro-tax groups are rallying their forces, including a threat by internet-based consumer advocate GetUp to organise a mass boycott of food and grocery groups reportedly involved in a planned A$10 million industry campaign against the tax.

Potential targets for GetUp - which claims a membership of 570,000 - include Coca-Cola, Heinz, Kraft, McDonald's, Schweppes and Nestle.