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Australian Emissions Trading Scheme down, but not out

03 December 2009

The Australian Government's proposed Carbon Pollution Reduction Scheme (CPRS) was voted down in the Senate yesterday by 41 votes to 33. This is the second time that the proposed emissions trading scheme has been voted down in the Senate, with Kevin Rudd's Labor Government lacking the necessary majority needed to pass the scheme in the Upper House.

The Government has pledged to cut Australian emissions by 5 - 25 per cent by 2020, with the final figure depending on the outcome of a deal in Copenhagen. The defeated scheme is the centrepiece of the Government's climate change strategy.

The vote comes after a rollercoaster two weeks in Australian politics during which the official opposition, the conservative Liberal-National Party Coalition, ousted former leader Malcolm Turnbull after several challenges.

The scheme had looked likely to pass last week, after the Coalition negotiated a series of amendments seeking to provide an additional $7bn in compensation to energy and other big emitting companies. These had been narrowly backed by a Coalition party room vote, before party factions descended into the highly public infighting that ultimately resulted in Mr Turnbull's replacement.

Despite his rejection of the scheme, new opposition leader Tony Abbott has said the Coalition will back a 5 -25 per cent emissions reduction target.

The Australian Greens also voted against the bill, insisting that the targets are not high enough, and that too much is being given to industry in compensation.

Despite the setback, Deputy Prime Minster Julia Gillard announced today that the government will bring the bill, complete with the recently agreed amendments, before the Senate again in February. She stated that the government wants to give the Coalition one more chance, once the summer break has allowed "calmer heads in the Liberal Party to consider this question".

As the legislation has been rejected twice by the Senate, Prime Minster Kevin Rudd has the opportunity to call a snap election and hold a joint session of both Houses of Parliament.  On current poll numbers, Labor would increase its majority in both houses at the expense of the coalition and therefore the legislation would pass.

Rupert Posner, the Climate Group's Australia Director noted that much of the business community is still in favour of the CPRS:

"Leading businesses and industry groups are telling us that they want certainty on this issue and that a market-based approach like the CPRS is the best option for Australia."

"While it is disappointing that Australia cannot provide a further boost to the momentum going into Copenhagen, the scheme will continue to be debated early next year. It is still odds on that Australia will have an emissions trading scheme approved by the Parliament sometime next year."

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