The electricity industry is warning power prices will have to go up if the Coalition carries out its threat to dismantle the carbon tax.

The Coalition is ramping up its warnings to businesses not to invest in Labor's carbon pricing scheme before the next election because it will scrap it if it wins power.

But Prime Minister Julia Gillard has accused Opposition Leader Tony Abbott of bluffing with his threats to repeal the scheme.

Either way, the Government says the uncertainty the Liberals are creating is locking in higher power prices.

The interim chief executive of the Energy Suppliers Association, Clare Savage, agrees.

She says the sector is committed to a carbon price and will seek to buy forward permits to support future electricity contracting to keep prices for consumers as low as possible.

"We're concerned that if there is any uncertainty around a future price of carbon, it will affect the ability for electricity to invest," she said.

"It will also impact on their ability to offer fixed-price electricity contracts which could put up prices for households."

Climate Change Minister Greg Combet says prices will rise if there is uncertainty.

"People just need to stay calm here. This is an economic reform that we need to make," he said.

"Just think about it from a practical point of view; we've needed to resolve this issue to allow investments to be made, for example, in power stations that will have lives of 30, 40 or 50 years.

"The last thing the need now is more uncertainty. They want to be able to make their investments with confidence, know that the numbers stack up, and carbon pricing allows them to do that.

"All that Tony Abbott is doing is coming along trying to create uncertainty for those investments which could have a consequence of pushing power prices up.

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"It's Tony Abbott threatening to wreck the joint if we don't give him the top job. He's like a kid that's lost his dummy."

On a broader front, Mr Combet says business is looking for the whole carbon pricing matter to be settled.

"I'm already having discussions with businesses about the purchasing of permits," he said.

"And in particular they're already looking beyond the first three-year fixed-price period to the purchasing of permits through the auctioning system, when we've got a flexible emissions trading scheme from July 1, 2015.

"And they're also looking at what abatement they would be purchasing on the international carbon market.

"So businesses will get on with things, start to plan ahead, start to hedge against price movement. That's what's going on in the real economy."

To repeal or not to repeal?

But Coalition finance spokesman Andrew Robb insists the carbon tax can and will be repealed.

"This thing can be dismantled; it must be dismantled. It is going to fund projects that the private sector would not consider in a fit," he said.

Mr Robb cannot say how the Coalition would unwind it because the Government has not yet settled on the structure of the $10 billion Clean Energy Finance Corporation.

"But the fact is, we will bring in legislation that will reverse and remove this Bob Brown bank or Bob Brown slush fund that has been set up or proposed to be set up by the Government," he said.

But Mr Combet insists a Coalition government could not revoke any loans that will have been made.

"It's bizarre. No, if loans are made, equity into the Clean Energy Finance Corporation will provide loan guarantees, equity investments and loans that will operate as a commercial entity," he said.

"Commercial contracts will need to be respected. These are all just threats to try and create uncertainty to wreck everything. And that's typical Tony Abbott."

Mr Robb denies he is warning business against buying permits or taking out loans because he is worried if they do it will make it difficult for the Coalition to unscramble the carbon pricing egg.

"It's just being prudent about the actions that we're going to take and the consequences of removing the tax," he said.

He does not accept the Government's claim that carbon pricing will be deeply entrenched in the economy soon.

"No, not for a second. There'll be a tax; that's all it is, a tax," he said.

"There'll be some companies that are being required to secure a permit for the first year.

"We will then remove that requirement for subsequent years as we remove the tax."

But Martijn Wilders, global head of climate change with law firm Baker and McKenzie, says businesses who pay attention to the Coalition's tactics are likely to suffer a financial cost:

'Nonsense on stilts'

Meanwhile, Ms Gillard says Mr Abbott will not go through with his blood pledge.

She says every living Liberal leader in Australia has supported putting a price on carbon, including Mr Abbott in the past.

"While we see a lot of huffing and puffing from the Opposition, the truth is the Opposition will not repeal carbon pricing," she said.

Greens leader Bob Brown has accused Mr Abbott of being economically irresponsible and business should ignore the Opposition Leader's warning.

"I think we'll find that compensation is coming down the line," he said.

"Tony Abbott's been talking about power prices going up, but what we didn't know it was his plan to do it himself, in Opposition."

But Mr Abbott has dismissed those concerns.

"It's complete nonsense. It's nonsense on stilts. Taking the tax off will reduce costs and reduce prices," he said.