The Coalition’s inability to secure a majority in the Senate following last weekend’s election means it will face a challenging environment in seeking to pass legislation over the next 12-18 months. Analysis suggests that with little support for both the carbon tax or Direct Action in the ‘current or ‘new’ Senate, a cross-party compromise on emissions regulation is highly likely. Should the Coalition seek to work with the current Senate to repeal the carbon tax in its first 100 days, analysis suggests it will be forced to concede on Labor’s ‘early ETS’ policy – which is unlikely. Should the Coalition wait to negotiate the repeal of the carbon tax with the new Senate, the gathering of minor party support is likely to be complicated by uncertainty over the Coalition’s current Direct Action Plan, with minor party support likely to emerge should the policy be re-worked to incorporate ‘baseline and credit’ principles, in line with Senator Xenophon’s preferred carbon market model.
As a result, emissions trading – in some form or another – appears likely to come back into focus in the Australian market. In this Market Tracker, we review the shape of the new Senate, analyse party positions on key carbon issues and model likely voting outcomes. We also update our policy probabilities and take a deeper look at timing scenarios for carbon legislation in both the current and new Senate.
