The Cabinet’s Climate Change sub-committee met this morning and decided to delay and significantly weaken the Government’s proposed emissions trading scheme. A lunchtime announcement by the Prime Minister detailed the changes: the scheme would be delayed until 2011 — after the next election — the range of its emissions reduction target will be reduced by only 5% of 2000 levels by 2020 unless agreement is struck at Copenhagen this year to pursue a 25% target. The price of carbon will be set at $10 per tonne for the first year of the scheme.

The amendments represent almost complete surrender to the largest polluters, who will now face virtually no increased cost associated with their carbon emissions. There is still no additional assistance to the coal industry, but Climate Change Parliamentary Secretary Greg Combet, in an implicit rebuke to Minister Penny Wong, will be tasked with negotiating with the sector.

The Government has consistently argued for the need to commence an emissions trading scheme on 1 July 2010, although it rejected speculation early this year that it was considering a delay after is significantly softened its rhetoric on the issue and commenced an abortive House of Representatives inquiry into alternative ways of addressing climate change. It had argued that business’s need for certainty and the urgency of Australia commencing its transition to a low-carbon economy mean the Coalition’s approach, of delaying the scheme until 2011 or 2012, was unviable.

In recent months, however, the Government has lost control of the climate change debate, which helped it defeat John Howard in 2007 and wrecked Brendan Nelson’s leadership last year. The Government’s unambitious targets and generous handouts to big polluters and Penny Wong’s dreadful handling of key stakeholders has seen the Government lose its climate change advantage and appear as recalcitrant as the Howard Government on the issue. Until recently, the Government has been locked into a strategy of claiming it had got the balance right between Coalition climate sceptics and Green fundamentalists.

The delay will not mean the current legislation would be withheld – in fact the point of the delay and the extensive revisions to the scheme will be to refocus pressure on Malcolm Turnbull to support the legislation on the basis that the Government had compromised on the key Coalition demands of timing and compensation. Given the Greens’ demand for an effective scheme and serious emissions targets, the Coalition is the Government’s only chance of passage through the Senate for its ineffectual CPRS. The additional pressure on Turnbull will further stress the Coalition, as Senate Nationals like Barnaby Joyce and Ron Boswell have indicated they are extremely unlikely to vote for an emissions trading scheme of any kind. However, the legislation would pass the Senate with the Nationals and minor parties voting against it.

The Greens will today launch an advertising campaign against the current version of the CPRS and offer support for an amended version of the scheme based on an unconditional emissions cut of 25% below 1990 levels by 2020, with a commitment to move to 40% conditional on the success of the Copenhagen conference later this year. The Greens have also suggested a range of improvements to the scheme, and proposed complementary measures, but unlike the 25% target, these are negotiable. The Government’s changes, however, indicate it is only interested in securing passage with the Liberals’ support.

The watering-down of the scheme leaves Turnbull with the choice of supporting the Government and publicly displaying the splits within his own Coalition, or maintaining his opposition on other grounds and playing to the Government’s portrayal of him as ideologically extreme and contrarian. The pre-emptive nature of the announcement also continues the peculiar Government obsession of not negotiating with the Coalition in the Senate, enabling it to persist with its strategy of claiming the Opposition is remorselessly negative. The Coalition is now in a very difficult position on the issue.

The changes will mean the costs of reducing Australia’s emissions will be greater, and Australia will go to the Copenhagen conference with a scheme that creates little incentive for any transition to a low-economy. Achieving a 25% reduction target will now be substantially more difficult with no contribution from large polluters, a delay and a capped price in the first year. It continues the remarkable string of victories big polluters have scored in neutering action on climate change, coming after last week’s exemption to the mandatory renewable energy target.

However, the Government will have regained control of the issue, which has always primarily been a political tool for it rather than a serious challenge to prevent climate change.