CANBERRA - Australia's government gained bipartisan backing on Tuesday for its revised carbon-trade plan, avoiding an early election and boosting compensation to big carbon emitters, coal companies and electricity generators.

Opposition leader Malcolm Turnbull said conservative senators will back the scheme in a parliamentary vote later this week, ending a deadlock that threatened the carbon-trade plan, a central part of the government's efforts to fight climate change.

However, divisions over the scheme run deep in the opposition and some members are threatening to vote against it or try to have the Senate vote, expected on Thursday, delayed until February 2010.

The center-left government needs seven extra votes in the 76-seat Senate to pass the scheme, which aims to put a price on every tonne of carbon produced and give industry an incentive to become more efficient.

Some of the Senators have said regardless of the party decision they will cross the floor (and vote against the legislation). I am confident enough Senators will comply with the shadow cabinet and that the legislation will pass, Turnbull told reporters after a heated, eight-hour party room meeting.

The Senate has already rejected the plan once. Another defeat would give Prime Minister Kevin Rudd a trigger for a snap poll.

The scheme is scheduled to start in July 2011, cover 1,000 of Australia's biggest polluters and 75 percent of the nation's greenhouse gas emissions.

It would become the world's most comprehensive carbon trade scheme outside of Europe's in terms of the percentage of emissions covered, but winning the opposition's support has come at the cost of billions of dollars in compensation to industry.


Backing from the Australian Senate would be a boost for U.N. climate talks in Copenhagen that start in less than two weeks.

Neighboring New Zealand is also expected to win parliamentary support later this week for its emissions trading scheme after a long political struggle.

The United States will be eyeing developments in both countries. The government does not yet have the numbers in the Senate to pass its climate bill.

Climate change, and our action on it, will go way beyond any of our lives here assembled. It goes to our kids and our grandkids, Rudd said in unveiling the revised plan.

He said the plan was affordable and would help Australia curb greenhouse emissions, blamed for global warming. The government has set a goal of cutting emissions by at least 5 percent from 2000 levels by 2020, or up to 25 percent if the rest of the world agrees to an ambitious climate pact.

Australia is the world's biggest coal exporter and is one of the world's highest per-capita emitters of greenhouse gases.

Greens politicians said the scheme would do nothing for the environment and would deliver more money to big polluters.

The Australian coal industry expressed disappointment, despite receiving A$1.5 billion in compensation over five years, while the electricity sector will see compensation more than double from A$3.3 billion to A$7.3 billion.

This package represents less than 10 percent of the $14.5 billion bill that the coal industry faces over the next 10 years, while other trade exposed industries will receive 65-95 percent rebate, Australian Coal Association executive director Ralph Hillman said in a statement, adding the deal was bad for jobs.

The Minerals Council of Australia said the bipartisan deal represented a A$114 billion gamble on the outcome of the Copenhagen climate talks in terms of how much the scheme will cost Australian business and households by 2020.

It is a bet on the rest of the world committing to reducing greenhouse gas emissions, Minerals Council chief

executive Mitch Hooke said in a statement.

Talks in Copenhagen are expected to at least yield a politically binding agreement on the shape of a broader and tougher climate pact.

Carbon market participants worried that despite a deal, the market in Australia would remain stagnant partly because of anti-speculative rules that prevented short-selling of Australian Emissions Units, the main trading instrument under the scheme.

It was also unclear if Senate approval would give a boost to a U.N. carbon offset scheme in which governments and companies in rich nations can use CO2 offsets from clean energy projects in poorer nations to meet emissions obligations at home.

Australia says it will allow unlimited imports of the offsets called CERs into its carbon pollution reduction scheme (CPRS).

($1 = 1.081 Australian Dollar)

(Additional reporting by Rob Taylor in CANBERRA, and Michael Perry and Bruce Hextall in SYDNEY; Editing by David Fogarty and Paul Tait)