Australia’s cap and trade system, the Carbon Pollution Reduction Scheme (CPRS), is being reintroduced into Parliament this week, after two rejections in 2009 (see here and here). However, it is almost certain that it will fail again, following decreasing public support for the policy after the Copenhagen conference and Tony Abbott’s ascension to the opposition leadership.

To start with, public support for Prime minister Kevin Rudd’s flagship policy has dived 10 points from 66 to 56 per cent according to the latest Herald/Nielsen poll, while opposition to the trading scheme has risen 4 points from 25 to 29 per cent. While there has always been a high level of confusion in the electorate about climate change policy, and in particular about the CPRS, the failure of the Copenhagen conference shifted to a certain extent the public sentiment about climate change. In particular, extensive media coverage of a series of ‘scandals’ linked to the IPCC’s work has opened new windows for the numerous Australian and international climate sceptics (see for example Lord Monckton).

However the biggest challenge faced today by the government is without doubt the unexpected come back of the opposition (the Liberals) in the climate debate. The previous opposition leader, Malcolm Turnbull, is a supporter of the scheme, which had greatly divided his party over the climate issue, to the benefit of the government. Yet Turnbull has recently been ousted by Tony Abbott, a strong opponent of cap and trade and climate policy in general, not to say a climate sceptic. The change here is that Abbott has come forward with an alternative to the governmental policy. The Coalition’s (Liberals+Nationals) “Direct action plan on the environment and climate change” would create an AUS$2.5bn fund to provide incentives for industry and farmers to reduce emissions through measures such as storing carbon in soil. The plan also includes the planting of 20 million trees by 2020 and would provide $1000 rebates to home owners for solar cells. The plan has immediately been slashed by environmentalists, Greens and the Labour Party as been unable to lead the country to a minimum 5 per cent cut in emissions by 2020 compared to 2005 levels, as Australia pledged in Copenhagen. While Kevin Rudd has ridiculed the direct-action plan as “a climate con job”, most business groups have backed the plan, agreeing with the opposition Leader’s assertion it is “cheaper, simpler and more cost-effective” than Labour’s proposed carbon emissions trading scheme.

With a now clear opposition to the scheme, the government’s CPRS is very likely to be rejected by the Senate this week. The government would then again have the possibility to trigger an early election, though it would be very unlikely since the next general election will take place this year. In the most optimistic scenario, a cap and trade system would therefore not be voted for another year. Kevin Rudd’s approval rating is still way ahead from his potential challenger, though Abbott’s popularity is rising. But it is surprising that Rudd is not working to rally public opinion: he has not made a speech about climate change in the past weeks and is, instead, trying to change the subject. It is time now for Prime minister Rudd to start campaigning for his cap and trade scheme and explain to people why Australia should be moving when things look bleak internationally.

Following five weeks of intense negotiations between the Rudd government and the Opposition, the Australian Senate voted once more, by 41 to 33, against bills that would have established the Carbon Pollution Reduction Scheme (CPRS). The Greens, Independent Senator Nick Xenophon, and Family First Senator Steve Fielding joined the Opposition (Liberals + Nationals) in voting down the scheme (SMH 02/12/09).

 The Minerals Council of Australia and the Australian Chamber of Commerce and Industry welcomed the rejection, while WWF and the Climate Institute, called for a double dissolution and joint sitting of Parliament to get the original bills through (SMH 04/12/09).

 Under Australia’s bicameral parliamentary system, both houses must reach majority agreement on proposed legislation before it can go forward into law. Following a vote against a bill it may, however, subsequently be revived or presented again. That is what happened this autumn following a first rejection of the CPRS by the Australian Senate in August (see my previous post). The legislation had been put on the table again by the government in November, passing without surprise the House of Representative on the 17^th.

 The Senate no vote came after an extraordinary few weeks of drama, in which the Opposition reached a deal to support the legislation with big changes, and then reneged after its change of leadership. Indeed, on Monday, former Opposition leader Malcolm Turnbull (who was backing the passage of the Australian ETS) was challenged within its own party, and was ousted as Liberal party leader by right-wing climate skeptic Tony Abbott. The new Liberal leader, who has been portraying the scheme as Kevin Rudd’s “big new tax”, managed to convince most Liberal Senators who would have supported the CPRS to vote down the scheme (except for two who crossed to floor).

 Mr Abbott insists that he will have a credible climate change policy but is making it clear that his policy will not include an emissions trading scheme any time soon. In particular, he said it would be “folly” for Australia to establish an emissions trading scheme before the United States had settled on its model: “The right time for an emissions trading scheme is when the rest of the world is signed up for one.” (ABC 02/10/09). Abbott plans to fight a climate change election using land management and energy efficiency measures instead of an ETS, and would welcome a debate on nuclear power as an option.

 Despite the fact that Prime minister Rudd now has the option to call for a double dissolution election, which he would without a doubt win, he has played down prospects of pulling this trigger. The government has said that in the next Parliamentary sitting period commencing on 2 February 2010, it will introduce bills to establish the CPRS, inclusive of amendments incorporated following negotiations with the Opposition announced on 24 November 2009, to give Parliament a further opportunity to consider and pass legislation. Hopes to portray Australia as a world leader on the issue have now vanished, putting Kevin Rudd in an incomfortable position as a friend of the chair in Copenhagen next week.

After the Government’s Carbon Pollution Reduction Scheme’s defeat in Senate last August, the Australian Opposition, the Coalition (Liberals + Nationals), had until last Sunday to propose amendments before the reintroduction of the bill in November (for previous developments, see here). After a Party meeting lasting more than four hours yesterday, Mr. Turnbull, the Opposition leader, confirmed the partyroom had endorsed his strategy, backing “commonsense amendments” which, if agreed to, “would save thousands of Australian jobs”(The Australian 19/10/09).

Most provisions intend to provide greater exemptions to key industries. Amendments include exemptions for the coal industry, greater assistance to power generators, a permanent exemption for agriculture, greater exemptions for energy intensive industries, and protection for food processing. The detailed list is available on the Liberals’ website. The Coalition won early support for its position last night, with the Minerals Council of Australia backing its amendments. “The proposed amendments will better align the CPRS with other emissions trading schemes around the world, promote investment in low-emissions technologies and provide the necessary flexibility to adjust to the outcome of the United Nations climate change talks in Copenhagen in December,” chief executive officer Mitchell Hooke said. (SMH 20/10/09)

Prime Minister Kevin Rudd, set a six-week timetable for negotiation and debate before a vote in November. The bill will be introduced to the House of Representatives this week, and should reach the Senate by mid-November. The government will push very hard for the passage of the bill by Copenhagen and may extend Senate sittings if necessary (SMH 18/10/09). However, the Nationals and some key Liberals strongly oppose the ETS, and threaten to cross the floor if Mr. Turnbull strikes a deal with the government. The legislation might still pass under this scenario, but Mr. Turnbull will face the embarrassment of a Coalition split on the issue just weeks after declaring he would stake his leadership on success.

The Australian domestic climate surrounding the emission trading scheme issue contrasts with the confidence and dynamism demonstrated by Labour Prime minister Kevin Rudd in multilateral talks. Mr Rudd was in New York late September to advance international negotiations on strategies to cut greenhouse gas emissions ahead of the December Copenhagen summit. He met Bill Clinton to discuss climate change and positioned Australia as a middle-power honest broker that can help smooth the way between the two superpowers, the US and China, which hold the key to a successful agreement in Copenhagen. Discussing tactics with UN Secretary-General, Ban Ki Moon, the latter asked Mr Rudd to chair a meeting at the climate talks – a significant role which recognises the contribution Australia has made so far to the global effort to strike a deal (SMH 21/09/09).

Nevertheless, back home, the Opposition (the Coalition of Liberals and Nationals), is trying to delay as much as possible the adoption of ETS legislation. As previously explained on this blog here and here, Rudd’s Carbon Pollution Reduction Scheme (CPRS) was defeated by the Senate in August. The legislation is due to be reintroduced in Parliament in November and the Opposition had been given until October 19th to present amendments.

But the Opposition leader, the Liberal Malcom Turnbull, is struggling to control the disunity among Coalition members. Increasing the pressure on their leader, many Coalition MPs are urging not to cut a deal with the government before the December meeting in Copenhagen. The Coalition argues that there might not be time to debate the legislation before the end of this parliamentary year. But in reality, it wants to wait and see what other countries will commit to. During a shadow cabinet meeting held last week, tactics were discussed and Turnbull desperately tried to unify his colleagues in favour of negotiations with the government. But opponents like Senator Mason have been arguing that to pass climate legislation before Copenhagen would “risk Australian jobs and Australia’s standard of living for negligible environmental benefit” (CourrierMail 06/10/09). Some Opposition members have charged that the rationale of the shadow cabinet for backing a pre-Copenhagen climate deal was to “avoid a double dissolution election” and the possibility of a flawed emissions trading scheme passing at a joint Parliamentary sitting (CourrierMail 06/10/09).

Mr Turnbull might actually be right to fear an election since his party has just taken another hit in the poll, the government leading by 16 points. Turnbull is now calling for a special meeting on October 18th, and hopes to get an agreement on proposed amendments to the CPRS legislation (ABC 06/10/09). Now that he has officially canvassed a split with the Nationals, who have said they will not agree to any deal with the Government over the scheme, Mr Turnbull must reduce chances of potential unrest among its own party when Parliament will resume on October 19th.

Cloud over climate climate change deal in Parliament House, Canberra

On Thursday (13/08/09), the Australian Senate defeated the Rudd Government’s Carbon Pollution Reduction Scheme (CPRS), a legislative package made up of a Carbon emission trading scheme and ten related bills (click here for previous developments). The Opposition, Greens, and the independents, Nick Xenophon and Steve Fielding, voted to defeat the package 42 to 30. Prime Minister Rudd has called the day “a disappointing day for Australia” and accused the opposition of “placing the nation’s future at risk” (ABC 13/08/09).

The Government is determined not to go to Copenhagen empty-handed, and will reintroduce the same legislation in three months. At that time, if the bills are rejected a second time, Labour will have a trigger to dissolve both houses of Parliament and call an early election.

Let’s have look at the opponents’ rationale for rejecting this scheme.

Malcolm Turnbull, the Coalition leader, has managed to save himself some embarrassment by gaining the support of the majority of his party room to keep alive the prospect of negotiating a deal with the Government over the emission trading scheme. Indeed, if Turnbull had directed the Coalition to vote for the Government scheme, his weakness would have been fully exposed. The Nationals, and perhaps even some Liberals, would have defied him by crossing the floor in the Senate.

However, his leadership is seriously threatened as he will have to reassess his position to avoid potentially disastrous elections, and faces an inevitable split among the Coalition. Eventually, Liberals will somehow have to support the legislative package and split from the Nationals, who are not prepared to countenance any emissions trading scheme. In the meantime, Turnbull is trying to win some time in order to offer constructive alternatives. But he is not. Two days before the vote, the Coalition had produced a policy model, commissioned from the consultancy Frontier Economics, and which Climate Change Minister Penny Wong has described as a ”mongrel” (SMH 14/08/09). The model is radically different from Labour’s scheme in that it treats electricity generation less punitively and claims to reduce the negative impacts on Australian employment, one of the main Liberal arguments against CPRS. But Turnbull has little hope of succeeding in negotiating with the Government, which is showing him no mercy.

The Greens rejected the bills because they see the Government’s 2020 emissions reduction targets – between an unconditional 5 per cent and a highly-conditional 25 per cent – as too timid; and generally condemn the CPRS’ easiness on polluters (ENS 14/08/09). Green groups are now using the defeat of the emissions trading scheme bill to urge the Government to separate its renewable energy target from the rejected trading legislation. Indeed, the renewable energy target – 20 per cent by 2020 – is set to reach the Senate next week for a vote, but is not expected to pass unless the Government removes a part of the bill that links compensation to heavy-emitting industries under the target to the passage of its now-rejected carbon trading scheme.

The Greens will move amendments to the target legislation, increasing it and removing industry assistance, and introducing a renewable energy feed-in tariff. The Opposition is also working on amendments, mainly to add extra exemptions for the aluminum and milk pasteurisation industries. Prime Minister Rudd said he would not commit to changes to the renewable energy target but that Labour is likely to separate this question from the carbon trading scheme. Next week’s vote on renewables target will therefore be an important test to see if Australian parties manage to overcome their excessive divisions. All the more so as a recent poll showed that Australians, who by a majority support the CPRS legislation, are losing patience with their politicians on climate change. (SMH 14/08/09)

The Rudd government has just released (19/06/09) draft regulations for the Australian Carbon Pollution Reduction Scheme (CPRS), outlining how carbon emissions will be measured and industry compensation calculated. The draft regulations specify the framework for the Emission Intensive-Trade Exposed assistance program, application procedures and reporting requirements for eligible entities under the program.

The regulations just published are the first of several disclosures on how the country’s emissions trading scheme will take shape, Australia’s Climate Change Minister Penny Wong said. The rules outline some of the highly emissions-intensive sectors that will receive up to 94.5 per cent of their expected needed amount of emission permits for free under the CPRS.
Production of carbon black, methanol, silicon, bulk flat glass, newsprint, and zinc will all be counted in this category. Moderately emission-intensive sectors will get up to 66 per cent of their allowances free of charge.

Treatment of energy-intensive trade-exposed industries under the carbon scheme is playing a major role in Australia’s debate on how to tackle climate change, as many industries and the Opposition fear jobs will be lost to countries without carbon regulations, such as China and India. In addition, Greens strongly oppose the draft, as stated by Senator Christine Milne: “The draft regulations confirm that the carbon pollution reduction scheme will be a multi-million dollar wealth transfer from the people to the big polluters, and that stands in the way of protecting the climate,” (ABC 19/06/09)

The Government says it is releasing the draft regulations earlier than normal because it wants to give MPs as much information as possible. It is indeed trying to get senators to support its scheme in an effort to have the legislation passed by the Senate next week. But the ETS legislation is in trouble. The Opposition, which does not want to vote on the scheme until next year, plans to filibuster all week to avoid it being put to a vote at all. The Greens have vowed to vote the scheme down but do not support delaying the vote. (ABC 18/06/09) If the bill is defeated, or there is a vote to defer it until August, either will count as a refusal by the Senate to pass it. In this case, things could start to become very difficult for the Rudd government, possibly triggering an early election before the end of the year. (SMH 19/06/09)

Australian Senate (flickr Aschaf)

Last week, in the biggest policy reversal of his prime ministership, aimed at wooing big businesses and the Liberal Party, Kevin Rudd announced important changes concerning Australia’s emission trading scheme.

Firstly, Prime Minister Rudd announced the delay of the scheme of one year, pushing back the start date to July 2011, in order to manage the impact of the global recession. Australia will also fix the trading price of carbon at AU$ 10 (US$ 7.35, € 5.50) a tonne until mid-2012 (instead of the AU$ 40 a tonne maximum price for emission permits originally proposed), making the scheme akin to a carbon tax in its first year. In addition, the government will increase free permit allocation by adding a “global recession buffer” in the early years. Industries eligible for 60 per cent of their permits issued free will receive a further 10 per cent, while energy intensive, trade exposed industries eligible for 90 per cent assistance will now receive an extra 5 per cent. This generous compensation for the nation’s heaviest polluters, illustrating the success of the country’s enormous oil, gas and coal lobbies, has been found repugnant by Rudd’s own expert, Professor Ross Garnaut.

The issue is that the Rudd government doesn’t have the power to implement any scheme because it doesn’t have the numbers in the Senate and faces a barrage of opposition from the Liberals, the Greens and independent Senators. Through accommodating the demands of business lobby groups, Rudd aimed at putting the Opposition Leader, Malcolm Turnbull, under business pressure to pass the emissions trading scheme in the Senate. But that was underestimating Turnbull’s stubbornness. Following its strategy of opposing anything and everything the Government says or does, the Federal Opposition said it will have an alternative proposal to the Government’s emissions trading scheme by the time it is debated in the Parliament next month. (ABC 10/05/09)

Secondly, Rudd announced a change to Australia’s 2020 emissions reduction target range. As a sop to environmentalists, he announced a heavily conditional commitment to increase from 15 per cent to 25 per cent the maximum amount by which greenhouse gases would be reduced by 2020. “I am in the practical business of responding to realistic challenges,” Mr Rudd said of his reversal, which would mean “a slower start” but a “stronger, greener conclusion” (SMH 05/05/09). The Government’s strategy was to win back public support for Labour’s climate policy by holding out the prospect that Australia was now supporting a stronger global agreement. However, this commitment would depend utterly on other countries, China and India included, making serious commitments at Copenhagen. The new deal was slammed by Green senators who consider the new target still too low and new corporate compensation too generous (SMH 10/05/09).

Today, hope around the two-fold Government strategy to win back support for its carbon scheme in Senate has evaporated. Australia remains deeply divided on how to build an ambitious national climate change policy. Four Opposition senators have even issued a report that says boosting Australia’s emissions could help the planet because if Australia reduced its emissions, that could mean industries moving offshore, where environmental standards were lower. Such initiative has reason to worry Climate Change Minister Penny Wong. She is determined to pass the emission trading scheme through Parliament in June; otherwise Australia’s negotiation credibility could be undermined at Copenhagen. But today it appears Wong will arrive in Copenhagen not only without a national commitment, but also without a national consensus.

As predicted in Climatico’s last national climate policy report, Australia has just taken the lead, along with Britain, in the development of Carbon Capture and Storage. A few days ago, Prime Minister Kevin Rudd inaugurated the Global Carbon Capture and Storage Institute in Canberra, with its 85 members, ranging from the governments of Japan and the US to giant coal and oil companies. The Institute will receive up to AU$ 100 million in government funding per year. CCS demonstration plants will soon be built.

Australia is indeed the world’s largest coal exporter, and coal is the nation’s most valuable export. As acknowledged by Rudd, “coal has been a major contributor to our nation’s prosperity.” (SMH 16/04/09). Yet coal production and use is also a very significant contributor to greenhouse gas concerns and remains a millstone around the country’s neck. By recognising that “the cold hard reality that coal will be a major source of power generation for many years to come” (SHM 16/04/09) Prime Minister Rudd is quite clear about his intentions, and therefore reassures the powerful industry lobby.

Pressure to be able to deliver Australia’s pledges of major carbon emissions reductions in 20 to 50 years is undoubtedly hangs in the balance. But what about medium term targets? Coal-fired power stations with CCS technology will not be operating for another ten years at least and they will not be commercially viable for 30-40 years. The technology’s efficiency is controversial. Moreover, CCS technology cannot be retro-fitted to existing coal fired power stations, so how long will it realistically take before Australia uses 100% clean coal?

The Government needs climate solutions now and should dedicate its funds to develop existing reliable renewable solutions such as wind and solar. Scientists from the government’s principal scientific board, the CSIRO, have taken a bold step last week by making clear that coal is the energy of the past. The scientists have chosen not to make a submission to the Senate inquiry into the Government’s Carbon Pollution Reduction Scheme (SMH 27/04/09) but have rather spoken out personally to the Senate committee. Their message was precise and simple: no coal-fired power plants should be built, and existing plants must shut within 20 years, if the world is to keep atmospheric carbon dioxide at a less dangerous level (SMH 24/04/09).