P 010444Z AUG 08
FM AMEMBASSY CANBERRA
TO SECSTATE WASHDC PRIORITY 9941
INFO AMCONSUL MELBOURNE 
AMCONSUL PERTH 
AMCONSUL SYDNEY

C O N F I D E N T I A L CANBERRA 000775 
 
NOFORN 
 
E.O. 12958: DECL: 08/01/2018 
TAGS: AS PGOV SENV
SUBJECT: COALITION RELEASES EMISSIONS TRADING POLICY 
 
Classified By: POLITICAL COUNSELOR JAMES F. COLE.  REASON 1.4 (D) 
 
 ¶1. (SBU) SUMMARY: The Coalition has decided to support an 
emissions trading scheme (ETS) "probably" by 2012, defying 
leader Brendan Nelson who wanted to make the introduction of 
an ETS conditional on the actions of other countries. This is 
a victory for Shadow Treasurer Malcolm Turnbull, and moderate 
Liberals, who are determined not to stray far from public 
sentiment on climate change. The Coalition and ALP ETS 
policies are similar - the main difference is timing, with 
the ALP's ambition a 2010 start date.  The Coalition is 
hoping media attention will now shift to the ALP which has 
the far more difficult task of implementing an ETS. END 
SUMMARY. 
 
COALITION DIVISION 
 
¶2. (SBU) For the previous three weeks, Nelson had 
flip-flopped on support for an ETS, while Turnbull, Deputy 
Leader Julie Bishop and Shadow Environment Minister Greg Hunt 
stuck to the Howard government policy - an emissions trading 
scheme by 2012 regardless of the outcome of international 
negotiations to establish a post-Kyoto global agreement on 
climate. The Coalition party room was divided by those 
(generally Moderates) who wanted to retain the Howard policy, 
and those (mainly the Right) who supported the Coalition 
adopting a tougher stance, including disowning the ETS 
concept. The media quickly focused on disunity in the 
Coalition, shielding the government from hard questions on 
the challenges of implementing an ETS. Nelson and his office 
exacerbated this by continuing to brief journalists about his 
plan to toughen Coalition policy - i.e. making the start of 
an ETS conditional on global responses, without first 
garnering unified support for changing the party's stance. 
 
NELSON FALLS INTO LINE 
 
¶3. (C/NF) On July 29, Shadow Cabinet met in Canberra to 
develop a position on ETS. The momentum appeared to be with 
Nelson, with Turnbull saying earlier in the week that an ETS 
should not be introduced until it was in "Australia's 
interests" to do so, and Hunt telling us that he expected a 
"middle ground" compromise outcome. Nelson, however, emerged 
from the meeting to announce that the Coalition supported a 
commencement date of 2012 for an ETS, but that the design of 
ETS should reflect what the rest of the world is doing, which 
turned back the clock to the original Howard policy, with 
room to oppose some design details if the international 
discussion breaks down. Nelson maintained a 2010 start date 
was irresponsible, but said he was willing to negotiate with 
Rudd. "If he has a convincing argument, we would like to hear 
it." The climate change skeptics and hard-liners in Shadow 
Cabinet reportedly did not offer much resistance. Hunt told 
us that the Shadow Cabinet had crafted a very detailed policy 
on Tuesday, and faced with that, the disgruntled party room 
fell into place relatively easily. Hunt attributed the 
success of the moderate position to a policy of holding their 
nerve and not floating their position too early. He appeared 
to confirm dissatisfaction in the party room over Nelson's 
public musings on what a policy should be. "I don't think the 
leader will be freelancing in the future," he said. 
 
NELSON FLIP-FLOPS AGAIN 
 
¶4. (SBU) On July 30, following a tense Coalition party room 
meeting, Nelson told the press that his MPs had backed Shadow 
Cabinet's position. In his written statement, he said the 
Coalition has a "three pillars approach" to combating climate 
change: A clean energy policy; international pressure; and an 
ETS. The Coalition policy says the ETS must take into account 
QETS. The Coalition policy says the ETS must take into account 
the outcome of the Copenhagen meeting at the end of 2009. The 
Coalition said it would vigorously scrutinize the Rudd 
government's legislation and "not support a scheme that will 
disadvantage Australia's national interest and competitive 
advantage". Hunt said that the Coalition still reserved the 
right to challenge key elements of implementing legislation, 
if they led to a "bad ETS" that did not protect Australia's 
cleaner energy developments or overly exposed Australian 
families to escalating costs. The Coalition believes an ETS 
should commence "not before 2011 and probably by 2012". The 
"probably" was a concession to those backbenchers angered 
that Nelson had not taken a tougher stand in Shadow Cabinet. 
This was reported as another Nelson flip flop, resulting in 
Nelson being put on the defensive again. In a fiery 
television interview July 29, Nelson said to the interviewer: 
"Are you suggesting that it should start in 2012 if it's not 
right?" A major wildcard in the Coalition policy will be 
their inclusion of the outcome of the Copenhagen negotiations 
in the criteria for support of an ETS. While consistent with 
the position of the former Howard government, there is wide 
latitude to fold in any outcome of the UNFCCC process into a 
decision to support or reject an ETS. 
 
LIBS MUST TURN ATTENTION TO ALP 
 
¶5. (SBU) COMMENT: The Shadow Cabinet meeting was held the 
same day a Newspoll showed overwhelming support for an ETS. 
We believe this focused the minds of members in the Shadow 
Cabinet on the political costs of abandoning support for an 
ETS (a Liberal MP told us before the Shadow Cabinet meeting 
that "wiser heads" would prevail). Essentially, the tumult of 
the last three weeks merely resulted in the Coalition 
supporting the policy it took to the 2007 election. Nelson's 
credibility among his colleagues, however, has taken a 
significant hit during this period. It has been an awful 
three weeks for him. His flip-flopping reflects his tenuous 
hold on the leadership. The Right (including his key numbers 
man and climate change skeptic Senator Nick Minchin) wanted 
him to take a tougher line, but Moderate Liberals, the public 
and media are strongly in favor of an ETS. The wriggling has 
fueled doubt among Liberal MPs (including some of those that 
voted for Nelson in the leadership ballot) about his 
discipline and political judgment. The odds of Nelson being 
replaced by the end of the year have shortened considerably. 
If, however, the Opposition can establish some form of unity 
on the ETS question and put their squabbling aside, scrutiny 
will inevitably turn back to the Rudd government which has 
the unenviable task of releasing the hard details on what the 
design and impacts of an ETS will look like over the next few 
months. END COMMENT. 
 
 
CLUNE