Prime Minister Kevin Rudd will this week announce the carbon tax will end, and an Emissions Trading Scheme will begin in July next year, 12 months earlier than planned.
Treasury modelling shows as a result households could be up to $420 better off.
From Canberra Samantha Hawley reports.
Presenter: Samantha Hawley
Speakers: Kevin Rudd, Australian Prime Minister; Greg Hunt, Opposition's environment spokesman; Innes Willox, heads the Australian Industry Group
SAMANTHA HAWLEY: It's a costly axe to Julia Gillard's carbon tax.
From next July the tax, which is currently fixed at $24, a tonne will be replaced with a floating price of about $6.
The move to an ETS (Emissions Trading Scheme) a year earlier than planned and will cost the Government billions of dollars.
Kevin Rudd's made this pledge.
KEVIN RUDD: We've still got a fair bit of budget work to do, 'cause this has to be a budget neutral undertaking.
SAMANTHA HAWLEY: But there will be a massive budget hole, meaning severe cuts elsewhere to be announced in coming days.
The household compensation linked to the tax will stay and treasury modelling shows the change means households could be up to $420 better off.
For instance, a single income couple with two young children earning around $75,000 a year will be $380 better off in 2014/15.
Pensioners would save between $140 and $180, and a dual income two child family on about $100,000 a year will save more than $400.
But the Opposition's environment spokesman, Greg Hunt, says the nation's budget shortfall will be massive.
GREG HUNT: Probably a $6 billion black hole on revenue.
SAMANTHA HAWLEY: A $6 billion hole over what period?
GREG HUNT: That's in one year alone - that's the 2014/15 period.
SAMANTHA HAWLEY: And Greg Hunt argues the floating price will continue to increase, meaning any financial benefit will be lost.
GREG HUNT: This is a classic Kevin Rudd con, because whether it's called a carbon tax or whether it's called an ETS, it's still a carbon tax and it's still intended to go up to $38 over the coming years.
Mr Rudd has finally conceded that it's destroying jobs and hurting families, but all he's doing is changing the name.
SAMANTHA HAWLEY: There is a difference though isn't there, because as you say in your prediction, the Government will be what $6 billion worse off, householders will be better off, and so will businesses, so it's not just in the name.
GREG HUNT: Well if this is a problem, the thing you do is get rid of the entire tax.
SAMANTHA HAWLEY: Innes Willox heads the Australian Industry Group.
INNES WILLOX: Well it's a different system that would happen under an emissions trading scheme so there's more to it than a name change.
Any moves that can reduce business costs by up to 75 per cent when it comes to what they're paying to meet our carbon requirements is something that is going to be most welcome by business.