Decision shaping up as one for the purists

THE looming convulsion over climate change is about two questions: how much extra financial compensation the Rudd government offers to win its policy and whether the Liberal Party declares an ideological war against urgent Australian action to mitigate global warming.

The answers are integral to Malcolm Turnbull's survival as Opposition Leader, Kevin Rudd's 2010 re-election strategy, the integrity of Australia's climate change policies and the future path of politics.

The past week has seen a deepening of the split within the Liberal Party, with Senate leader Nick Minchin defying Turnbull by leading the charge to bury Rudd's scheme, and leadership aspirant Tony Abbott switching sides to join the Minchin camp.

At week's end Turnbull was still planning to crash through. His game plan is to carry his shadow cabinet to support Rudd's amended scheme, obtain a majority within a bitterly divided partyroom and wear damaging defections in the Senate in the cause of denying Rudd a double-dissolution poll. Turnbull remains confident he can prevail. But his tactics can be undone at several points. He needs substantial concessions from the Rudd government in the final wash-up of the Penny Wong-Ian Macfarlane negotiation; he must manage a party where hostility to climate change action is growing; and he risks as the price of victory significant Senate defections that mean a permanently fractured party, casting doubt on his ability to survive as leader.

The events of next week defy prediction. But the international trend is working against Rudd and Turnbull. The Copenhagen conference, once hailed as the event to authorise a new treaty, will signal the inability of nations to find global agreement. The election of Barack Obama has failed to deliver meaningful US action. And the divisions between developed and developing nations are as deep as ever. Such trends have boosted the opponents of action within the Liberals and the Nationals. Antagonism towards Rudd's Carbon Pollution Reduction Scheme is growing among the Coalition rank and file at the same time that Turnbull is trying to negotiate a deal that gives it the kiss of life. This creates a potentially explosive situation. A significant minority against any deal has formed within the shadow cabinet.

Meanwhile, Abbott is sending a new message to his leader: the best way of uniting conservative Australia is to oppose the scheme and rally a voting crusade against it through to the 2010 election.

For Turnbull, however, this is a highly unpalatable (and untenable) option since the whole world knows he believes in global warning, champions an Australian response and believes in an ETS. From the start, Turnbull's electoral judgment was that those Liberal MPs and senators who see electoral dividends in an ideological confrontation with Rudd on climate change are barking mad. The Liberal division on climate change is unlikely to be easily repaired.

The next decisive step, however, rests with the Rudd government. Labor's dilemma is acute: to negotiate in good faith with the Liberals, it needs to find more financial assistance for the power generators and affected industries. The Victorian government is pressing Rudd for extra support, given its reliance on brown-coal fired electricity with private-sector ownership of the power plants that face refinancing obligations.

Senior Rudd ministers have been divided on this. At its heart is the assault on the Rudd government's financial analysis by investment bank Morgan Stanley in its confidential report on the financial plight of the generators. In the unlikely event the lights went out in Victoria the blame would be sheeted home not just to Premier John Brumby but to Rudd. In devising his policy, Rudd opened the door to compensation for the power companies and has faced a rapid escalation in the power sector's financial demands.

Abbott's message this week - that the Liberals could not consider passing Rudd's scheme unless their amendments were accepted in full - is really a method of saying no. It penetrates to the heart of the Wong-Macfarlane negotiation: At what point are Labor's concessions sufficient to give Turnbull a chance of prevailing and passing the scheme? The dilemma is that as opposition opinion hardens, the cost Turnbull needs becomes more expensive for Rudd and Wong.

The Liberals are in a weak bargaining position. Rudd has a political fallback: a 2010 double dissolution election with his CPRS as a prime issue. Yet the latest twist is the growing Coalition minority that believes, contrary to the most conventional of conventional wisdoms, that the political current has begun to run its way.

Beneath an increasing dogmatism on both sides are several core benchmarks. First, what is Rudd's justification for insisting on his legislation before Copenhagen? In truth, this argument has collapsed, given Copenhagen will not finalise any agreement.

Second, how urgent is the need for Australian action? The case has weakened precisely because the rest of the world has faltered, a reality Australia's media seems reluctant to report. This gives the Liberal critics their strongest case, with Minchin saying it is "idiotic of this country to legislate an ETS before the US Congress does so". He argued that with Australia responsible for only 1.4 per cent of global carbon dioxide emissions, nothing this country does can make the difference but the economic damage would be real: "Passing this law would condemn Australia to lower living standards for absolutely zero environmental gain."

The power of this idea that Australia should wait until the big emitting nations take serious action has more traction than before. Yet Rudd's answer will still hold majority support: that the world is moving and Australia must accept the obligation on itself to act.

Rudd will reduce the decision to its bedrock "action or inaction" choice, with Labor as the party of action and the Coalition on the side of inaction.

Third, while the Coalition raises dire warnings about the economic cost of the CPRS, Rudd has a strong reply: the cost of delay will be greater, witness the support of most business lobbies for the bill. It is possible this decision will affect the fate of conservative Australia for years.

If Turnbull votes yes, he becomes an enabler of Rudd's CPRS and provokes hostility from much of his own party, but if he votes no he alienates the Coalition from any action position on climate change and hence from the majority of the community.

Conservative politics is divided about the nature of Australian values. Turnbull believes the public will give priority to climate change action while Minchin thinks the flaws in climate change mitigation will see the public hedging its bets. Turnbull believes the Coalition vote in 2010 will be maximised by playing down climate change and running on the economy. But his opponents have a long-run view: they are circling the wagons for a protracted ideological struggle in the belief that vindication will arrive eventually and that now is the time to draw the battle lines.