Australian Opposition Backs Carbon Caps

By RACHEL PANNETT
CANBERRA -- Australia's opposition leader said he will rally support to pass a government plan to cap the country's greenhouse-gas emissions after Prime Minister Kevin Rudd agreed to key compromises aimed at placating critics of the effort.
If Australia's Parliament passes the carbon plan into law -- which now appears likely -- in a vote scheduled this week, Mr. Rudd will have achieved a significant political victory as other nations struggle to contain carbon emissions world-wide.

A similar plan has moved slowly in the U.S. Senate, and talks between world leaders to carve out a new global pact to replace the Kyoto Protocol in Copenhagen next month appear unlikely to yield a binding deal.
Australia is the biggest per-capita polluter in the developed world because it uses fossil fuels, chiefly coal, for around 90% of its electricity generation. Like the U.S., it is a heavily industrialized economy that has previously resisted capping emissions for fear it could crimp economic growth.
Australia accounts for only about 1.5% of global emissions, so any such program would be largely symbolic in terms of the broader global picture. But it would put further pressure on countries such as the U.S. to accelerate their plans to approve carbon-reduction schemes. One of Mr. Rudd's first acts in office in 2007 was to add Australia to the signatories of the Kyoto Protocol, isolating the U.S. as the only major developed economy not bound by mandatory caps.
Following weeks of discussions between the government and opposition Liberal-National coalition negotiators, Mr. Rudd and Climate Change Minister Penny Wong offered seven billion Australian dollars (US$6.48 billion) in compensation, including loan guarantees and other assistance for coal miners, electricity generators, liquefied natural-gas projects and others. They also offered to permanently exclude agriculture from the program.

Liberal Party leader Malcolm Turnbull said the government made the offers on the condition that its carbon program would pass this year. The opposition leader said the plan is "good for the environment, it is good for farmers, and it offers us one of the best near-term opportunities for carbon-dioxide abatement."
The plan still faces some opposition, including from mining companies and some environmentalists who believe the latest compromises weaken the plan. But Mr. Turnbull's support increases the odds a plan will be approved. Although the governing Labor Party won a majority in Australia's lower house of representatives at the last election, it needs the support of at least seven opposition senators in the country's upper house to pass any new laws -- a number Mr. Turnbull is expected to deliver.
If passed, the government plan will see Australia introduce in July 2011 a market-based carbon-trading program similar to one operating in Europe since 2005, forcing the nation's biggest polluters to pay for their greenhouse-gas emissions. The aim, by 2020, is to reduce Australia's emissions by at least 5% from levels at the turn of the century.
Environment groups and industry were united in their skepticism toward Tuesday's deal. Sen. Bob Brown, whose environmentalist Greens Party holds five seats in the upper house Senate, described it as a "black day for the environment," adding that Mr. Rudd has "caved in to the big polluters" at the expense of households. The Greens are expected to vote against the plan.
Meanwhile, the coal industry continued to hold out for a better deal. Queensland Resources Council Chief Executive Michael Roche said the latest compensation package for coal -- which saw government support doubled to A$1.5 billion over five years, mainly in the form of free permits for carbon emissions -- represents less than 10% of the A$14.5 billion cost the coal industry faces over the next decade if the carbon program is established. Concessions to miners also is a large part of the U.S. debate.
"Every ton of coal not produced in Australia as a result of this tax will simply be produced by our competitors, who are not being penalized in the same way by their governments," Mr. Roche said.
Opposition lawmakers rejected an earlier version of the legislation in August. Key changes since then include making 75% more free permits for carbon emissions available to electricity generators, and extending the compensation period for the sector to 10 years from five years in a package now valued at A$7.3 billion, up from around A$3.9 billion.
Write to Rachel Pannett at rachel.pannett@dowjones.com