Rob Taylor, PlanetArk 3 Dec 09;
CANBERRA - Australia's parliament rejected laws to set up a carbon trading scheme on Wednesday, scuttling a key climate change policy of Prime Minister Kevin Rudd and providing a potential trigger for an early 2010 election.
Acting Prime Minister Julia Gillard said the government would re-introduce the carbon trade bills in February to give the opposition Liberal Party one more chance to support the scheme, adding the government was not looking at an early election.
"Today the climate change extremists and deniers ... have stopped this nation taking action on climate change," Gillard told reporters.
"This nation is one of the hottest and driest continents on Earth. We are going to be hit particularly hard and early by climate change," she said. "We are determined to deliver the Carbon Pollution Reduction Scheme, we are determined to deliver real action on climate change."
The second rejection of the carbon-trade legislation by a hostile Senate on Wednesday gave Rudd a legal trigger to call an election that could come as early as March or April 2010, and to then ram his laws through a special joint sitting of both houses of parliament if he was returned to power.
But Gillard played down early election speculation.
"The prime minister has made it very clear that it is his intention to have the parliament go full term," she said.
The prime minister, who is overseas, had hoped to take his carbon-trade scheme to next week's global talks in Copenhagen, where world leaders will seek a new agreement to curb greenhouse gas emissions.
The emissions trading scheme (ETS) would have been the biggest outside Europe, covering 75 percent of Australian emissions and starting in July 2011.
The Senate rebuff throws the future of carbon trading in Australia into confusion, creating new uncertainty for business, which had sought clarity from the political debate.
"From the point of view of a lot of businesses in Australia they're now back in the dark. No one knows what is coming next," said Tim Hanlin, chief executive of the Australian Climate Exchange.
"For a lot of companies that are going to make investment decisions as we come out of recession, it will be more difficult with no certainty about the carbon price."
Australian electricity prices fell after the Senate rejected the legislation, with the 2011 contract falling 3.7 percent to A$44 per megawatt hour in thin trade.
The "cap and trade" carbon scheme would have forced big polluters, particularly in the coal and electricity sectors, to buy carbon emission permits. Rising permits prices would act as an incentive to reduce greenhouse gases.
The scheme was defeated in the Senate, by 41 votes to 33, by opposition climate skeptics and Greens who wanted tougher emission reduction targets. Two Liberals voted for the laws. The government only needed seven opposition votes to pass the laws.
The Liberal Party last week agreed to back the carbon laws, but climate change skeptics forced a leadership and policy change on Tuesday. "We won't have an ETS as part of our policy going to the next election...," Liberal leader Tony Abbott said Wednesday.
MARCH ELECTION?
Senior opposition lawmaker Christopher Pyne said he expected a dissolution of both houses of parliament and an election early in the new year, ahead of polls due around late November.
"I think the election will be on March 6," Pyne said.
Political scientist Dr Rick Kuhn, of the Australian National University, said reintroduction of the bills would maintain pressure on the Liberal Party while keeping open the option of calling an early election.
"It's more likely that they are keeping the pressure up on the Liberals, driving a wedge further inside the Liberals," he said. "I don't think the government's bluff has been called. I think they are in a very, very strong position."
Bookmakers Centrebet said the odds of a Rudd victory at the next election lengthened for the first time in several months after the carbon laws were defeated, to A$1.22 from A$1.15 -- meaning a A$1 stake would win A$1.22 -- while odds of an opposition win shortened to A$4.10 from A$5.00.
Market analysts believe defeat of Australia's emissions trading plans could temporarily dent political momentum ahead of next week's U.N. climate talks, but the impact is unlikely to affect global carbon prices until at least 2013. [nSYD445124]
European emissions traders told Reuters that regardless of whether some opposition rebels backed the government's bill or it failed completely, an Australian scheme in its proposed form would have little immediate impact on carbon prices.
Australia's population of 21 million has the rich world's highest per capita carbon emissions. It is heavily reliant on coal, shipping and motor transport, so its environmental policies and carbon-cutting potential are closely watched.
(Editing by Michael Perry and Alex Richardson)
Australia's Failed Carbon Trading Scheme
James Grubel and David Fogarty, PlanetArk 3 Dec 09;
Australia's parliament rejected laws to set up a sweeping carbon emissions trade scheme on Wednesday, scuttling a key policy of Prime Minister Kevin Rudd and setting a trigger for an early 2010 election.
Here are some facts about how the failed carbon-trade scheme would have looked.
* The Carbon Pollution Reduction Scheme was set to have started on 1 July, 2011. Under the scheme, about 1,000 of Australia's biggest polluting companies and operations would have had to purchase carbon permits, covering 75 percent of national emissions.
* The government committed to an unconditional emissions cut of 5 percent by 2020. The target could have been increased to 25 percent if the world agreed to a tough new climate pact to expand or replace the U.N.'s Kyoto Protocol.
* The "cap-and-trade" scheme required polluters to buy a permit for every tonne of carbon produced. The government proposed a flat carbon price cap of A$10-a-tonne on start-up. Full auctioning and trading of permits was to have started from 2012.
* The government estimated a carbon price of A$26 a tonne in 2012-13 due to the strong Australian dollar.
* The scheme included compensation for businesses and households, with money raised from permits helping taxpayers cope with increased costs for fuel and electricity. The government had also promised to cut fuel excise to match increases under emissions trading, while welfare payments would have been increased as well.
* Additional expenditure measures would initially have cost A$1.28 billion and $7.01 billion over the period 2019-20. A lower estimated carbon price meant a reduction in assistance to households that would have totaled A$5.76 billion to 2019-20.
ASSISTANCE TO KEY SECTORS
* Some polluters exposed to overseas export competition would have received assistance in 2011-12 at 94.5 percent for high emission intensive activities, 66 percent for moderate emission intensive activities and decline at 1.3 percent per annum.
* Coal Sector: A total of A$1.5 billion in transitional assistance over five years, up from A$750 million previously.
* Voluntary Action: The government would have ensured the CPRS took into account voluntary action by households to cut emissions.
* Electricity sector: An increase of A$4 billion in assistance, increasing the total value of permits to A$7.3 billion.
* Electricity Prices: A$1.1 billion would have been allocated to assist medium and large manufacturing and mining businesses with CPRS-related rises in electricity prices in the early years.
* Agriculture: Farmers would have been exempt from the scheme, but would have been able to take part in the market for carbon offset.
* Food processing: A five-year, A$150 million assistance package would have been established within a Climate Change Action Fund.
* Cost of Living: Living costs would have risen by around 0.9 percent, although power bills would have risen by 16 percent. Gas and other household energy bills were seen up 9 percent.
* Households: Around 90 percent of low-income households would have received assistance equivalent to 120 percent or more of their cost of living increase under the scheme.
(Editing by Jonathan Standing)
