The Federal Minister for Climate Change and Water, Senator Penny Wong has reassured state governments concerned about the economic impacts of the national emissions trading scheme.

Senator Wong said the emissions trading scheme (ETS) would bring about considerable economic reform, but acknowledged that the introduction of the ETS would only follow community consultation.

“I think all of us understand that there isn’t a menu of easy options when it comes to tackling climate change,” Senator Wong told Government News.

“We put a Green Paper out there, a paper which sets out the government’s proposals for what is very substantial economic reform. We have asked the community, including different levels of government, for their views and we look forward to receiving them.

“We will certainly consult with the community as we have until now and we will certainly consult with different levels of government as we have until now.”

Through the emissions trading scheme, the Federal Government will cap the amount of carbon pollution industry can produce and sell permits up to that limit. Companies are entitled to buy and sell permits, allowing the market to find an efficient solution for reducing carbon pollution.

Earlier this week, the Australia Institute issued a warning about the impact of the ETS on states and territories. The Canberra-based think tank predicted that state governments could lose up to $1.4 billion a year following the introduction of the ETS in 2010.

The NSW State Government is now commissioning its own economic modelling to determine the effect ETS will have on its industries. Findings on the potential impacts will be relayed to Federal Government, NSW Premier Morris Iemma said yesterday.

In response, Senator Wong said: “In terms of economic modelling, we have said very clearly there is one of the largest economic modelling exercises in Australia’s history being undertaken by the Australian treasury.

“The government will release that when modelling is completed, which we anticipate to be in October. The reason we are undertaking that modelling is because we do very clearly understand the need to act responsibly when it comes to implementing the carbon pollution reduction scheme.”

Senator Wong’s comments were made yesterday at a business event in Sydney hosted by the Australia-Israeli Chamber of Commerce.