The Climate Change Authority has told the federal government it would be significantly cheaper to meet Australia's obligations to cut carbon emissions by purchasing international permits as part of its climate change policy.
The government is under pressure from business groups to consider the use of international carbon reduction permits to boost Australia's chances of meeting an emissions reduction target of 5 per cent on 2000 levels by 2020.
In what could be its final report, the Climate Change Authority says meeting the target with only domestic action - as proposed by the government's Direct Action policy - is too expensive while there is a flood of cheap permits on the international market.
The report urges the government to reduce costs to the taxpayer and be more competitive by using a combination of domestic emissions reduction policies and the purchase of international credits.
It finds the government could spend a fifth of what it plans to spend on its $2.5 billion Direct Action policy and buy enough international permits to reach an emissions reduction target of 19 per cent by 2020.
Prime Minister Tony Abbott has been a key opponent of the purchase of international credits, which he described in 2011 as ''money that shouldn't be going offshore into dodgy carbon farms in Equatorial Guinea and Kazakhstan''.
However, it is understood that the Business Council of Australia and the Australian Industry Group wrote to Environment Minister Greg Hunt and Mr Abbott a few months ago urging the government to reconsider.
Environment groups also back the proposal and the expert reference panel for the government's emissions reduction fund recommended international permits as insurance should Direct Action fail to meet the 5 per cent target.
It is understood Mr Hunt privately supports their use, as do a number of other government frontbenchers. But one party source said that Mr Abbott remained the key stumbling block to a change in policy and a backflip on permits would struggle to find support in the party room.
The CCA report says the present oversupply of international credits meant they could be purchased for as little as $1.15 a unit. But it urges the government to move quickly and begin buying up permits before March next year or run the risk that they will become more expensive.
''International trade in emissions reductions has a legitimate place in reducing greenhouse gas emissions,'' the report says.
''As long as the underlying emissions reductions are genuine, they have the same effect on global climate outcomes as domestic reductions.''
The story Buying carbon permits would be cheaper than Direct Action policy, Tony Abbott told first appeared on The Sydney Morning Herald.