The Climate Change Minister Greg Combet says the use of international carbon markets will help Australia reduce its emissions at the lowest cost to business.
But the Opposition leader Tony Abbott says allowing companies to offset their carbon overseas means that Australia's own emissions will actually rise by 2020.
He's also fended off criticism from industry groups that his 'Direct Action' plan to cut emissions domestically would end up doubling their costs.
Presenter: Joanna McCarthy, Canberra correspondent
Speaker: Dr Josep Canadell, executive director of the Global Carbon Program at the CSIRO and a member of the UN Intergovernmental Panel on Climate Change; Greg Combet, Australian Climate Change Minister, Julia Gillard, Australian Prime Minister; Tony Abbott, Australian Opposition leader
McCARTHY: When the planned emissions trading scheme kicks in from 2015, Australian firms will be able to buy up to half their permits overseas.
That means up to half the emissions reductions claimed by Australia wouldn't actually be achieved in Australia.
The Opposition says that makes the scheme pointless.
Climate change minister Greg Combet disagrees.
COMBET: Because the atmosphere knows no national boundary; a ton of pollution that's reduced overseas credibly done is of the same consequence, the same utility, the same importance as a ton of pollution reduced in our own economy.
McCARTHY: Mr Combet says a global market will mean Australia's emissions are reduced at least cost to industry and households.
And industry groups agree.
The Australian Industry Greenhouse Network represents business groups, mining and manufacturing industries.
They're calling for companies to be able to buy more of their greenhouse emission reductions from overseas.
And they say the opposition's plan to reduce emissions in Australia would end up doubling the cost to business.
The Prime Minister Julia Gillard.
GILLARD: The Australian industry greenhouse network is confirming what the government has said for some time - that Mr Abbott's carbon plan is twice as expensive as the government's and we are concerned that his plan would cost families $US1300 a year.
McCARTHY: Under the coalition's Direct Action policy, the government would use a tender process to buy abatements from local companies.
Opposition leader Tony Abbott says the policy is fully costed and capped.
ABBOTT: We will spend up to $3.2 billion over the forward estimates period on our Direct Action policy. We won't spend a dollar more than that so this idea that our policy is going to cost some astronomical figure is simply wrong.
McCARTHY: And he says the use of overseas offsets means companies won't be reducing their own emissions at home, at least by 2020.
ABBOTT: Under the prime minister's proposal, Australia's emissions don't go down by five per cent by 2020, they go up. From 578 million tonnes to 621 million tonnes, that's roughly a ten percent increase, it's not a five per cent decrease.
McCARTHY: Meanwhile Australia's aid program has been investing heavily in Indonesia and Papua New Guinea to help create an overseas market around avoided deforestation.
The idea to that companies would pay developing countries not to cut down their forests and companies can then offset the emissions that are reduced.
Dr Josep Canadell is the executive director of the Global Carbon Program at the CSIRO and a member of the UN Intergovernmental Panel on Climate Change.
CANADELL: Basically, Australia has been investing quite a bit in helping Papua New Guinea and Indonesia to be what's called REDD Ready so the REDD is 'reduce emissions from deforestation and degradation' program. And the reality is that we need initial investment to prepare the capacity to be able to monitor changes in emission reductions to verify the findings that are reported, and that's what Australia has been doing for a number of years.
McCARTHY: But critics say the offsets also take the pressure off Australian companies to ween themselves off fossil fuels.
For that reason, Dr Canadell says any scheme needs to have a balance between the emissions reduced at home and those reduced overseas.
CANADELL: I guess countries - and Australia is not alone - are looking around for all options, very complex portfolios of carbon mitigation. The reality is that we want to achieve very stringent, very aggressive carbon mitigation levels and I think we need do to utilise all the systems that are available to us. Of course if we were to make a big investment overseas and not doing it here probably this thing wouldn't be right in the longer term because then it would be even harder for Australia to do further reductions after 2020, but I think that we're looking at a pretty comprehensive and a cross-sectorial portfolio to do a mitigation.
McCARTHY: So you wouldn't support those calls by industry for them to be able to buy more international permits than the current scheme?
CANADELL: What I'm saying is that as we'd do well at the beginning, I think it would become harder in the future to then meet further requirements for emission reductions. We want to put a cap on how much comes from overseas versus the investment we do nationally.