CANBERRA (Reuters) - Australia has shelved plans for an ambitious carbon emissions trade scheme for at least three years due to parliamentary opposition and slow progress on a global climate pact, Prime Minister Kevin Rudd said on Tuesday.
The decision bows to the political reality that a hostile upper house Senate, where the government is seven votes short of a majority, is refusing to pass the scheme. It has been rejected twice and a third rebuff is expected in weeks.
The promise of an emissions scheme helped propel Rudd to power in 2007 but public support has slipped, with another election due this year. A delay could also slash up to A$2.5 billion ($2.3 billion) from the 2010/11 budget, according to government data.
Rudd, who leads in opinion polls, said the government would wait until the expiry of the Kyoto pact in 2012 before pushing on with plans for one of the world’s most comprehensive regimes.
“That will provide the Australian government at the time with a better position to assess the level of global action on climate change,” Rudd told journalists in Sydney.
Newspapers, citing unsourced reports, said the saving of promised business and household compensation for the scheme would be reflected in the May 11 national budget, although ministers would not confirm this directly.
“The blocking of the Carbon Pollution Reduction Scheme legislation by the opposition has caused delays and created uncertainties which will of course affect the budget treatment of the CPRS,” Climate Change Minister Penny Wong’s spokeswoman said.
Rudd’s government had planned to cut Australia’s carbon emissions by 5 percent by 2020, forcing 1,000 large company emitters to buy permits to pollute from July 2011.
But after industry opposition the plan funneled compensation to energy and trade-exposed industries such as AGL Energy, BlueScope steel and OneSteel.
One stock trader said the delay in carbon reforms had been discounted in the equities market, but confirmation stirred the Australian electricity market, where trade in 2012 power contracts showed some rare signs of life on Tuesday.
Under the reforms, full trading of emission permits was to have begun in 2012, but uncertainty over whether this would actually happen meant very few traders dared to move contracts for that year. That uncertainty appeared to fade on Tuesday as markets digested news there would be no trade in 2012, sparking a fall in prices.
Rudd’s center-left Labor Party will now take its carbon plan off the table, with the scheme to start in 2013 at the earliest.
Conservative opposition treasury spokesman Joe Hockey said delaying the scheme made a mockery of Rudd’s pledge that climate change was the “great moral and economic challenge of our time.”
Hockey said the scheme had been shelved to improve the budget outlook, helping deliver a promised return to surplus earlier than official forecasts of 2015/16 and improve the forecast A$57.7 billion deficit for the year to end-June 2010.
“Postponing the scheme allows the government to remove the revenue from the sale of carbon permits of A$28 billion over four years, and assistance measures of A$30.5 billion, from the budget forward estimates,” Hockey said.
The Australian Greens, who control five of seven Senate crossbench votes the government needs to pass legislation, said the decision to abandon the emissions scheme meant the government should look at interim alternatives like a levy on polluters.
“In the face of ever-stronger warnings from scientists, the government must not throw the baby out with the bathwater and abandon any plans to put a price on carbon,” Greens Deputy Leader Christine Milne said.
A new survey conducted by Auspoll for the Climate Institute and the Conservation Foundation found voter concern about global warming had slipped 9 percentage points since May 2009 but was still strong at 68 percent, with climate still an election issue.
Just 36 percent of voters believed Rudd was the best person to handle climate issues, a fall of 10 percent from February last year, while 40 percent said there was no difference between the government and the conservative opposition.
($1=1.079 Australian Dollars)
Additional reporting by Mark Bendeich in SYDNEY; Editing by Ed Davies and Paul Tait