Pricing carbon may actually stop the transition to cleaner energy, says West Australian Premier Colin Barnett.
The premier told ABC Radio in Perth on Wednesday that far from being an incentive, the carbon price may soak up surplus cash that could have been used by polluting industries to convert to cleaner alternatives.
"In some ways it may actually stop a transition to cleaner energy," Mr Barnett said.
"For example, you impose a carbon tax on a polluting industry; it pays that tax, it no longer, therefore, has cash reserves to make the sort of changes needed.
"Right around Australia you're seeing coal power station owners - whether they're government or private - saying: 'This tax affects our industry, we've got two choices; either continue or close - we won't be reinvesting in the alternative'."
Mr Barnett said it would have been cheaper and simpler to legislate the "increasing use of renewables - in particular natural gas in power generation".
He admitted that WA consumers, even those who had opted to pay a premium of up to $480 a year for renewable energy, were being supplied mostly with coal-fired and gas-fired electricity without their knowledge.
"The reality is, despite the increased use of renewable energy, most of the electricity that we use in our house - whether you opt for green energy or not - is in reality produced by coal and increasingly gas-fired power stations," Mr Barnett said.
The premier's comment was in relation to the Australian Competition and Consumer Commission giving WA electricity retailer Synergy the go-ahead on Wednesday to levy a carbon-price surcharge on customers paying for renewable energy.
Synergy gives its customers the option to pay $10-$80 in a two-month billing cycle to receive up to "141.34 per cent green energy", according to its website.
Many customers, according to the ABC, had indicated they would pull out of the scheme because fo the carbon tax ruling.
"I still encourage people to support renewable energy by paying that little bit extra, but understandably a lot of people may pull out," Mr Barnett said.