By Rob Taylor
CANBERRA (Reuters) - Australia's parliament rejected a plan for the world's most ambitious emissions trade regime as expected on Thursday, bringing the nation closer to a snap election and prolonging financial uncertainty for major emitters.
Conservative lawmakers holding the largest block of votes in the Senate joined with Green and independent Senators to defeat the government's plans for a Carbon Pollution Reduction Scheme set to start in July, 2011.
But the government renewed its pledge to push through the scheme before a U.N. meeting at year's end in Copenhagen where world nations will try to hammer out broader global climate pact. Canberra is eager to position itself as a climate leader, not a laggard.
"This bill may be going down today, but this is not the end," Climate Change Minister Penny Wong told the Senate in a veiled pointer to a possible snap poll.
"We will bring this bill back before the end of the year because if we don't this nation goes to Copenhagen with no means to deliver our targets," Wong said before the vote.
If the Senate blocks or rejects the legislation a second time, after an interval of three months, it will hand Prime Minister Kevin Rudd a trigger for an early election. Rudd remains well ahead in opinion surveys.
With polls showing most Australians favor action to combat climate warming, Rudd's Labor has promised emissions cuts of 5-25 percent on 2000 levels by 2020, with the higher end dependent on a global agreement at the Copenhagen talks to replace the U.N.'s Kyoto Protocol.
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Of the 72 Senators present in the chamber, 30 voted for the scheme and 42 against in a show of hands purely along party lines. The government would have needed seven more votes for the scheme to pass.
Only minutes after Thursday's vote, Australia's second-largest power retailer, Origin Energy, called on lawmakers to urgently agree a plan to cut carbon emissions.
"The ongoing uncertainty surrounding the (carbon-reduction) legislation is 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," it said in a statement.
"We remain convinced the CPRS legislation provides the framework for a good, workable scheme."
Australia is the world's biggest coal exporter, and relies on coal for about 80 percent of electricity generation, prompting industry warnings some coal mines and coal-fired power stations will be forced to close under the carbon-trade regime.
Under the scheme, about 1,000 of Australia's biggest polluting companies would have had to purchase carbon permits, covering 75 percent of national emissions.
The major conservative opposition wants the scheme delayed until after Copenhagen and the outcome of a vote in the U.S. Senate on carbon trading legislation.
Developed nations are under pressure to firm up their emissions reductions targets for 2020 to help seal a post-Kyoto pact. Big developing nations, such as India and China, which are not bound by emissions curbs under Kyoto, are already taking steps to tackle their rapidly growing carbon pollution.
China, widely considered the world's biggest emitter, on Thursday signaled a long-term plan to curb greenhouse gas emissions as an important part of its development plans, blaming global warming for increasing droughts and floods and melting glaciers.
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The government's emissions trading plan was a key promise from Rudd's 2007 election win. He has said he prefers to serve a full three-year term, with elections due in late 2010, but analysts have said he might want a poll in early 2010 to avoid a vote later in the year when unemployment is expected to peak.
The Australia Greens, who control five crucial Senate swing votes, wrote to Rudd and Wong after the rejection to promise future support for the 11 CPRS bills if the government hardened its reduction targets and backed renewable energy.
"We invite the government to immediately engage in constructive discussions with the Greens on this proposal, so we can together create meaningful action on the climate crisis," Greens leader Bob Brown said.
Environment groups said the failure of the legislation left the world in a more vulnerable position in lead-up negotiations to the Copenhagen meeting.
"We are all aware that climate change is an urgent problem which needs an urgent solution," WWF-Australia Chief Executive Greg Bourne said.
(Additional reporting by James Grubel in CANBERRA and David Fogarty in SINGAPORE; Editing by Michael Perry and Bill Tarrant)
