Prime Minister Julia Gillard outlined to Parliament the Government’s two-staged plan proposed to start in 2012.

The scheme will start with a fixed price period for three to five years before moving into an emissions trading scheme.

Federal Minister for Climate Change and Energy Efficiency Greg Combet said the carbon price was ” the cheapest and fairest way to cut pollution and build a clean energy economy”.

Opposition Leader Tony Abbott said that there’s a better way to tackle climate change than a “massive” new electricity and petrol tax.

Independent Senator Nick Xenophon said that that a carbon emissions tax should not be imposed on “cleaner” fossil fuels such as natural gas, and that a better system would be an intensity-based “efficient emissions trading scheme”.

“I do not have an issue with using natural gas as a transitional fuel to achieve those targets; I think that needs to be looked at, whereas a carbon tax will not give the right price signals for that,” Mr Xenophon said.

“Natural gas could be a good transitional fuel because, notwithstanding that it is a fossil fuel, it is much cleaner than coal.”

Origin Energy welcomed the proposal and called it a “positive start” in defining a credible long-term framework in addressing the issues of climate change.

“The sooner we start the transition toward a lower emission economy, the smoother and lower cost that transition will be,” Origin said.

“To drive a switch to lower carbon options in the electricity market, the fundamental requirements are a clear and credible long-term pricing framework and a carbon price that makes a real difference to investment decisions.”

Shell Australia Chair Ann Pickard also welcomed the announcement, saying the company believed that a carbon pricing system should encourage investment in the technological developments needed to raise energy efficiency and lower carbon dioxide emissions, without distorting international competition.

“Shell looks forward to a robust debate on the policy’s detail with the Government and other stakeholders, particularly in regard to how trade-exposed industries such as local refineries and LNG developments are treated,” Ms Pickard said.

ConocoPhillips Australia President Todd Creeger has said from a fundamental standpoint, the company supports a price on carbon, but he urged the Federal Government not to disadvantage the LNG industry under its carbon price plans.

Mr Creeger said LNG was cleaner than other energy sources, including coal, but the industry uses large amounts of electricity to cool natural gas to its liquid state.

“Developing LNG, you are going to emit more, but you are displacing four equivalent units in a higher intensity market and we think that should be recognised for that as an industry,” he said.

In line with these comments, Queensland Resources Council (QRC) Chief Executive Michael Roche said the issue for the QRC is the amount of transitional assistance given to emissions-intensive trade-exposed producers who incur these costs but can’t pass them on in international markets.

The Australian Petroleum Production & Exploration Association (APPEA) said that the Australian oil and gas industry supports a national climate change policy that delivers abatement at least cost and facilitates investment decisions consistent with there being an international price on carbon.

APPEA Chief Executive Belinda Robinson said announcement “marks the start of a process which may achieve this objective but, if the July 2012 timeline is to be met, answers to many difficult questions will need to be found quickly.

“Developing Australia’s natural gas resources for export and domestic use is the most significant contribution that Australia can make in addressing the global greenhouse challenge,” she said.

“The design of Australia’s carbon price must be done in a way that encourages, rather than impedes, the development of Australia’s enormous gas resources.

“APPEA will continue to call for the removal of the plethora of inconsistent, ineffective and costly greenhouse abatement policies that have sprung up in recent years in the absence of an efficient market based response,” Ms Robinson said.