Big new tax only option, Abbott told

TREASURY has repudiated Tony Abbott's direct action approach to climate change.

It argues that it would be in Australia's national interest to "rely on market-based mechanisms" to limit the nation's greenhouse gas emissions.

The so-called Blue Book briefing to the Coalition, prepared in case it had won government, warned that the commitment to reduce national emissions to 5 per cent below 2000 levels by 2020 "cannot be achieved without a carbon price unless significant economic and budget impacts are to be imposed".

The opposition has campaigned against plans to impose a price on carbon, labelling Labor's shelved Carbon Pollution Reduction Scheme as a "great big new tax", a position it has held since the election and since Julia Gillard left open the possibility of introducing a carbon tax as advocated by the Greens.

"A broad-based market mechanism which prices carbon, driving large-scale abatement through long-term investment in low-emissions technologies and changes in behaviour by both producers and consumers across the economy, is the only realistic way of achieving the deep cuts in emissions that are required," Treasury said.

It said market-based mechanisms represented the lowest cost pathway when compared with regulation, mandatory standards or budget financed initiatives.

"A market-based mechanism can achieve the necessary abatement at a cost per tonne of emissions that is far lower per tonne of emissions than alternative direct action policies."

The briefing said the sooner an emission trading scheme could be implemented the better. "Too much time has already been wasted - for which the Australian community will necessarily pay a high price."

In a separate briefing to the government, Treasury urged it towards a comprehensive carbon price regime, warning there were costs associated with continuing uncertainty, particularly in the electricity generation sector.

It urged the government to have the Productivity Commission conduct a detailed estimate of the cost of climate change action.