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Carbon price of $29 'not implausible'

The nation's top climate change bureaucrat has offered only a modest defence of the federal Treasury's widely disputed prediction of a $29 carbon price in 2015, describing it as "not implausible".

Amid concerns the government faces a future budget blowout if revenue from the sale of carbon permits does not match expectations, the Climate Change Department head Blair Comley repeatedly declined to endorse Treasury's $29 forecast when he fronted a Senate estimates hearing this morning.

Treasury has based its estimate on how much revenue the government will receive from sales of carbon permits on the assumption that a tonne of carbon reduction will be worth $29 in the 2015-16 financial year.

European carbon units are trading at less than $10 and United Nations-managed carbon credits created by green projects in developing countries at less than $3.

When Australia links its scheme to Europe's in 2015, the Australian price will be effectively set by Europe. Most experts believe the European price will be nothing like $29 in 2015.

Asked by the Liberal senator Simon Birmingham whether he backed the $29 figure, Mr Comley said: "There are quite reasonable arguments that that is not an implausible estimate of the price in [2015-16]."


Senator Birmingham replied: "If that's the best endorsement we can get for it, that's what I'll take."

Mr Comley stressed the $29 figure was Treasury's estimate not his own department's, though he said the Climate Change Department gave advice to the Treasury about the state of international carbon markets.

Mr Comley said that "much of the commentary about what's happening with carbon prices tends to have a very short-term focus".

The price in question was still three years away, and the European Union was poised to take regulatory action to push up its price.

Even if Australian permits sell at $15 in 2015-16 the government would earn only about $3.5 billion that financial year, which is more than $3 billion below the $6.7 billion Treasury listed in its May budget papers.

But the government would still have to pay out the fixed household compensation for the carbon price, which will total nearly $5 billion in four years' time.