Australia govt warned not to weaken emissions trade

CANBERRA (Reuters) - Australia's government was warned on Tuesday against softening a planned emissions trade system expected to hit big corporates and households, with Greens senators saying minor lawmakers could ensure it was still-born.

The emissions trade system will begin in 2010 and bring the biggest upheaval to Australia's energy-reliant economy in a generation, with big miners in particular facing rising costs.

The system's government-backed architect, academic economist Ross Garnaut, will release a draft blueprint on how trading could operate on Friday, with analysts looking for recommendations on an overall carbon emissions cap.

"The key thing that people want to see is a serious cap on emissions. We're saying that it should be at the top end," said Greens Senator Christine Milne, urging a cut of 40 percent on 1990 emissions levels by 2020.

But consumers, angered by the prospect of higher fuel and electricity costs, are becoming jittery, while a survey of 250 CEOs by the Australian Institute of Management found 80 percent had scant understanding of what the new regime would mean.

The left-leaning Labor government, which won a stunning election victory last November in part on a promise to fight climate change, said it would not bow to pressure for a weaker system of carbon curbs as polls showed rising voter concern.

"The government is not designing an emissions trading scheme on the basis of polls, we're designing it for the long-term economic future of the country," Climate Change Minister Penny Wong told local radio.

On coming to power, the Labor government immediately ratified the Kyoto Protocol on climate change and promised a carbon trading scheme by 2010 to give business a financial incentive to cut pollution.

Australia is responsible for about 1.2 percent of global carbon emissions, but remains one of the highest polluters per capita because of the nation's reliance on coal and other fossil fuels. It is the world's largest coal exporter and relies on coal to generate about 80 percent of its electricity.

MOUNTING COSTS

Newspaper reports said Labor was looking hard at rebates to guard consumers against expected sharp rises in fuel and other costs, with inflation already at 16-year highs and official interest rates at an eye-bleeding 7.25 percent.

With Senate control passing to minor parties and independents from Tuesday, Greens spokesman Tim Hollo said the scheme could be hobbled by competing independent demands to soften the impact on households and Greens wanting tougher action.

"If they tried to weaken it, we would fight it in every way that we possibly can," he told Reuters. "And if the (major) opposition holds to the view they seem to be coming out with, that they will vote against it helter-skelter, that leaves us with the ability to negotiate," Hollo said.

A Herald Sun newspaper poll said 93 percent of Australians had little or no idea of how emissions trading would recast the A$1 trillion economy, with a fifth unaware of what the regime even meant.

Emissions trading allows companies to accept limits on their greenhouse gases outflows and continue their emissions under permits issued under a national carbon cap.

Trade in permits allow companies to cover their actual level of emissions, with some economists tipping the Australian permit auction could net A$20 billion ($19.2 billion).

Wong said Garnaut's report would be only one factor the government considered, with an official options paper due later in July and laws sent to parliament by end-2008 and fine-tuning of the emissions scheme done in early 2009.

($1=A$1.04)

(Additional reporting by Mark Bendeich; Editing by Ben Tan)