The Australian Senate has put off a vote on the government’s much-debated emissions trading scheme until August. A political stand-off in the upper house of the nation’s parliament could see the country go to an election over the proposed carbon cap and trade laws before the end of the year.

The government had been keen to force a vote on the Carbon Pollution Reduction Scheme (CPRS) even though it was clear the bill would be defeated in a hostile Senate where the government does not hold a majority. The bill has already passed the lower house.

All non-government parties in the Senate oppose the bill for various reasons, despite amendments by the government designed to win the support of the conservative Opposition and independents. The CPRS would cover the top emitting 1000 companies and be applied widely across the economy on 70 per cent of national emissions.

The scheme’s start date has already been delayed a year to July 2011 while free permits and assistance have been increased to trade-exposed industries and the coal sector. The bill now sets a low, fixed carbon price of $A10 ($US8) per tonne in the first two years.

The Opposition argues Australia should not commit to the scheme before it sees the final form of a US scheme and what post-2012 global agreement might emerge at the UN meeting in Copenhagen in December. They have also commissioned more modeling of the economic impacts of the CPRS and alternative carbon pricing options.

The Senate remains highly likely to reject the CPRS on August 13 when it is now scheduled to come to a vote. Two defeats of the bills would give the government a trigger for an early election dissolving both houses of parliament. It’s not clear whether the government would take that option, nor whether the Opposition would be willing to risk it.

A game of brinksmanship is set to play out over the coming months, possibly coming to a head on the eve of the Copenhagen conference. Meanwhile, most business groups would like to see a political resolution in the interests of business certainty.

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