(Corrects ranking in paragraph two)
* Australia axes world's second biggest ETS before it starts
* Embattled PM Abbott picks up a big political victory
* Opposition calls it an "appalling" day for Australia
By Matt Siegel
SYDNEY, July 17 The Australian Senate voted on
Thursday to scrap the country's carbon tax and plans for
emissions trading, a major victory for conservative Prime
Minister Tony Abbott that leaves uncertainty about how the
country will meet its carbon reduction goals.
Australia is one of the world's biggest carbon emitters on a
per capita basis and abandoning plans for the world's third
largest emissions trading scheme (ETS) after Europe and
Guangdong, set to begin from 2015, is a major setback for global
Abolition of the carbon tax was a centerpiece policy of
Abbott's 2013 election, but his Liberal-National coalition
struggled to repeal the legislation without control of the upper
On Thursday, the Senate voted 39 to 32 to dump the carbon
tax and planned ETS with the support of mining magnate Clive
Palmer, whose Palmer United Party (PUP) holds the balance of
power in the chamber.
The repeal was fiercely opposed by the opposition Labor and
Greens Party, who portrayed the vote as a stain on the country's
"This is an appalling day for Australia when a government,
rather than lead in the face of what the world is facing up to
... is determined to stick with the past," Greens leader Senator
Christine Milne said before the vote.
Abbott, once a climate-change sceptic, has long argued that
the carbon tax is a burden on industry and consumers in a
country reliant on coal-fired power and does little to cut
emissions. The tax saw 348 of Australia's biggest companies pay
A$25.40 for each tonne of CO2 they emit.
But Abbott's plan to replace the carbon tax with an A$2.55
billion Emissions Reduction Fund that would see big emitters
paid to cut carbon levels is opposed by Palmer, leaving it
unclear how Australia will meet it emissions reduction goals.
Australia's Renewable Energy Target scheme, which Palmer
insisted not be repealed, is designed to ensure that 20 per cent
of Australia's electricity comes from renewables by 2020.
Australia has committed unconditionally to reducing its
overall emissions by 5 per cent compared with 2000 levels by
2020, but some now doubt it will be able to do that.
"By repealing the carbon pricing mechanism, it is entirely
unclear how this may now be achieved," said Bret Harper,
associate director with carbon advisory firm Reputex.
Investors are likely to welcome an end to years of
uncertainty on the long-term outlook for carbon pricing and the
fact that Abbott has retained the A$10 billion Clean Energy
Finance Corporation, another of Palmer's demands.
The government-backed loan agency invests in wind, solar,
and bioenergy projects in Australia with a total loan portfolio
of over A$700 million since it started in mid-2013.
A spokesman for Aluminum maker Alcoa said the repeal
had long been expected and factored into the company's planning.
But AGL Energy Ltd, Australia's second-largest gas
and electricity company, warned the move would curb its earnings
before interest and tax in the next financial year by around
A$186 million ($174.06 million), partly due to an expected fall
in wholesale electricity prices.
Scrapping the carbon tax will be seized on by Abbott as a
major political victory, at a time when support for his
government has slumped following an unpopular budget in May, but
the cost may be high.
Last month the Lowy Institute released a poll showing that
concern about climate change amongst Australians was up nine
points since 2012 and that 45 percent of adults think measures
should be taken to prevent it "even if this involves significant
To gain support from the PUP Senators, Abbott agreed to
guarantee that savings from repealing the carbon tax would be
passed onto consumers, adding to the government's fiscal
pressures as it tries to rein in growing deficits.
($1 = 1.0686 Australian Dollars)
(Additional reporting by Stian Reklev in Beijing, James Regan
in Sydney; Editing by Michael Perry and Joseph Radford)