Australia brings forward decision on carbon price

CANBERRA (Reuters) - Australia’s government intends to wrap up an agreement next year on pricing carbon, Prime Minister Julia Gillard said Monday, testing the strength of her minority rule and pressing the accelerator on Canberra’s climate change fight.

As world climate talks got underway in Mexico, Gillard said the government would bring forward by a year a decision on how to price carbon emissions, but left unclear whether a previous 2013 date for implementation of any scheme would stay in place.

Ruling Labor, she said, had to find a way to break a deadlock in the parliament over laws to price polluting emissions that conservative opponents have warned will massively drive up electricity and transport costs for voters.

“This Parliament is the master of its own destiny,” Gillard told reporters. “I’ve said that 2011 needs to be the year that the nation decides on how we price carbon, with sufficient consensus that it can be legislated.”

Labor won a second term in August elections, but needs support from three independents and a Green lawmaker to remain in power, leading to concern that Gillard’s government might not survive a three-year term and be rocked by instability.

A decision in April not to pursue a cap-and-trade scheme to fight carbon emissions by the world’s biggest per-capita emitter led many green-leaning voters to punish the party.

It also exacerbated industry uncertainty about climate policy, with Australia needing A$100 billion in fresh investment over the next decade to replace aging coal-fired power stations providing 80 percent of its electricity.

Gillard’s drive to overcome three rejections of carbon trading by lawmakers comes as officials from almost 200 nations gather in Mexico to try to agree on modest steps to slow climate shift.

Few expect the November 29 to December 10 meeting to reach an agreement to extend the present Kyoto climate pact beyond 2012, with the United States at loggerheads with China, and hobbled in its own push to curb emissions after divisive recent elections.

Australia’s government had previously aimed to start carbon trading with a A$10 ($9.64) fixed permit price by 2011-12, moving to full trade from 2012-13 to achieve a reduction in emissions of at least 5 percent over 2000 levels by 2020.

Gillard, stung by criticism that her government had not been bold enough on promised economic reforms, said 2011 would be a critical year to “walk the reform road,” delivering on promises of health, pension increases, as well as carbon pricing.

“We need to force this matter through in 2011, that is through to a decision,” she said. Aiding Labor will be a re-cast upper house Senate from July 1 dominated by sympathetic Greens.

Miners including BHP Billiton have warned the lack of a price on carbon is discouraging investment in renewable and clean-energy sources to replace aging coal-fired power stations, while hampering low-carbon industry development.

The absence of a national scheme is also stoking fears among investors that state governments develop their own, widely diverging climate policies: a concern exacerbated at the weekend by elections in Victoria state.

The election delivered a surprise victory for opposition conservatives opposed to carbon pricing. The conservatives are also expected to win elections early next year in heavyweight New South Wales state, and possibly Queensland after that.

“The carbon tax that she ruled out before an election has now been ruled in since an election, and what that means is a massive increase in the cost of living for Australian households,” conservative opposition leader Tony Abbott told parliament after Gillard’s speech.

Gillard has set up a cross-party committee to advise on how to price carbon, and lawmakers will spend the next year deciding on a carbon tax or market-based system, or a mix of both.

($1=A$1.037 Australian dollars)

Editing by Ed Davies