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OO RUEHPB RUEHPT
DE RUEHBY #0437/01 1240717
ZNR UUUUU ZZH
O 040717Z MAY 09
FM AMEMBASSY CANBERRA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1466
INFO RUEHBJ/AMEMBASSY BEIJING 9455
RUEHCP/AMEMBASSY COPENHAGEN 1142
RUEHJA/AMEMBASSY JAKARTA 5430
RUEHPB/AMEMBASSY PORT MORESBY 2002
RUEHUL/AMEMBASSY SEOUL 9784
RUEHKO/AMEMBASSY TOKYO 3519
RUEHWL/AMEMBASSY WELLINGTON 5762
RUEHBN/AMCONSUL MELBOURNE 6319
RUEHPT/AMCONSUL PERTH 4582
RUEHDN/AMCONSUL SYDNEY 4542
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHMFIUU/HQ EPA ADMINISTRATORS WASHINGTON DC
RHEHAAA/THE WHITE HOUSE WASHINGTON DC

UNCLAS SECTION 01 OF 02 CANBERRA 000437 
 
SENSITIVE 
SIPDIS 
 
STATE FOR S/SECC STERN, OES/EGC TALLEY, USDA FOR FAS/OA AND 
OCRA, TREASURY FOR PIZER, DOE FOR SHRIER, EPA FOR WAXMONSKEY 
 
E.O. 12958: N/A 
TAGS: SENV KGHG ECON AS
SUBJECT: RUDD PULLS PLUG ON EMISSIONS TRADING IN 2010 
 
REF: CANBERRA 411 
 
¶1. (SBU) Summary:  Australia will delay implementation of its 
proposed economy-wide emissions trading plan until July 2011 
in response to strong political opposition (reftel) and the 
global recession.  PM Kevin Rudd announced May 4 changes to 
the government's Carbon Pollution Reduction Scheme (CPRS) 
intended to secure the votes to win Senate passage this year. 
 Facing growing resistance among Coalition and independent 
senators, and vehement pushback from the Greens, Rudd and 
Climate Change Minister Penny Wong have chosen the lowest 
cost compromise by delaying the CPRS for a year and then 
imposing cost controls to further protect industry from 
initial costs of the scheme from 2011 to 2013.  If 
international agreement on tough emissions reduction targets 
is reached, however, Australia's target for 2020 would 
increase from 15 percent to 25 percent.  The compromise may 
not be enough to win Greens support, but may be enough for 
the Coalition to support passage of the CPRS legislation 
before the international meeting at Copenhagen in December. 
End Summary. 
 
START DATE DELAYED 
------------------ 
 
¶2. (SBU) Rudd announced the changes to the six bills 
comprising the CPRS at a news conference on May 4, saying 
they were necessary to adapt to the changed global economic 
conditions since the CPRS White Paper was released in 
December 2008.  The changes will move the start date of the 
CPRS to 2011 instead of 2010, fix carbon prices at A$10 a ton 
for the first year of the scheme, increase assistance for 
trade exposed industries, attach a heavily-conditioned target 
of 25 percent reduction above the 15 percent in the CPRS now, 
and establish a Carbon Trust to help fund voluntary actions 
to reduce emissions.  The 25 percent target will be adopted 
only if a global agreement is reached that includes 
aggressive action to hold atmospheric CO2 concentrations at 
450 parts per million by 2050, which Rudd associated with a 
"scientific chance" to save the Great Barrier Reef.  The 
changes are designed to answer many of the attacks from the 
Opposition and industry that the scheme was too aggressive in 
light of the global financial crisis.  Rudd said that the 
amended legislation will be put before Parliament as soon as 
possible, likely during the next sitting, which begins the 
week of May 11.  Rudd and Wong still hope to pass the 
legislation this year in order to have a credible national 
commitment on the table before UNFCCC negotiations culminate 
at Copenhagen in December. 
 
¶3. (SBU) The changes to the CPRS clearly aim to put greater 
pressure on the Coalition to support the scheme.  Support for 
the CPRS has eroded steadily with worsening economic news 
over the past year, and major industry and political 
opponents have been increasingly vocal against the plan. 
Australian Cement Industry Federation CEO Robin Bain told 
econoff on May 1 that she was convinced the CPRS was headed 
Qeconoff on May 1 that she was convinced the CPRS was headed 
for defeat.  Most telling, Bain said, was that Rudd had not 
made a major public appearance to support the scheme in 
several months, and key industries like LNG and 
manufacturing, even though they had won government support 
within the CPRS legislation were still arguing publicly 
against it.  Climate Institute analyst Edwin Jackson told 
econoff on April 27 that there were "a range of scenarios" 
facing the CPRS, including defeat, modification, or passage 
with Coalition support.  Jackson said that polling showed 
general support for climate change was still strong in 
Australia despite the global downturn.  He acknowledged that 
the accelerating pace of action in the U.S. was helping the 
government's push here, but said that the plan then in place 
was drawing fire from all sides, especially as economic news 
worsened.  The Coalition-sponsored Pearce Review of the CPRS 
was released on April 29, and said that the government had so 
 
CANBERRA 00000437  002 OF 002 
 
 
far failed to adequately assess the environmental costs and 
benefits of the CPRS and argued that it would lead to lower 
wages in real terms over the long haul.  Pearce also 
suggested the economic analysis of the risks to 
competitiveness and transitional impacts of the CPRS were 
inadequate.  Opposition Leader Turnbull told the press on May 
4 that the Coalition would not back the CPRS legislation and 
called on the government to refer the scheme, and 
alternatives like a carbon tax, to the Australian 
Productivity Commission for a detailed review. 
 
ECONOMIC WOES CONTINUE 
---------------------- 
 
¶4. (SBU) The announcement comes as economic news continues to 
worsen for Australia.  Unemployment claims continue to rise 
and housing prices are falling across Australia as the 
recession sets in.  The May 12 budget is believed by most to 
include large-scale government borrowing to pay for a range 
of Rudd's key obligations.  Rudd was careful to argue in his 
press conference on the CPRS that it was the government's 
"aspiration" that the CPRS will be self-funding and not 
increase costs on households in the initial phases, but did 
not guarantee that Australian families would not see any 
significant price increases. 
 
¶5. (SBU) Comment: In making these changes to the CPRS, Rudd 
has recognized that the scheme in its initial form was headed 
for defeat in the Senate.  While both independent senators 
and the Greens are still unlikely to support this new scheme, 
the changes are clearly aimed at attracting Coalition support 
in the Senate.  The delay pushes the impact of the scheme out 
beyond the next election and matches Turnbull's demand for a 
2011 start date.  Big business has now gotten a better deal 
from the Government and may decide that this is the best deal 
it will get.  In addition, the tougher conditional target 
could protect the ALP from the flight of disaffected Labor 
climate change voters to the Greens, while the delay and 
further protection for industry will help protect the jobs of 
Rudd's "working families."   The changes confirm Rudd as a 
pragmatist who sees the benefits of passage of the CPRS 
legislation as more important than their economic impact over 
the next 5-6 years.  With economic problems leading the 
headlines, Rudd and Wong have softened their initial bid in 
order to get something they can take into both the 2010 
elections and the international arena. 
 
CLUNE