PUTTING a price on carbon is the ''essential starting point'' in dealing with climate change, according to Australia's top economists.
Asked as part of The Age Economic Survey what is the best way of tackling climate change, almost all respondents agreed that carbon must be priced so that there is an incentive for people to stop emitting greenhouse gases.
The view is at odds with Opposition Leader Tony Abbott, who has ruled out taking either a carbon trading scheme or a carbon tax to the election. Mr Abbott says he will instead look to cut Australia's greenhouse gas emissions through better land management and energy-efficiency measures.
Macquarie economist Richard Gibbs said Australia had ''little choice'' as the world's highest per capita emitter but to fully engage in global efforts to reduce emissions.
''Placing a cost on carbon emissions is a basic economic issue, which Australian policymakers need to address in a holistic and worldly way,'' he said.
Mr Gibbs said the world had moved past questioning whether global warming was occurring and was now focused on how best to limit the damage. ''Climate change is fundamentally an economic issue and therefore we should not allow ourselves to be hijacked by the scientific debate,'' he said.
Citi Group's Paul Brennan said not only would a carbon price modify behaviour but it would also stimulate investment in clean technology to assist those heavy emitters reduce their carbon footprints.
Where economists, and many in business, tend to differ is on the way to price carbon. Should it be a straight-up tax, which is much easier but would rise over time and would leave some uncertainty about how people would behave to a ceratin price point? Or do you introduce a new market, cap emissions at a certain level and allow those included in the scheme to trade the permits at fluctuating prices on a supply-and-demand basis?
Shane Oliver, AMP's chief economist, advocates an open and transparent market to bring about change.
''Using an emissions trading scheme is a good centrepiece to allow free market forces to work out the best way to reduce emissions over time,'' he said. ''But obviously regulation will be needed to ensure that it happens …''
ANZ's Warren Hogan says unless the details of the trading scheme are sound it could save a lot of time to simply implement a tax.
''Carbon emissions trading needed to be very well designed and executed in order to be effective and efficient,'' he said. ''As Professor Ross Garnaut has pointed out, a national carbon tax is probably preferable to a poorly designed carbon emissions trading scheme.''
However, Steve Keen, economics professor at the University of Western Sydney, is somewhat uncomfortable with linking environmental outcomes to economic instruments.
''I don't take seriously any of the market-based solutions being proposed - the cap-and-trade and so on - because they treat the ecology as something that is contained within and manipulable by the economy,'' he said.
Monash University's Jakob Madsen said a better understanding of economics would ensure any suggestion that action on climate change would lead to mass job losses and an economic downturn would be more quickly rebuffed.
''Many politicians and economists argue that any reductions in CO2 emissions are costly in terms of employment, welfare and output. However, this is a myth and reflects poor economic models and understanding of economics,'' he said.
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