Australia delays carbon trade, may toughen target

By Rob Taylor

CANBERRA (Reuters) - Australia's government put back its much-vaunted carbon-emissions trading scheme by a year on Monday, bowing to industry demands for more relief amid a recession while opening the door to an even deeper long-term reduction.

Lacking the political backing to implement the world's most sweeping cap-and-trade scheme outside Europe, Prime Minister Kevin Rudd said the regime would be delayed until mid-2011, but he still aimed to push laws through parliament this year.

But the major opposition, Green opponents and a key independent senator immediately rejected Rudd's concessions as "flawed," making eventual success far from assured.

"Starting slower because of the global economic recession and finishing stronger, with the prospect of a bigger outcome for greenhouse gas reductions... we believe gets the balance right," Rudd told reporters.

The setback was not unexpected after months of hardening resistance to Rudd's plan, a cornerstone of his election platform. Some carbon industry players said the delay could help clear away uncertainty that had stymied early trade and clouded the outlook for corporate costs.

The new draft included several short-term concessions to big industry in Australia, one of the world's biggest emitters per capita: a low fixed carbon price capped for a year at A$10 ($7.36), with a transition to full market trading in July 2012; and increased eligibility for free emissions permits, including 95 percent for the heaviest export-oriented polluters.

But Rudd also left open the possibility of deeper reductions.

While maintaining his interim 2020 emissions reduction target at 5 to 15 percent below 2000 levels, he said the government could increase the cut to 25 percent if other rich nations agreed to similar reductions at Copenhagen -- a measure aimed at appeasing Green party legislators who wanted tougher targets.