Prime minister clashes with opposition leader as Labor government pledges to push forward with emissions trading plans.

Australian prime minister Julia Gillard has today attempted to head off business and political opposition to her government’s latest emissions trading plans, confirming that the price of carbon set through the scheme will be fixed before it gets under way. However, she failed to reveal the level at which the levy will be set.

Gillard last week announced she wants to set a carbon price from next July and hopes to have an emissions trading scheme in place by 2015

“We need to price carbon and the best way of doing that is an emissions trading scheme where the market sets the price for carbon,” Gillard told ABC Radio. “We will have a fixed price from the start.”

Gillard’s multi-party climate change committee released a framework for an emissions trading scheme last week which suggested that a fixed-price scheme that matured to a full market-based cap and-trade scheme within five years represented the best available option for pricing carbon.

But less than a week on from the announcement, opposition to the scheme is rallying.

Yesterday’s Prime Minister’s Question Time descended into mutual accusations of dishonesty over the effects of the tax as tempers flared between Gillard and opposition leader Tony Abbott.

The opposition Liberal-National coalition has long opposed any attempt to price carbon emissions, arguing that the latest proposals would raise average household electricity prices by AU$300 (£187) per year.

However, new opponents to the government’s plans are now emerging as media focus on the issue grows. In a widely reported blow to the government, Australian Industry Group chief executive Heather Ridout, one of Labor’s key business allies, failed to throw her weight behind the scheme this week.

Meanwhile Paul O’Malley, chief executive of BlueScope, Australia’s biggest steel manufacturer, described it yesterday as “economic vandalism”. The Australian Chamber of Commerce & Industry has also voiced concerns.

However, the plan still has the support of the Business Council of Australia and the Energy Supply Association of Australia, both of which insist some form of carbon pricing is necessary to help the country curb its emissions.

The prime minister told caucus members today she would not take a backward step, insisting the government would win the argument on pricing carbon by engaging “patiently, calmly and methodically” with the wider community.

“We can prevail in a debate that is based on reason versus fear,” she told Labor MPs.

Success in passing carbon legislation is likely to come down to the votes of the three key independent MPs who became the kingmakers for Julia Gillard’s administration following the inconclusive result of last year’s general election.

Rob Oakeshott has said he will support the scheme, while Tony Windsor helped devise the plans for the price on carbon and is seen as a supporter, although he recently refused to commit unequivocally to voting for the levy.

Andrew Wilkie also warned he would not support the tax if it offered excessive compensation to big polluters, stating he could not see himself supporting levels of compensation similar to those proposed in the abandoned emissions trading scheme proposed by the previous, Labor government.