SCENARIOS-Where to now for Australian carbon trade laws?

Published: 05 Nov 2009 19:06:39 PST

CANBERRA, Nov 6 - Australia's government is running out of time to pass its carbon-trade laws ahead of December's global climate talks in Copenhagen, with a weak domestic opinion poll for Prime Minister Kevin Rudd clouding the outlook.

Climate Change Minister Penny Wong has begun negotiations with the opposition over amendments to the scheme, designed to end a deadlock in parliament's Senate. The chamber sits only 8 more days this year, from Nov. 16.

Rudd is struggling to deal with 78 asylum seekers stranded off Indonesia on an Australian ship. The issue has led to a dramatic drop in Rudd's poll support and could embolden the opposition to harden its position against the carbon laws.

The government wants carbon trading to start in July 2011, and the laws passed by the end of this month.

Here are possible outcomes for the package of 11 carbon-trade bills, which were defeated once already in the Senate in August.

WILL THE LAWS PASS THIS YEAR?

* The chances of the laws passing this year are growing less likely. Australian National University climate law expert Andrew MacIntosh says there is only a 30 to 40 percent chance of a deal before February 2010.

* The government says it is negotiating amendments in good faith, meaning there is still a chance of a deal. But the government wants to make sure any changes do not hurt the budget.

* Updated budget figures on Nov. 2 show the scheme will run at a deficit in its initial years, leaving little room for extra industry compensation demanded by the opposition.

* If a deal is done with the opposition, up to 10 opposition lawmakers, including 5 members of the junior National Party, could defy Opposition Leader Malcolm Turnbull and vote against the scheme.

* The government, which does not have a majority in the Senate, needs seven votes from other lawmakers to pass the bills. If a deal is brokered, the government should then secure the numbers, even if the opposition splits.

* A "yes" vote would give industry a boost, putting a price on every tonne of carbon emitted and giving certainty on investment plans. It would also be good for the Copenhagen climate meeting because it showed a major energy user and exporter taking steps to tackle its emissions.

WHAT WOULD A DEAL LOOK LIKE?

* A deal to postpone the Senate vote until February 2010 and after the Copenhagen summit would be a major win for the opposition, and may improve the chances of the laws passing next year. But it would extend business uncertainty.

* The government would need to permanently exempt agriculture from the scheme. That would have minimal impact on the budget, as agriculture is already exempt until at least 2015.

* The opposition also wants more compensation for coal miners and electricity generators, and more generous qualifying rules for compensation for exporters, but the government is unlikely to make any big changes on these issues.

WHAT HAPPENS NEXT?

* The next regular round of opinion polls, due the week parliament resumes from Nov. 16, could be the key.

* If the asylum seeker issue continues to erode Rudd's poll support, the opposition could strengthen its stance and make it harder to achieve a political deal.

* At the same time, the government continues to attack the opposition for being divided on climate policy. The risk is that Rudd might be more interested in trying to destabilise Turnbull's leadership than he is in a deal on carbon trading.

Both sides of the political divide in Australia will also be carefully watching progress of the U.S. climate bill which, like Australia's laws, aims to limit carbon emissions through trading of pollution permits.

While a U.S. Senate panel approved the Democratic bill on Thursday, it's looking increasingly unlikely it will pass a full Senate vote before Copenhagen because it lacks majority support.

Support for Obama's administration might also be eroding after resounding defeats for Democratic Party gubernatorial candidates in Nov. 3 polls.

WILL THERE BE AN EARLY ELECTION?

* Rudd would have the option of calling a snap election any time, but possibly in early 2010, if the laws are postponed or defeated a second time in the Senate.

* But Rudd has regularly played down the chances of an early election and said he wants to serve his full term, with elections around the end of 2010.

* Shifting pubic sentiment on asylum policy would also cool the chances of an early election.