In an effort to ease the strain on an economy now on the edge of recession, Prime Minister Kevin Rudd said the government would delay the start of the world’s most sweeping cap and trade scheme outside of Europe until mid-2011, but still aimed to push the emissions trading laws through parliament this year.

While maintaining his interim 2020 emissions reduction target at 5 to 15 percent below 2000 levels, Rudd said the government could increase the cut to 25 percent if other rich nations agreed to similar reductions, a measure aimed at appeasing Green party legislators and environmentalists.

Major emissions industries and political opponents had complained about the original plan for the scheme to start on July 1 next year, saying it would hamper any economic recovery.

The delay could give Rudd, who has been under pressure from industry and opposition politicians to water down or even ditch the scheme, more time to win approval for the plan.

Major emissions industries, from aluminium-smelters to airlines, had complained about the planned July 1, 2010, launch date next year, saying it would hamper economic recovery and destroy jobs at a time when unemployment was rising fast.

A slower start but tougher reduction target might help the government push the carbon-trading laws through an obstructive upper house of parliament dominated by conservative opponents, five Green senators and two swing-vote independents.

Rudd also said there would be a fixed carbon price for 1 year to July 2012.

Conservatives have been calling for the scheme to be delayed and the influential Greens want tougher interim targets.

“I’m a little surprised but I suppose the good thing is at least it gets resolved... The worst outcome is continued uncertainty about what is going to happen,” said Gary Cox, vice president of commodities and energy at global brokers Newedge.

INDUSTRY WELCOMES DELAY

The Australian Chamber of Commerce and Industry (ACCI), representing business, last week told a Senate inquiry into carbon trade that the scheme should be delayed until financial turmoil had passed and the economy returned to trend growth.

“We will certainly welcome any changes,” said Greg Evans, director of industry policy for the ACCI, said on Monday.

“Clearly, the balance of interests warrants delay in the implementation of the operational elements of the...scheme in Australia,” Evans said.

The Australian Greens wrote to Rudd with an offer to break the political impasse in the Senate and support carbon-trading legislation if amendments made it environmentally effective.

The Greens want Australia to make an unconditional emissions cut of 25 percent below 1990 levels by 2020, with a commitment to move to a 40 percent cut if world climate talks in Copenhagen in December forge a new global climate pact.

Rudd was considering extending the upper limit to 25 percent, political sources told Reuters. But in preparing changes, the government would still aim for laws setting up the scheme to pass parliament this year, but delaying its start until 2011.

How Australia will change its carbon trading plan

 Australia’s centre-left government announced a one-year delay and major changes to its carbon trading plans on Monday, citing the global economic recession for the need to set back the start date until July 2011.

Under the changes to the eagerly anticipated scheme, major polluting exporters will receive more free permits and the carbon price will be fixed at A$10 ($7.35) a tonne for the first 12 months of the scheme. The government also opened the door to a tougher 2020 emissions reductions target.

Australia plans to auction carbon permits to 1,000 of Australia’s biggest firms, covering 75 percent of emissions.

Following is a list of changes announced by Prime Minister Kevin Rudd and Climate Change Minister Penny Wong on Monday.

DELAY

The carbon trading scheme will now start on July 1, 2011, instead of the original start date of July 1, 2010. Rudd said the 12 month delay would help business deal with the impact of the global recession. Rudd still wants the legislation for the scheme, which was initially expected to become law by mid-year, passed this year.

CARBON PRICE

The government will fix the price of carbon at A$10 a tonne for the first 12 months of the scheme, with a transition to full market trading from July 1, 2012. The original scheme had capped the price at a maximum A$40 a tonne, but not fixed a price.

EMISSIONS TARGET

The government will lift its target for reducing emissions by the year 2020 to 25 percent, based on 2000 levels, if the world agrees to an ambitious global deal to stabilise levels of CO2 equivalent in the atmosphere at 450 parts per million or less by 2050. It said up to 5 percentage points of the 25 percent target could be achieved through the government buying international credits, such as avoided deforestation credits, using revenue from the trading scheme, no earlier than 2015.

But the government will maintain its target for a minimum cut of 5 percent if there is no global agreement, or by 15 percent if major developed economies agreed to substantial cuts.

The original plan had set a target of 5 percent, with cuts of up to 15 percent if there was a global agreement to deep cuts. The Greens have called for a miniumum cut of 25 percent by 2020.

INDUSTRY HELP

In the first year of the scheme, the government will increase the number of free permits for major polluting exporting industries, under what it labels a global recession buffer.

Industries originally eligible for 90 percent of free permits will now receive 95 percent of permits for free in the first year. Those industries are likely to include anluminium smelters, cement clinker producers, lime, silicon and iron and steel manufacturers.

To qualify for the top level of assistance, industries must produce 2,000 tonnes or more of carbon equivalent for every A$1 million in revenue.

Industries originally entitled to 60 percent assistance will receive an extra 10 percent of free permits in the first year of the scheme, giving an effective rate of assistance of 66 percent. Those industries are likely to include LNG and alumina industries, and petrol refiners.

To qualify for the 66 percent assistance rate, industries must produce between 1,000 and 1,9999 tones of carbon equivalent for every A$1 million in reenue.

Rates of assistance will decline at 1.3 percent ayear, inline with the original plan.