RUDD'S EMISSIONS TRADING SCHEME DEFEATED IN SENATE

UNCLAS SECTION 01 OF 02 CANBERRA 001070 SENSITIVE SIPDIS STATE FOR S/SECC STERN, PERSHING, OES/EGC TALLEY, EEB MONOSSON, WHITE HOUSE FOR BROWNER E.O. 12958: N/A TAGS: SENV KGHG PREL AS SUBJECT: RUDD'S EMISSIONS TRADING SCHEME DEFEATED IN SENATE REF: A. CANBERRA 1053 ¶B. CANBERRA 920 ¶C. CANBERRA 893 ¶1. (SBU) Summary: The Rudd government's Carbon Pollution Reduction Scheme (CPRS) was defeated in the Senate after the Opposition changed leadership and subsequently rejected the scheme. The government will re-introduce the bill on February 2, but consensus is that the current deal is dead. In the meantime, Rudd will not benefit from the added leverage that an approved CPRS legislation would have given him in international negotiations at Copenhagen. The Greens could now acquire the role of power broker in future climate change votes in the Senate. End Summary. CPRS FALLS SHORT BY 5 VOTES -------------- ¶2. (SBU) The CPRS identified a reduction target between 5-25% over 2000 levels by 2020 (depending on the outcome of international negotiations) and did not include specific targets that were to be announced at Copenhagen. Nevertheless, the CPRS was defeated following several days of intense debate (more than 40 hours in the Senate). The election of new Liberal Leader Tony Abbott (ref A) on December 1 was the final blow, as he immediately signaled he would not vote for the bills, characterizing them as "a $120 billion tax on Australians." All the Independent, Green, National Party and Liberal (save two) senators voted against the bill. ¶3. (SBU) Major Australian industry groups generally accept the CPRS and want an end to the uncertainty over a future low carbon framework. The government failed to convert that acceptance public pressure on the Opposition from key industries ahead of the vote. The government plans to reintroduce the bills on February 2, but Abbott's outspoken opposition to climate change and the CPRS in particular will make it very unlikely that the government can negotiate a deal in 2010. FRONT AND CENTER FOR 2010 ELECTIONS -------------- ¶4. (SBU) General opinion is the turnabout on the CPRS will weaken the Opposition in future elections, which could come as early as March if Rudd chooses to use the defeat as a trigger for a double-dissolution of parliament. The only way the existing plan could be passed now is through a joint sitting of parliament following an early election. Few believe that Rudd, not known as a risk-taker, will take that route. Climate change should therefore be one of the predominant campaign issues in the regular elections, which are scheduled for late 2010. ¶5. (SBU) The Opposition will need to devise a counter-proposal to the cap-and-trade scheme in the first quarter of 2010. The Liberals will be hesitant to embrace carbon taxes - since they axed the CPRS by portraying it as a tax - and so will likely rely on alternative approaches, such as increased funding for clean technology, voluntary agricultural offset programs and sequestration, and subsidies Qagricultural offset programs and sequestration, and subsidies for higher renewable energy investment. Given the Liberals' overall electoral weakness, the Greens could gain several Senate seats and become the swing party in the Senate, and further complicating passage of future legislation. WILL IT IMPACT COPENHAGEN? -------------- CANBERRA 00001070 002 OF 002 ¶6. (SBU) Comment: The government's position fell apart due to a perfect storm of growing unease about the impacts of the national cap-and-trade system's cost, irreconcilable differences within a skeptical opposition, and the Rudd government's inability to convincingly link the CPRS to Australia's future welfare, at least among enough members of the Opposition. The defeat means little for Australian industry and emissions in the short term, as the CPRS was not due to enter into force until 2011. Rudd will be unable to use passage of the bills to demonstrate Australia's strong leadership role on this issue in Copenhagen. Australia's failure to enact a comprehensive scheme could further stoke fears that developed countries may not be able to follow through domestically on commitments made in Denmark. BLEICH