European pension funds with trillion dollar portfolios have told the Prime Minister, Julia Gillard, they would be more confident to increase investments in Australia with a carbon price.

A letter from the Institutional Investors Group on Climate Change, representing 72 funds with AUD 8.8 trillion in assets under management, said the group was 'in favor of Australia commencing its low carbon transition via a market mechanism' in order to 'provide investors with confidence'.

The letter comes as Labor backbenchers from steel-making electorates demanded extra assistance for the industry, while the government and the Greens remain deadlocked over three key issues for a carbon tax.

Labor is under intense political pressure from the Coalition in its manufacturing heartland seats, but the biggest sticking points include the assistance to coal mining, coal-fired electricity generation and the default emissions reduction target.

At a press conference notified through the Department of Climate Change, the backbencher Stephen Jones insisted that he and his fellow ''steel seat'' MP Sharon Bird were ''strong voices'' inside the Labor caucus for ''special arrangements for steel'', including the same 95 per cent free permit deal that was offered by the Rudd government and additional regional assistance for manufacturing areas.

He said that ''Without additional and specific assistance for the steel industry I can't see this deal flying. 'We need to get a message to the Greens that they have to have a reality check as well, if we are to make this thing fly they have to understand there are thousands of workers in thousands of families that rely on manufacturing industries and we are not going to get a deal that does not protect their industries.”

(Sourced from www.canberratimes.com.au)