Acting Prime Minister Julia Gillard said the government would re-introduce the carbon trade bills in February to give the opposition Liberal Party one more chance to support the scheme, adding the government was not looking at an early election.
“We believe that over the Christmas period there is time for the calmer heads in the Liberal Party to consider this question, to consider acting in the national interest,” Gillard told reporters.
“This nation is one of the hottest and driest continents on Earth. We are going to be hit particularly hard and early by climate change.”
The government, she said, was determined to “deliver this legislation. That is why we will bring it back to parliament next year. The prime minister has made it very clear that it is his intention to have parliament go full term.”
It was the second rejection of the carbon-trade legislation by a hostile Senate. The vote gave Rudd a legal trigger to call an election that could come as early as March or April 2010, and to then ram his laws through a special joint sitting of both houses of parliament if he is returned to power.
The prime minister, who is overseas, had hoped to take his carbon-trade scheme to next week’s global talks in Copenhagen, where world leaders will seek to curb greenhouse gas emissions.
The Senate rebuff throws the future of carbon trading in Australia into confusion, creating new uncertainty for business, which had sought clarity from the political debate.
“From the point of view of a lot of businesses in Australia they’re now back in the dark. No one knows what is coming next,” said Tim Hanlin, chief executive of the Australian Climate Exchange.
“For a lot of companies that are going to make investment decisions as we come out of recession, it will be more difficult with no certainty about the carbon price,” he said.
Australian electricity prices fell after the Senate rejected the legislation, with the 2011 contract falling 3.7% to Aus$44 per megawatt hour in thin trade.
The “cap and trade” carbon scheme would have forced big polluters, particularly in the coal and electricity sectors, to buy carbon emission permits. Rising permits prices would act as an incentive to reduce greenhouse gases.
The scheme was defeated in the Senate, by 41 votes to 33, by opposition climate sceptics and Greens who wanted tougher emission reduction targets.
It would have been the biggest outside Europe, covering 75% of Australian emissions and starting in July 2011.
Senior opposition lawmaker Christopher Pyne said he expected a dissolution of both houses of parliament and an election early in the new year, ahead of polls due around late November.
“I think the election will be on March 6. I think the government will call a double dissolution election if the ETS (emissions trading scheme) is voted down this week,” Pyne said ahead of the vote.
John Connor, chief executive officer of the Climate Institute, said: “It is difficult to see what option we have but to actually put this to the public in a double dissolution election”.
Bookmakers Centrebet said the odds of a Rudd victory at the next election lengthened for the first time in several months after the carbon laws were defeated, to $1,22 from $1,15, while odds of an opposition win shortened to $4,10 from $5,00.
Market analysts believe defeat of Australia’s emissions trading plans could temporarily dent political momentum ahead of next week’s U.N. climate talks, but the impact is unlikely to affect global carbon prices until at least 2013.
European emissions traders told Reuters that regardless of whether some opposition rebels backed the government’s bill or it failed completely; an Australian scheme in its proposed form would have little immediate impact on carbon prices.
Australia’s population of 21 million has the rich world’s highest per capita carbon emissions. It is heavily reliant on coal, shipping and motor transport, so its environmental policies and carbon-cutting potential are closely watched.
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