December 7, 2016 / 7:14 AM / 8 months ago

Australia PM rejects carbon pricing, fuels divisions with power generators

Australia's Prime Minister Malcolm Turnbull enters the General Assembly Hall to speak during the 71st United Nations General Assembly in Manhattan, New York, U.S. September 21, 2016.Eduardo Munoz

SYDNEY (Reuters) - Australia's center-right Prime Minister Malcolm Turnbull on Wednesday ruled out introducing carbon pricing on emissions from the country's power generators after a backlash from within his own party.

Turnbull told reporters in Sydney the government would "not be imposing a carbon tax" or "an emissions trading scheme", only days after his energy minister flagged the possibility of such a program.

The move has frustrated energy firms who had supported the scheme and now say the government's policy casts doubt over the ability of Australia - one of the largest carbon emitters on a per capita basis due to its reliance on coal-fired power plants - to meet its own carbon reduction goals.

"Whatever happens, it needs to be a market-based mechanism that puts a price on carbon," said Catherine Tanna, managing director of EnergyAustralia, the country's third-largest electricity retailer and second biggest carbon emitter.

Power generators account for roughly one-third of Australia's carbon emissions.

The policy issue has strained relations between Australia's political leaders and its energy generators, which have called for more clarity on how much electricity providers must generate through renewable sources.

The federal government wants 23.5 percent of Australia's energy mix to come from renewables by 2020, but nearly all states have set much more ambitious renewable goals to cut carbon dioxide emissions from their electricity sector - clouding the outlook for many generators.

With several states proposing renewable electricity generation targets of more than 50 percent, Tanna says energy generators believe compliance will be difficult.

Australia aims to cut greenhouse gas emissions to 26-28 percent below 2005 levels by 2030 under the Paris climate accord.

"Australia's climate policy is quite unorganized and there is no certainty for power generators on investment or divestment," said David Blowers, energy fellow, Grattan Institute.

Australia's energy minister Josh Frydenberg on Sunday said the country may introduce an emissions scheme for power generators, requiring electricity producers to purchase credits from other generators should they exceed emission thresholds.

But after criticism from influential conservative figures within the ruling Liberal Party, Turnbull on Wednesday ruled out any form of pricing of emissions.

The Prime Minister is under pressure over poll numbers that have fallen to the lowest levels since he assumed office in September 2015 and has at times been openly rebuked by conservative members of his coalition.

He was deposed as leader of the Liberal Party in December 2009, primarily as a result of his support for a price on carbon emissions.

Reporting by Colin Packham and Byron Kaye; Editing by Sam Holmes

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