Australia faces growing opposition to carbon trade law

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CANBERRA (Reuters) - Australia’s government faced new objections to its pioneering carbon trading scheme from both ends of the political opposition on Tuesday, just as it unveiled the legislation it hopes to pass by the middle of this year.

The draft laws contained few changes to what could be the most sweeping cap-and-trade system in the world, including a commitment to cut emissions by 5 percent of 2000 levels by 2020.

Instead, lawmakers from the Greens and the conservative opposition banded together to establish a two-month inquiry, saying they will not support the scheme without major changes.

Greens politicians want tougher targets and conservative opposition parties want the scheme delayed to soften the blow for businesses that will shoulder higher costs during a recession.

“This scheme, in its current form, cannot get through,” Opposition spokesman Andrew Robb told reporters.

Under the current legislation, the scheme will be the world’s broadest, covering 75 percent of emissions. Around 1,000 of the largest polluters, from transport operators and aluminum makers to gas producers and refineries, will have to pay to pollute.

Some of the permits, each representing a ton of carbon dioxide, will be auctioned and some given away depending on the industry. But the overall aim is to push companies to pollute less over time or face ever rising costs.

Australia’s center-left Labor government needs the support of the opposition, or the five Greens and two independents, to pass the carbon trade laws in the Senate, and the new review raises the risk of a significant set-back just as the U.S. government tries to galvanize support in the fight against climate change.

“The negotiation process is going to be fairly convoluted given there are three main parties to participate and, of course, they are pulling in different directions,” said ANZ Senior Economist Julie Toth.

“I think the actual trading system will go ahead in some form but I wouldn’t be at all surprised to see it delayed by six to 12 months.”

Releasing the package of six bills, Climate Change Minister Penny Wong said she was open to talks with opposition and Greens Senators to ensure the laws, which will be introduced to parliament in May, are passed by the end of June in time to meet the government’s schedule to start trade from July 2010.

The legislation was largely unchanged from a policy White Paper released three months ago and the draft laws will be open for public comment until April 14.

SENATE BATTLE

“The Government does not have the majority in the Senate and we will talk to senators from all sides,” Wong told reporters. “The question that will confront some senators is, ‘do you throw away something because you’d rather have everything?’”

Wong said the government wanted the laws passed before a U.N.-backed meeting in the Danish capital in December that will bring together nearly 190 nations to try to seal a broader global framework to cut greenhouse gas emissions.

The Greens want the government to make strong emissions cuts of around 25 percent by 2020, but the conservative opposition, which holds the biggest voting bloc in the Senate, wants delays and more compensation for big business.

The government has said it will back a 15 percent cut if other rich nations commit to similar cuts at Copenhagen.

Australia, the world’s biggest coal exporter and a growing supplier of LNG, accounts for 1.5 percent of global carbon emissions but is one of the highest per-capita polluters, with 80 percent of electricity from coal-fired power stations.

The Australian emissions trade scheme will see a large portion of its carbon credits auctioned, unlike EU emissions allowances which are given out free.

Australia’s major exporting polluters, including iron ore and aluminum producers BHP Billiton, Alcoa and Rio Tinto, and liquefied natural gas (LNG) producers Chevron and Woodside Petroleum, will get significant exemptions for their emissions.