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World News

Australian carbon plan looks like key election issue

CANBERRA (Reuters) - Australia’s prime minister offered a truce to both big business and greens on Monday over his hotly contested plan to cut carbon emissions, but hostilities are far from over and may end up running to the next election.

Kevin Rudd announced carbon trading would be delayed by 12 months to July 2011 and that big-polluting exporters would receive more compensation to help them adjust, citing the need to help business already dealing with global recession.

He also held out the prospect of tougher emission-reduction targets in the long term, as a gesture to the Greens party whose support he may need to push his amended plan through parliament.

But the reactions from both industry and the Greens on Monday showed Rudd was no closer to securing the political support required to push the carbon laws through the upper house Senate. In the end, Rudd pleased neither business nor green groups.

That means any legislative delays could put the issue back on the agenda for the next election, due in late 2010 -- potentially turning it into a re-run of the 2007 campaign, where Rudd’s pledge to tackle emissions helped him win a landslide victory and to unseat then conservative prime minister John Howard.

With the extra time afforded by the 12-month delay, Rudd would be unlikely to go to an early election if the Senate blocked the carbon laws. Instead, he would likely use the issue as a political weapon against the conservative opposition.

Rudd said the government would now consider raising its emissions target to a cut of 25 percent on year 2000 levels by 2020, if the world agrees to strong targets in Copenhagen, up from his first plan for cuts of between 5 and 15 percent by 2020.

Rudd needs support from either the conservative opposition parties or from five Greens and two independent senators, to pass his laws through the Senate.

Conservative Liberal Party leader Malcolm Turnbull said the changes announced by Rudd would only complicate the carbon scheme, and legislation should now be put on hold.

The Greens said they would now run a television ad campaign against the plan until the next election, accusing the government of bowing to pressure from the coal industry and big polluters.

INTENSE LOBBBYING

Big business had intensified its lobbying against the plan in recent months, and the July 2010 start date was considered ambitious for what was a historic economic reform.

The original plan was always a political risk for Rudd, who would have headed into elections within months of the start of carbon trading, just as business and households were feeling the impact of the resulting higher costs.

The changes, however, mean Rudd will now be able to go to the next election without having to worry about a business and economic backlash from carbon trading, Australian National University analyst Norman Abjorensen told Reuters.

The changes also allow the government to await the outcome of global climate talks in Copenhagen in December before committing to a target to curb greenhouse gas emissions, making the scheme more palatable for Australian voters.

“There is a pragmatic realisation in the government that there is no valid reason why Australia should be a pace-setter when there is no international agreement,” Abjorensen said.

“The jobs losses, the increase in the cost of power and all the business costs were compelling arguments for a delay.”

The global economic downturn, which has put Australia on the brink of recession, gave Rudd the political excuse he needed to change a policy which was a central promise of his election victory in late 2007.

Editing by Bill Tarrant

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