Prime Minister Julia Gillard softened the impact of her unpopular carbon tax plans on Sunday by promising it will not increase Australian gasoline prices.
She said the tax would never be applied to gasoline despite transport being Australia's third-largest and fastest-growing source of greenhouse gas emissions.
The government plans to tax big polluters for every ton of carbon gas they produce beginning July 1 next year in a bid to reduce Australia's greenhouse gas emissions. The plan is weighing the ruling center-left Labor Party down in disastrous opinion polling because of fears about how it will affect costs, particularly electricity costs.
Key issues including the tax rate and how compensation will be distributed to help industry and households make the transition to a lower-carbon economy are still being negotiated with the minor Greens party and independent lawmakers whose support is crucial to the plan becoming law.
Gillard on Sunday ended some of the most politically damaging speculation that the tax would increase pump prices.
"Petrol prices will not be touched by carbon pricing," Gillard told Australian Broadcasting Corp. television. "The design of this scheme is that petrol will be out now and out for the future."
Her promise will anger the Greens party, which wants the tax applied across the entire economy.
Gillard credited rural independent lawmaker Tony Windsor with swaying her to exclude gasoline. Gillard relies on Windsor's support to maintain a fragile single-seat majority in the House of Representatives.
"He has put forward a powerful case for people in country Australia who have got no choice but to jump in their cars and get places," she said, referring to a lack of public transport outside big cities.
The Australia Chamber of Commerce and Industry said in a statement the gasoline exemption would will simply shift the price burden of reducing the nation's emissions to other areas of the economy.
The government has promised to slash Australia's greenhouse gas emissions by 2020 to at least 5 percent below 2000 levels. Australia is one of the world's worst greenhouse gas emitters per capita, largely because it relies heavily on abundant reserves of cheap coal for electricity.
Conservative opposition leader Tony Abbott opposes polluters being forced to pay anything for the carbon gas that they create. His stance has helped his coalition lead in recent opinion polls.
Labor is hoping that public hostility toward the tax will have subsided before Australia's next elections are due in 2013.