By James Grubel
CANBERRA (Reuters) - Australian Prime Minister Julia Gillard reaffirmed on Friday a delay in introducing a price for carbon pollution, angering environmentalists, scientists and business ahead of her bid to secure re-election.
The delay, until 2012 at least, is certain to test the ruling Labor Party's ties with the small Greens party ahead of the August 21 contest. The Greens are set to be kingmakers in the next parliament, controlling the balance of power in the Senate upper house.
Voters deserted Labor in favor of the Greens in April when the government first postponed a carbon trading scheme after twice failing to win passage of its climate policy in parliament.
"This is a complete failure of leadership by the prime minister," said Greens Senator Christine Milne.
Some academics were blunter.
"The majority of Australians will see this for what it is, a feeble attempt to defuse climate change as an election issue," said Richard Denniss, Executive Director of the Australia Institute.
Opinion polls show Gillard has turned Labor's fortunes around and the latest Reuters Poll Trend shows she is on track to win the election with an increased majority.
The government and conservative opposition have both promised to cut emissions by five percent by 2020, but the opposition is opposed to carbon trading, which it calls a great big new tax.
Big business and mining companies also oppose carbon trading, saying it would increase their costs and force projects offshore.
Gillard said a trading scheme was essential to reduce carbon emissions, but no decision would be made until a new Citizen's Assembly canvassed community views for the next 12 months.
"Australians have real concerns about making changes that are this big and they need more information," she said. "They are concerned about the impact on jobs and the impact on the prices of goods and services that they rely on, especially electricity."
Voters want quick action on climate change, according to opinion polls. Business is increasingly concerned over a lack of a carbon policy, with power suppliers warning of stalled investment and rising power prices.
Economics professor Warwick McKibbin, a board member of the Reserve Bank of Australia, said Labor's climate policy was "extremely disappointing" and delayed action purely for "political advantage."
EMISSIONS TRADING UNCERTAINTY REMAINS
The lack of a price on carbon would cost the economy and consumers an extra A$2 billion ($1.75 billion) by 2020 due to investment in less energy efficient coal-fired power plants, the Climate Institute estimates.
"Business has been on board with carbon pricing for some time. This proposal could simply mean more procrastination," Frank Jotzo, deputy director of the Australian National University's Climate Change Institute.
The global head of Baker & McKenzie's climate practice also questioned Labor's climate policy.
"To what extent is this an election policy as opposed to a government policy?" said Martijn Wilder. "On the key issue on whether or not there will be an emissions trading scheme, there still remains uncertainty."
To reassure big business, Gillard said carbon trade policy would remain the base for generous compensation for the biggest polluters. She ruled out lifting the threshold for compensation.
Australia, the world's largest coal exporter, accounts for about 1.5 percent of global emissions, but is one of the highest per capita emitters due to a reliance on burning coal to generate about 80 percent of domestic electricity.
Gillard said a re-elected Labor would demand new coal-fired power stations be equipped to capture and store carbon.
She also announced an extra A$1 billion over 10 years to help promote renewable energy projects. Australia has laws to ensure 20 percent of power comes from renewable energy by 2020.
"We have not abandoned our commitment to take action on climate change," Gillard said. "We will harness the power of natural resources - wind, sun, geothermal energy and biofuels."
(Additional reporting by Michael Perry in Sydney; Editing by Ed Davies and Ron Popeski)
