Prime Minister Kevin Rudd says it is obvious energy costs will increase under an emissions trading scheme, and has called on the Opposition to rise above partisan politics on climate change and do what is right for the future.
With soaring petrol prices making emissions trading a hot-button political issue, the Prime Minister said all energy sources - including petrol - that were subject to a carbon tax would increase in price.
"If you adopt a position of acting on climate change, it does have an impact on energy prices. That's just the truth," Mr Rudd told Parliament.
Mr Rudd added that John Howard had once been of the same view and the Coalition was now just scaremongering.
Labor is insisting petrol would have to be included in its emissions trading scheme, starting in 2010, for the scheme to be effective. The Coalition had the same policy, but since the election has backed away.
It is now stirring up concerns that Labor's scheme will increase petrol prices even more.
The Minister for Transport, Anthony Albanese, said the Coalition's environment spokesman, Greg Hunt, was inconsistent.
"The fact is that the shadow minister has at least six positions he's put forward on climate change, more positions than the Kama Sutra," Mr Albanese told Parliament.
The Treasurer, Wayne Swan, also took aim at Mr Hunt, who is leading the campaign on petrol prices. "This is a guy who has made a career criss-crossing the country in his hemp underpants pretending to be the green conscience of the Liberal Party," he said.
The first indication of how the scheme will work will come next week when the Government's hand-picked expert, Ross Garnaut, hands down his report.
It will recommend the inclusion of petrol but Mr Swan again made clear yesterday that the Government would not be bound by Professor Garnaut's recommendations and would also be considering Treasury modelling.
"We don't necessarily have to agree with every recommendation that is put forward by Professor Garnaut," Mr Swan said.
"We will take our decision in the national interest."
The Government sidestepped questions during a marathon cabinet meeting last week in which ministers canvassed leaving petrol out of the emissions trading scheme until 2012, which would be after the election.
Mr Rudd has said repeatedly that pensioners and other needy people would be compensated for their increased energy bills.
No commitment has been made on petrol but the Government will examine reducing excise to offset the cost of a carbon tax. This would cause no net increase to the price of petrol and be revenue-neutral.
The option is being examined as part of the taxation review by the Treasury secretary, Ken Henry.
Purists argue this would be pointless, as price rises were needed to encourage people to use less energy.
But Mr Rudd said that thanks to the current oil shock, petrol prices were already a deterrent.
"The price signals it is sending out to the entire economy … are of themselves huge," he said.
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