ANALYSIS-Nod for Australia’s Labor likely boost for CO2 laws

September 7, 2010

By David Fogarty, Climate Change Correspondent, Asia

SINGAPORE, Sept 7 (Reuters) – Australia is now much more likely to introduce a price on planet-warming carbon pollution after support by independents and Greens returned the Labor Party to office on Tuesday.

Independents Rob Oakeshott and Tony Windsor backed Labor on Tuesday, with climate change among their top issues, ending a 17-day wait after an inconclusive Aug. 21 election left neither major party with a majority in the lower house of parliament.

Analysts and industry say a weakened Labor, which held a majority previously and had tried to pass carbon trading laws, will be under pressure from the Greens to revive carbon trading legislation that sectors such as power generators are demanding.

“At the core of Australia’s policy framework must be a price on carbon,” Carl McCamish, executive general manager of sustainability for major power generator and retailer Origin Energy.

Voters punished Labor in part because of the government’s decision in April to shelve emissions trading laws, a step that angered a large number of Australians who wanted stronger action on climate change and industries demanding policy certainty.

“Ongoing uncertainty risks delaying both the investment necessary to meet Australia’s long-term baseload electricity needs and the investment in lower-carbon technology required to gradually reduce Australia’s emissions,” McCamish said in emailed comments to Reuters.

Australia is among the developed world’s most polluting nations on a per-capita basis, with coal used to generate more than 80 percent of electricity.

The previous Labor government won support for laws mandating 20 percent renewable energy generation by 2020. But the laws aren’t enough to cut the nations’ rising carbon emissions.


Last week 19 Australian energy companies, including generator and retailer AGL, TRUenergy and unlisted Pacific Hydro, wrote an open letter in support of a price on carbon to drive a shift to cleaner gas and new-generation renewables, such as geothermal.

“Investors have been looking for some clear political direction on climate change and it appears we may get it,” said Nathan Fabian, chief executive of the Investor Group on Climate Change, which represents institutional investors with total funds under management of about $600 billion.

“A carbon price is sorely needed just for pure certainty for business so we can get on planning the energy transformation that we need,” Lane Crockett, general manager, Australia, Pacific Hydro, a global clean energy investor, told Reuters on Tuesday.

The Greens, whose support is crucial to Prime Minister Julia Gillard’s government, have backed an interim price on carbon, a massive boost in renewable energy investment and in the past have called for a tough carbon cut target for 2020.

The Greens will hold the balance of power in the upper house Senate from July next year, further adding pressure on Gillard to bring in some form of carbon pricing, either through an interim tax or to push through reworked emissions trading laws.

“There’s no doubt we’ll get a price on carbon,” said Martijn Wilder, global head of Baker & McKenzie’s climate change practice.

“In my view you don’t want an interim process, you want to go straight into having an effective means of controlling carbon,” he told Reuters.

A revived emissions trading scheme looked likely, some analysts said, but hinged on the Greens, which previously demanded a 40 percent cut in emissions by 2020 compared with Labor’s unconditional cut of 5 percent by 2020 from 2000 levels.

“Without a majority in either chamber of parliament, the government is likely to revise the emissions trading scheme it proposed under Prime Minister Rudd in order to win legislative support,” said Tim Jordan, a Deutsche Bank analyst for environmental, social and governance, in Sydney.

Reaction from the power trading market was muted on Tuesday, an analyst said, with the feeling it would be some time before the government could move on a carbon price.

“It’s very difficult for (power) pricing to go beyond 2012,” the analyst said. (Additional reporting by Bruce Hextall in Sydney; Editing by Michael Urquhart) ((; +65 6403 5662; Reuters Messaging:

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