SCENARIOS: Possible outcomes for Australian carbon trade laws

CANBERRA Mon Aug 10, 2009 5:18am EDT

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CANBERRA (Reuters) - Australia's carbon trading laws are set to be defeated in the Senate this week, with conservatives, Greens and two independent lawmakers in rare agreement to oppose it.

Prime Minister Kevin Rudd's government needs seven more votes to pass the 11 bills through the Senate. If the laws are rejected twice, Rudd could call a snap election.

Here are some possible outcomes for the government.

HOLD FIRM, SET UP ELECTION TRIGGER (Likely)

If the government forces a vote in the Senate on Thursday, the laws in their current form will fail. If the Senate blocks or rejects the laws a second time, after an interval of three months, it will hand Rudd a trigger for a possible snap election. Rudd, who is well ahead in opinion polls, has repeatedly said he does not want an early election, but refuses to rule out the option.

Rudd could call a snap election in early 2010 and current opinion polls suggest he would win with an increased majority. He could then pass the carbon trade laws through a joint sitting of the lower house and the Senate to clear the political deadlock. The danger for Rudd is that while the carbon laws would pass a joint sitting, a future Senate could be more unpredictable with increased numbers of Greens and independents.

DEAL WITH OPPOSITION (Unlikely)

The government's best hope of passing the laws is to get the opposition, which has the largest voting bloc in the Senate, to change its stand and support the laws. The opposition wants to postpone a vote on the laws until after global climate talks in Copenhagen in December. But political pressure on the opposition is growing, and Opposition Leader Malcolm Turnbull's poll rating has collapsed.

Turnbull now wants to avoid forcing an early election on the carbon trade laws and has proposed negotiations on amendments.

The government is refusing to negotiate, but might be willing to make some concessions later in the year to get its laws passed ahead of the Copenhagen climate talks.

DEAL WITH GREENS, INDEPENDENTS (Unlikely)

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 will only support the plan if the government makes a stronger commitment to curb greenhouse gas emissions. Independent Nick Xenophon also wants stronger emissions targets. The final independent, Steve Fielding, has said he does not believe human activity is responsible for global warming, and he is unlikely to support the legislation.

RENEWABLE TARGET SPLIT (Likely)

The conservatives and five Green senators also want to split off separate Renewable Energy Target laws, tied to the carbon trade scheme by the government through promised industry compensation for electricity generators.

The laws set a renewable energy target of 20 percent by 2020. The government joined the two pieces of legislation to pile more political pressure on Turnbull's conservatives.

The government could reject splitting the bills in the lower house where it dominates, even if the Senate decides to separate the two issues. But Wong and Rudd may be willing to accept the split next week, to unlock around $22 billion in planned solar and wind energy investment, once the carbon trade legislation is dealt with.

(Reporting by Rob Taylor; Editing by James Grubel and David Fogarty)

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