THE Gillard government has seized on the passage of its carbon pricing laws as a political turning point, predicting that the reality of the tax and a likely advertising campaign will puncture the Opposition Leader's ''scare campaign'' and help revive her party's political fortunes.
After Labor and the Greens combined in the Senate to finally pass the bills yesterday, the Prime Minister, Julia Gillard, said they had ''made history''.
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National affairs editor Lenore Taylor discusses the passing of the carbon tax legislation through the senate.
The Treasurer, Wayne Swan, said it had been possible only because Ms Gillard was ''as tough as nails'' during ''a really tough debate''.
The Opposition Leader, Tony Abbott, has made a ''blood pledge'' to repeal the laws after the next election, which he says will be a referendum on the tax.
He is overseas but issued a statement saying it was a betrayal of Ms Gillard's ''no carbon tax'' election promise and ''a new burden for families struggling under cost-of-living increases''.
Ms Gillard said the nation had ''taken the most effective step it can to cut carbon pollution'', with the tax designed to achieve at least a 5 per cent reduction in emissions by 2020. The Greens leader, Bob Brown, hailed it as a ''green letter day''.
The government estimates that personal tax cuts, increased benefits and pensions will either overcompensate or fully compensate 6 million households for higher costs of about $10 a week.
The tax will be paid directly by the 500 biggest-polluting businesses from July 1 next year.
A new coalition of 300 businesses welcomed it yesterday but the Business Council of Australia said it had the potential to ''significantly increase risks to economic growth and competitiveness''.
The council has been particularly concerned that the starting price of $23 a tonne is far higher than the figure of $9 to $12 a tonne applying in Europe and that only a legislated amendment could change it.
The most emissions-intensive industries will initially receive 94.5 per cent of their permits free.
But the Climate Change Minister, Greg Combet, told the Herald a price difference did not matter during the three-year, fixed-price period before the tax converted to an emissions trading scheme.
''During that time it is not linked to international markets and it provides certainty for investors. And, in fact, I am pleased we have a fixed price with all the uncertainty in carbon markets at the moment,'' he said.
Business is also concerned about the uncertainty created by Mr Abbott's promise to repeal the tax. Mr Combet conceded the Coalition position would hinder investment certainty but said ''business has to look through Tony Abbot's stupid politics and opportunism and look at their legal obligations - because this is now the law of the land''.
A government advertising campaign appears likely next year before the tax comes in, although the government says no decision has been made.
Mr Abbott pointed out that ''on the government's own figures, 3 million Australian households would be worse off '' and the National Party frontbencher Barnaby Joyce declared it was ''a sad day when we reorganise our economy on the basis of a colourless, odourless gas''.
Mr Combet predicted Mr Abbott's position would ''become untenable when none of the things he has predicted actually happen''.
Ms Gillard appeared to rule out ever agreeing to a repeal of the tax, even if Labor suffered an election rout. ''This is our package … We'll support it today, we will support it tomorrow, we will support it in a year's time, five years' time, 10 years' time.'' The carbon price has been at the heart of the past four years of political turmoil. Labor and the Coalition went to the 2007 election promising an emissions trading scheme but the version of the former prime minister Kevin Rudd was defeated after Tony Abbott overthrew Malcolm Turnbull as Coalition leader because of his pro-carbon pricing stance.
Mr Rudd then backed away from his scheme, slumped in the polls and was overthrown.
The policy was resurrected when the Greens and some crossbench independents made it a condition of Labor's forming government last year.