Emission trading will begin in Australia from 2010. While the design features of the scheme are yet to be finalised, whatever scheme is introduced will lead to higher energy prices. This paper assesses the likely impact of higher energy prices on a range of different household types over time. It finds that while introducing emission trading leads to significant energy price increases, energy affordability improves as incomes increase and targeted polices can protect low income households from being disadvantaged by changes in prices.