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SCENARIOS: Where to Now for Australia Carbon Trade, Election

Date: 13-Aug-09
Country: AUSTRALIA
Author: James Grubel

CANBERRA - Australia's carbon trading laws were defeated in parliament's upper house Senate on Thursday, leaving the government's plan to curb greenhouse-gas emissions in disarray and raising speculation of an early snap election.

Climate Change Minister Penny Wong said the government would submit the package of 11 bills to the Senate a second time before year-end. Thursday's vote was defeated by 42 to 30, meaning the government needs seven more votes to get the plan through.

If the laws are rejected a second time after three months, Prime Minister Kevin Rudd could call a snap election on climate change, rather than wait for the next regular election, due in late 2010.

Here are some of the options for the government.

HOLD FIRM, SET UP EARLY ELECTION TRIGGER

The government can send the bills back to the Senate any time. But if it waits three months to push a second vote, Rudd will have the trigger for an early double-dissolution election of all 76 Senators and 150 members of the lower House. Opinion polls suggest Rudd would easily win an election fought on climate change, with an enlarged majority.

To qualify as an election trigger, the legislation must be exactly the same as the package defeated on Thursday. That means Rudd must decide whether to submit the same package, or allow changes and negotiate amendments with the opposition. Rudd may be forced to decide whether an election trigger is more important to him than the emissions-trading laws. If he wins an election, Rudd could then pass the package through a special joint sitting.

The earliest the Senate could vote a second time, and still qualify as an election trigger, would be November 16.

A DEAL WITH OPPOSITION ... UNLIKELY

The government could sit down with the opposition and make changes to its emissions scheme to allow the laws to pass. But any agreement looks unlikely, as the opposition says it does not want to debate the bills again until after global climate talks in Copenhagen in December.

But Opposition leader Malcolm Turnbull desperately wants to avoid an early election on climate, as his party is split on the issue. He has put forward his own broad proposals, and says he is willing to negotiate amendments to allow the scheme to pass.

Turnbull wants more compensation for the coal industry, electricity generators and exporting companies, and wants agriculture to be permanently excluded from the emissions trading system. He also wants to guarantee that industry compensation will match or be better than the United States is proposing under laws currently being hammered out in the U.S. Congress.

A DEAL WITH GREENS, INDEPENDENTS ... DIFFICULT

The government's only other hope of passing the laws is to negotiate with the five Greens and two independents, who themselves pull in different directions. The Greens want deeper cuts in greenhouse emissions, and they have already written to Rudd proposing a deal.

But the government is unlikely to commit to any deeper target. And even if it wins support from the Greens, it still needs the two independents. One of those independents, Steve Fielding, does not believe human activity is responsible for global warming and he is unlikely to support any carbon trade laws.

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