Australian government warned not to weaken emissions trade system

Australia's government was warned yesterday against softening a planned emissions trade system expected to hit big corporates and households, with Greens senators saying minor lawmakers could ensure it was still-born.

The emissions trade system will begin in 2010 and bring the biggest upheaval to Australia's energy-reliant economy in a generation, with big miners in particular facing rising costs.

The system's government-backed architect, academic economist Ross Garnaut, will release a draft blueprint on how trading could operate on Friday, with analysts looking for recommendations on an overall carbon emissions cap.

"The key thing that people want to see is a serious cap on emissions. We're saying that it should be at the top end," said Greens Senator Christine Milne, urging a cut of 40 per cent on 1990 emissions levels by 2020.

But consumers, angered by the prospect of higher fuel and electricity costs, are becoming jittery, while a survey of 250 chief executive officers by the Australian Institute of Management found 80 per cent had scant understanding of what the new regime would mean.

The left-leaning Labour government, which won a stunning election victory last November in part on a promise to fight climate change, said it would not bow to pressure for a weaker system of carbon curbs as polls showed rising voter concern.

"The government is not designing an emissions trading scheme on the basis of polls, we're designing it for the long-term economic future of the country," Climate Change Minister Penny Wong told local radio.

On coming to power, the Labour government immediately ratified the Kyoto Protocol on climate change and promised a carbon trading scheme by 2010 to give business a financial incentive to cut pollution.

Australia is responsible for about 1.2 per cent of global carbon emissions, but remains one of the highest polluters per capita because of the nation's reliance on coal and other fossil fuels. It is the world's largest coal exporter and relies on coal to generate about 80 per cent of its electricity.

Newspaper reports said Labour was looking hard at rebates to guard consumers against expected sharp rises in fuel and other costs, with inflation already at 16-year highs and official interest rates at an eye-bleeding 7.25 per cent.

Emissions trading allows companies to accept limits on their greenhouse gases outflows and continue their emissions under permits issued under a national carbon cap.

Trade in permits allow companies to cover their actual level of emissions, with some economists tipping the Australian permit auction could net €12 billion).

Mr Wong said Mr Garnaut's report would be only one factor the government considered, with an official options paper due later in July and laws sent to Parliament by the end of this year and fine-tuning of the emissions scheme done in early 2009.