CIE modelling found that the carbon price would jump from $22 a tonne to $49/t, assuming the conversion from the fixed-price carbon tax to an ETS takes place in 2016-17.

The rise is based on an assumption that the government's emissions reduction target is 5% below 2000 levels, which is Australia's current unconditional commitment. But a 15% target would produce a price of $71/t while a 25% target, which the government could move to in the event of a global emissions reduction agreement, would see the carbon price jump to $93/t.

According to MCA, “the research puts new light on opposition claims that Prime Minister Julia Gillard's plan to put a price on carbon will hit business the hardest and drive up prices for consumers”. It added that, “With concern about price impacts in areas like gas, electricity, water and groceries driving popular opinion against a carbon price, the research will increase pressure on the prime minister to name her targets before the carbon-pricing regime begins.”

MCA chief executive Mitch Hooke said the decision not to set a 2020 target until mid-2014 or 2016 would have adverse consequences for investment confidence.

"This flaw seriously undermines the stated purpose of the carbon price scheme, namely to provide a stable policy framework for investment agreement," he said.

Hooke also signalled the mining industry would not accept the compensation in Kevin Rudd's 2009 carbon pollution reduction scheme, which had left nearly 90% of Australia's minerals exporters paying the world's highest carbon costs.

The modelling predicts that by 2020-21 the carbon price would rise to $57/t under a 5% target, $83/t under a 15% target and $109/t under a 25% target.

The research, which assumed the fixed price to be implemented next year would start at $20/t, warns that the government's intention to delay naming an emissions reduction target will create "considerable scope for uncertainty in the transition from fixed to flexible prices".

In addition, Hooke noted the medium-term target was "one of the most fundamental aspects of a carbon pricing scheme" because it set a cap and shaped the trajectory for national emissions reductions "and therefore the carbon price".

"But the proposed architecture is weakened by a fudge on the 2020 target, possibly until 2016, because the government and the Greens simply cannot reach agreement," he concluded.

This article first appeared in EnvironmentalManagementNews.net.