SCENARIOS-Possible outcomes for Australian carbon trade laws

CANBERRA, July 2 - The passage of landmark climate legislation through the U.S. House of Representatives, and a series of bad polls for Australia's opposition, have raised hopes Australia might pass its carbon trade plans through parliament.

Prime Minister Kevin Rudd's government is seven votes short of a majority in parliament's upper house Senate, and a vote on the 11 bills which set up the Emissions Trading Scheme (ETS) has been deferred until August 13.

But opposition leader Malcolm Turnbull said the conservatives will seek to amend the laws, raising hopes of a shift from his policy of wanting to postpone a decision on the laws until 2010 and after climate talks in Copenhagen in December.

The government wants carbon trading to start in July 2011, as a central plank of its policy to fight global warming, but has been unable to break through the political roadblock.

Here are some possible outcomes for the government.

DEAL WITH OPPOSITION

If the government forces a vote in the Senate when debate resumes in August, the laws in their current form will fail.

The government's best hope of passing the laws is to get the opposition, which has the largest voting bloc in the Senate, to change its stand and support the laws.

The opposition's current policy is to try to postpone a vote on the laws until 2010 and after the global climate talks in Copenhagen. But political pressure on the opposition is growing, and Turnbull's poll rating has collapsed after he used a fake email as the basis of a political attack on Rudd.

Turnbull now wants to avoid forcing an early election on the carbon trade laws, and he has said the opposition wants to frame its own amendments, suggesting a deal might be possible.

The opposition has said it wants more protection in the carbon trade plan for electricity generators and Australia's coal industry.

HOLD FIRM, SET UP ELECTION TRIGGER

If the ETS laws are rejected in August, the government can bring the package back to parliament in late October or mid-November. If the Senate blocks or rejects the laws a second time, after an interval of three months, it will hand Rudd a trigger to call an early double-dissolution election, for all lawmakers in both houses of parliament.

Given the timing of Parliament, Rudd would likely run out of time for an early election in 2009, but he could go to the polls in early 2010, cashing in on disarray within the opposition and getting an election out of the way before needing to present a tough budget in May.

If the government wins a double-dissolution election, it could then push the ETS laws through a special joint sitting of the lower house and the Senate to clear the political deadlock.

DEAL WITH GREENS, INDEPENDENTS

The government's only other hope of passing the laws is to negotiate with the five Greens and two independents, who themselves pull in different directions.

The five Greens will only support the plan if the government makes a stronger commitment to curb greenhouse emissions.

Independent Nick Xenophon also wants stronger emissions targets, and he has commissioned more economic modelling on alternatives to the government's plan.

The final independent, Steve Fielding, has said he does not believe human activity is responsible for global warming, and he is unlikely to support the legislation.

Fielding's stance means even if the government won support from the Greens and Xenophon, it still would not have the numbers to pass the package.

WAIT FOR THE NEXT NORMAL ELECTION

The next regular election is due in late 2010. If the laws are not passed by then, the ETS will become a major campaign issue.