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Carbon tax a burning issue for Australia's wobbling government— Australia

Preface

The fight to introduce a carbon trading scheme in Australia has already brought down one prime minister. Now it threatens to engulf the tenure of another.

Election, Julia Gillard, Politics

11 July 2011

The fight to introduce a carbon trading scheme in Australia has already brought down one prime minister. Now it threatens to engulf the tenure of another. Over the weekend PM Julia Gillard unveiled a plan for the second biggest carbon emissions trading proposal in the world after Europe’s. And now, analysts say, the real battle begins.

Opponents of the plan, led primarily by Liberal Party leader Tony Abbott and the highly-exposed coal and steel industries, have begun a campaign in the media and the backrooms of parliament that they hope will derail the scheme before it is likely ot be voted into law later this year by a cobbled-together coalition of Labor, the Greens and three independent MPs.

“There will be a concerted campaign to undermine the proposal,” said Tim Jordan, an analyst with Deutsche Bank in Sydney who worked as an advisor to the former climate change minister during the unsuccessful negotiations under the last prime minister Kevin Rudd.

“The fight is far from over. There’ll be months of political wrangling with efforts to block the scheme, either by undermining the independents or putting pressure on the agreement between the government and the Greens, trying to drive a wedge between the parties – there’ll be a big political effort,” he said.

Under the plan, from 2012 a price of AU$23 (€17.50) would be placed on each tonne of pollution. But the most emissions-intensive, trade-exposed activities – aluminum smelting, steel manufacturing, flat glass making, zinc smelting and most pulp and paper manufacturing activities – will receive free permits for 94.5 per cent of industry average carbon costs. Not that they are happy – these firms were the first to lash out at the plan. The New South Wales Chamber of Commerce took out full-page ads targeting the independent MPs that are key to the passage of the bill. If Labor loses just one of them, the ambitious legislation – and Gillard’s government – collapses.

The mining industry spent millions on an advertising campaign against then prime minister Kevin Rudd’s proposed “super tax” on carbon. It helped put the final nail in the coffin of his premiership last year. Those same industries now have to decide whether or not it is worth attempting a repeat act for a fight in which they appear to be losing the momentum, according to Professor Peter Chen, an media expert at the Department of Government and International Relations at the University of Sydney.

“They’re going to run a marginal seat campaign against Labor Party members and try and mobilise people in those areas. And that means a lot of money,” he said.

Still, the countervailing forces are so powerful that the scheme is more than likely to pass, says Deutsche Bank’s Jordan. The government needs a win and the Greens know this is their last chance for a decade if it fails. The independents, meanwhile, only have influence in government because of their ability to influence this vote, which they don’t want to squander.

“Two weeks ago I was giving it about 50-50. I just thought there were so many impediments to a deal, but now I think it’s got be better than 75 per cent,” Jordan said.

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