TONY JONES, PRESENTER: If you think you’ve already spent too much money filling up your car each week, you won’t be too pleased with the Government’s plan to slug you even more.

The Industry Minister Ian Macfarlane has revealed drivers could face a new tax of up to two cents a litre on fuel.

Well that’s because Australia’s oil reserves have fallen well below international standards and the cost of complying could run into billions.

The emergency supply is designed to protect the economy from a future oil shock.

The nasty surprise for motorists came as the Government unveiled its energy white paper today. It promises a decision on how to deal with that oil reserve issue this year.

The paper also steps up the Coalition’s case against subsidies for renewable energy, arguing they push up prices.

Well Labor has responded by offering a compromise deal on one of those big subsidies, the Renewable Energy Target, which the Government has been threatening to cut.

Our political correspondent Tom Iggulden filed this report from Canberra on the energy white paper.

TOM IGGULDEN, REPORTER: This is what an oil shock looks like.

The year after the 1973 crisis, the International Energy Agency was born. The 29 nations who signed up, including Australia, agreed to keep at least 90 days worth of supplies in reserve as a buffer against future shocks.

But after more than a decade of declining local production, reserves now stand at just 52 days and falling.

Australia’s the only country failing to meet the agency’s target reserves.

There’s two options to change that: building bigger storage tanks or buying contracts on the international markets.

IAN MACFARLANE, INDUSTRY MINISTER: Either option is extraordinarily expensive; we’re talking billions and billions and billions of dollars.

TOM IGGULDEN: And that, says the minister, would be passed on at the bowser.

IAN MACFARLANE: Well we’re talking about numbers between half and two cents a litre.

TOM IGGULDEN: A deadline of this year for dealing with the problem was promised in the minister’s new energy white paper. He’s open to the idea of walking away from an agreement Canberra’s been party to for 40 years.

IAN MACFARLANE: Do Australians want us to remain compliant, do they want us to actually pay these billions and billions of dollars to be compliant with an international treaty?

TOM IGGULDEN: The cost of another source of energy, electricity, was the main focus of the white paper, taking aim at “environmental policies” for “inflated prices”.

The Renewable Energy Target and subsidies for rooftop solar panels, the report says, “distort market signals and cause unintended disruptions to competitive energy markets.”

The Greens immediately labelled the paper pro-fossil fuel …

CHRISTINE MILNE, GREENS LEADER: It’s basically written by the coal industry for the coal industry.

TOM IGGULDEN: … and fossil fuel generators aren’t disagreeing.

What’s your response there?

JOHN BRADLEY, ENERGY NETWORK ASSOCIATION: We think when you look at this energy white paper, it’s a pretty sensible framework.

IAN MACFARLANE: And it’s a policy which will give the energy industry in Australia the confidence they need to invest.

TOM IGGULDEN: That doesn’t extend to renewable energy suppliers in the wake of the government’s attempts to slash the Renewable Energy Target.

JOHN CONNOR, THE CLIMATE INSTITUTE: We’ve seen a complete collapse in investment in renewable energy and so we’ve seen an industry desperate some certainty and ultimately pushing for a compromise far less than what we would have liked and which the ALP has endorsed today.

BILL SHORTEN, OPPOSITION LEADER: And we call upon Tony Abbott and his Liberal government to save the renewable energy sector, not kill it.

TOM IGGULDEN: Currently the RET would deliver 41,000 gigawatt hours of renewable energy by 2020. The Government wants to cut that to 32,000. Today, Labor offered a deal for 33,500.

BILL SHORTEN: Labor’s prepared to meet in the middle. We are prepared to do a deal to save tens of thousands of jobs, to save billions of dollars of investment.

IAN MACFARLANE: We can get a deal the day they agree to 32,000 gigawatt hours, and in the meantime, I’m continuing my negotiations with the Senate crossbench, which I’m very confident that I’ll conclude in the next two or three weeks.

TOM IGGULDEN: Fossil fuel generators are supporting attempts to cut back renewable subsidies, pointing to numbers in the white paper which show they’re unfair on non-solar households.

JOHN BRADLEY: There are cross-subsidies of about $120 per year for some solar customers, which is happening because they’re not contributing to the fair share of the cost of providing them their network service.

TOM IGGULDEN: Traditional power generators are also supporting moves by the Industry Minister to free them up to charge more at peak times, coupled with smart meters to give households a way of changing their consumption habits.

IAN MACFARLANE: They will pay more at certain times and less at certain times and on the swings and roundabouts, they’ll pay less overall.

TOM IGGULDEN: Lowering peak demand, say power companies, also means reducing their biggest cost.

JOHN BRADLEY: It will not only lower network investment, it’ll also save customers significantly in the hip pocket.

TOM IGGULDEN: For all the focus on power prices, critics say there’s one glaring omission from the paper: any talk of how the Government’s energy policy will work with its climate change policy.

JOHN CONNOR: That is, to clean up our energy sector, to make it modern, smart and clean. What we have here is a recipe to stay old, dumb and dirty for far too long.

IAN MACFARLANE: Climate change is going to be discussed as part of our submission to the Paris conference at the end of this year. The paper is flexible enough to accommodate a range of options.

Extracted in full from Lateline.