Senate votes down Australian cap-and-trade bill

Australia's plans for transitioning to a low-carbon economy were thrown into turmoil today when the opposition successfully blocked the government's flagship emission cap-and-trade bill for the second time this year.

The vote, which follows a dramatic week that saw opposition leader Malcolm Turnbull ousted over his decision to reach a compromise with the government, resulted in the bill being defeated by 41 votes to 33.

The vote represented a victory for Tony Abbott, who replaced Turnbull yesterday as leader of the opposition Liberal Party and successfully managed to marshal senators who had previously been split on the issue to vote against the bill.

They were joined in an unlikely alliance by parliamentarians from the Green Party who also voted against the bill on the grounds that the five per cent cuts in emissions by 2020 promised by the bill are not ambitious enough.

The defeat of the bill, which follows a similar result in the summer, gives the ruling Labor government the legal trigger to call an early election from March next year and pass the legislation through a special joint sitting of both houses of parliament were he returned to office.

However, it remains unlikely that prime minister Kevin Rudd will exercise that right. Deputy prime minister Julia Gillard told reporters that it remained Rudd's intention to hold the next election in late 2010 as originally scheduled.

She also said that the government would launch a last-ditch attempt to pass the legislation before the Copenhagen climate change conference this month, with a vote this Friday designed to allow Liberal senators who had originally signalled support for the bill to break ranks.

"Today the climate change extremists and deniers... have stopped this nation taking action on climate change," she said. "This nation is one of the hottest and driest continents on Earth. We are going to be hit particularly hard and early by climate change. We are determined to deliver the Carbon Pollution Reduction Scheme. We are determined to deliver real action on climate change."

The defeat of the scheme, which was scheduled to come into effect from July 2011 and aims to cover about 75 per cent of Australian carbon emissions, will come as a major blow to both Australian green businesses and the global carbon trading sector which had been anticipating the launch of the largest emission cap-and-trade scheme outside of Europe.

"From the point of view of a lot of businesses in Australia, they're now back in the dark," Tim Hanlin, chief executive of the Australian Climate Exchange, told Reuters. "No one knows what is coming next. For a lot of companies that are going to make investment decisions as we come out of recession, it will be more difficult with no certainty about the carbon price."

The government had offered a series of concessions designed to secure opposition support for the bill, delaying the introduction of the scheme until 2011 and introducing free emission allowance allocations and other financial measures to protect carbon-intensive industries and poor households from adverse impacts. However, the issue split the Liberal Party, which includes a number of climate-sceptic senators and has consistently argued that the scheme would damage the economy.