The Rudd Government's failed Carbon Pollution Reduction Scheme has been exposed as economically irresponsible by the Productivity Commission, the Australian Greens said today.

The Greens today called on the Government to stop sandbagging 19th century polluters and move into the 21st century by supporting the swift transition to a carbon neutral economy.

"Australians already agree with the Greens that the Continue Polluting Regardless Scheme would lock in environmental destruction, but today the Productivity Commission has backed our view that it is also economically irresponsible," said Australian Greens Deputy Leader, Senator Christine Milne.

"There are economic, social and environmental opportunity costs when Governments spend billions of dollars propping up old polluters when those resources are desperately needed for transforming the economy into a carbon neutral powerhouse."

The Productivity Commission's annual report on government assistance to industry has condemned the Rudd Government's plan to hand out billions to big polluters because it would sandbag emission-intensive industry and "impose additional costs" other industries. They noted that 50% of all budgetary assistance to 2011-12 is in the form of free permits under the CPRS. The Commission concluded that:

'[Free permits] risk muting the price signal explicit in the carbon price. By doing so they hold resources in emission intensive activities longer than might otherwise be the case, allowing a more gradual transition to lower emission activities.'

This view was backed up by the 'Copenhagen Call' from the World Business Summit on Climate Change overnight, which concluded that 'Governments should strive to end the current perverse subsidies that favour high emission transport and energy infrastructure and promote deforestation'.

"This morning Greg Combet kicked a spectacular own goal by proudly declaring that the Productivity Commission says the Government's CPRS is too generous to big polluters," Senator Milne said.

"Greg Combet clearly revealed that this scheme is about nothing other than propping up the old polluters by warning the Minerals Council conference today that they need to lock in support for this deal because they will never have anything better.

"A truly green ETS would have a strong target and a strong price signal.

"There is no surer indication that the Government's targets are unacceptably weak than that the Coalition parties are supporting them, but the truth is the National Party will never vote for an ETS and the Coalition will always struggle to support one.

"With the CPRS set for defeat, the Government must now begin discussions with the Greens to develop an environmentally robust and economically efficient emissions trading scheme."