The federal government needs to put up more money to help the electric power industry make the transition to emissions trading, power generators say.
The federal government plans to provide $4 billion to heavy-emitting industries under its planned carbon pollution reduction scheme, due to begin by July 2010.
But the amount is not enough, a group representing coal, gas, diesel and bio-electricity generators has told a Senate inquiry hearing in Canberra.
The level of assistance must meet industry's expected asset value loss, the National Generators Forum said.
"Treasury modelling... is optimistic in its assumptions about the potential impact on existing assets," executive director John Boshier told the hearing.
The forum says assistance must be provided to industry for at least a decade.
The carbon pollution reduction scheme aims to cut emissions by five per cent by 2020. If other nations jump onboard, the government will consider extending the targets to 15 per cent.
The federal government is expected to introduce legislation setting up the scheme to parliament in May.
The electricity industry says the amount of assistance on offer is not sufficient.
The Energy Supply Association of Australia says the industry emits around 200 million tonnes of greenhouse gases per year.
The transition to an emissions trading scheme (ETS) will cost about $55 billion over 10 years, the association estimates.
The association's acting chief executive Clare Savage said energy supply would face major challenges unless more money is put on the table.
"There is a risk of short-term financial distress, and premature retirement of plants," Ms Savage told the Senate inquiry hearing.
"In the medium to longer term there's a risk of threat in the investment environment."
The government must also deregulate energy pricing so companies can pass on the full cost of the transition to an ETS to consumers, Ms Savage said.
"If retailers are unable to pass on the full cost of the supply then you can't expect them to remain profitable."
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