COALITION RELEASES EMISSIONS TRADING POLICY

C O N F I D E N T I A L CANBERRA 000775

NOFORN

E.O. 12958: DECL: 08/01/2018
TAGS: AS PGOV SENV
SUBJECT: COALITION RELEASES EMISSIONS TRADING POLICY

Classified By: POLITICAL COUNSELOR JAMES F. COLE. REASON 1.4 (D)


1. (SBU) SUMMARY: The Coalition has decided to support an
emissions trading scheme (ETS) "probably" by 2012, defying
leader Brendan Nelson who wanted to make the introduction of
an ETS conditional on the actions of other countries. This is
a victory for Shadow Treasurer Malcolm Turnbull, and moderate
Liberals, who are determined not to stray far from public
sentiment on climate change. The Coalition and ALP ETS
policies are similar - the main difference is timing, with
the ALP's ambition a 2010 start date. The Coalition is
hoping media attention will now shift to the ALP which has
the far more difficult task of implementing an ETS. END
SUMMARY.

COALITION DIVISION


2. (SBU) For the previous three weeks, Nelson had
flip-flopped on support for an ETS, while Turnbull, Deputy
Leader Julie Bishop and Shadow Environment Minister Greg Hunt
stuck to the Howard government policy - an emissions trading
scheme by 2012 regardless of the outcome of international
negotiations to establish a post-Kyoto global agreement on
climate. The Coalition party room was divided by those
(generally Moderates) who wanted to retain the Howard policy,
and those (mainly the Right) who supported the Coalition
adopting a tougher stance, including disowning the ETS
concept. The media quickly focused on disunity in the
Coalition, shielding the government from hard questions on
the challenges of implementing an ETS. Nelson and his office
exacerbated this by continuing to brief journalists about his
plan to toughen Coalition policy - i.e. making the start of
an ETS conditional on global responses, without first
garnering unified support for changing the party's stance.

NELSON FALLS INTO LINE


3. (C/NF) On July 29, Shadow Cabinet met in Canberra to
develop a position on ETS. The momentum appeared to be with
Nelson, with Turnbull saying earlier in the week that an ETS
should not be introduced until it was in "Australia's
interests" to do so, and Hunt telling us that he expected a
"middle ground" compromise outcome. Nelson, however, emerged
from the meeting to announce that the Coalition supported a
commencement date of 2012 for an ETS, but that the design of
ETS should reflect what the rest of the world is doing, which
turned back the clock to the original Howard policy, with
room to oppose some design details if the international
discussion breaks down. Nelson maintained a 2010 start date
was irresponsible, but said he was willing to negotiate with
Rudd. "If he has a convincing argument, we would like to hear
it." The climate change skeptics and hard-liners in Shadow
Cabinet reportedly did not offer much resistance. Hunt told
us that the Shadow Cabinet had crafted a very detailed policy
on Tuesday, and faced with that, the disgruntled party room
fell into place relatively easily. Hunt attributed the
success of the moderate position to a policy of holding their
nerve and not floating their position too early. He appeared
to confirm dissatisfaction in the party room over Nelson's
public musings on what a policy should be. "I don't think the
leader will be freelancing in the future," he said.

NELSON FLIP-FLOPS AGAIN


4. (SBU) On July 30, following a tense Coalition party room
meeting, Nelson told the press that his MPs had backed Shadow
Cabinet's position. In his written statement, he said the
Coalition has a "three pillars approach" to combating climate
change: A clean energy policy; international pressure; and an
ETS. The Coalition policy says the ETS must take into account
QETS. The Coalition policy says the ETS must take into account
the outcome of the Copenhagen meeting at the end of 2009. The
Coalition said it would vigorously scrutinize the Rudd
government's legislation and "not support a scheme that will
disadvantage Australia's national interest and competitive
advantage". Hunt said that the Coalition still reserved the
right to challenge key elements of implementing legislation,
if they led to a "bad ETS" that did not protect Australia's
cleaner energy developments or overly exposed Australian
families to escalating costs. The Coalition believes an ETS
should commence "not before 2011 and probably by 2012". The
"probably" was a concession to those backbenchers angered
that Nelson had not taken a tougher stand in Shadow Cabinet.
This was reported as another Nelson flip flop, resulting in
Nelson being put on the defensive again. In a fiery
television interview July 29, Nelson said to the interviewer:
"Are you suggesting that it should start in 2012 if it's not
right?" A major wildcard in the Coalition policy will be
their inclusion of the outcome of the Copenhagen negotiations
in the criteria for support of an ETS. While consistent with
the position of the former Howard government, there is wide
latitude to fold in any outcome of the UNFCCC process into a
decision to support or reject an ETS.

LIBS MUST TURN ATTENTION TO ALP


5. (SBU) COMMENT: The Shadow Cabinet meeting was held the
same day a Newspoll showed overwhelming support for an ETS.
We believe this focused the minds of members in the Shadow
Cabinet on the political costs of abandoning support for an
ETS (a Liberal MP told us before the Shadow Cabinet meeting
that "wiser heads" would prevail). Essentially, the tumult of
the last three weeks merely resulted in the Coalition
supporting the policy it took to the 2007 election. Nelson's
credibility among his colleagues, however, has taken a
significant hit during this period. It has been an awful
three weeks for him. His flip-flopping reflects his tenuous
hold on the leadership. The Right (including his key numbers
man and climate change skeptic Senator Nick Minchin) wanted
him to take a tougher line, but Moderate Liberals, the public
and media are strongly in favor of an ETS. The wriggling has
fueled doubt among Liberal MPs (including some of those that
voted for Nelson in the leadership ballot) about his
discipline and political judgment. The odds of Nelson being
replaced by the end of the year have shortened considerably.
If, however, the Opposition can establish some form of unity
on the ETS question and put their squabbling aside, scrutiny
will inevitably turn back to the Rudd government which has
the unenviable task of releasing the hard details on what the
design and impacts of an ETS will look like over the next few
months. END COMMENT.


CLUNE