The state and territory governments will lose up to $1.4 billion a year as a result of the introduction of an emissions trading scheme, a new report says.
The report by Canberra-based think tank the Australia Institute suggests the budgets of NSW and Victoria would be the hardest hit by rises in the cost of energy, transport and wages.
There needed to be a discussion about how the states and territories would be compensated under the federal government's plan, Australia Institute director Richard Denniss said.
"The problem is not that some costs will rise, but that at the moment there is no discussion of the need to compensate the state and territory governments," he said.
"Nearly one-and-a-half-billion dollars per year could employ more than 15,000 teachers or nurses," he said.
The report suggests NSW would lose $466 million a year, while the budgets of Victoria and Queensland would take a hit of $358 and $289 million, respectively.
Resource rich Western Australia would lose $159 million while South Australia would lose $99 million.
The governments of Tasmania and the ACT would be $22 million and $26 million worse off, while the Northern Territory would lose $16 million.
"The commonwealth has said that it will compensate households and polluters, but it looks to us as though the state governments have got a much stronger case for compensation than the big emitters," Dr Denniss said.
"Unless the commonwealth puts compensating the states ahead of compensating the polluters then those who rely most heavily on government services will miss out the most."
