Environment and Energy Minister Josh Frydenberg has been forced into a humiliating U-turn on climate change policy less than 48 hours after releasing details for a pending review.
After two days of vocal opposition from the Coalition backbench, the minister has shelved plans for a review of the direct action climate policy next year to examine whether to introduce an emissions intensity scheme for the electricity industry - a form of carbon pricing.
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Carbon review divides government
Cory Bernardi gives voice to government divisions over a proposed carbon intensity trading scheme in the electricity sector. Courtesy ABC News 24
It is understood skittishness in the government leadership group led to the idea being dropped on Tuesday.
It follows Fairfax Media reporting on Monday, based on an interview with Mr Frydenberg, that the long-awaited review would consider such a scheme while focusing on limiting electricity price rises, maintaining energy security and cutting greenhouse gas emissions.
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In the interview, Mr Frydenberg confirmed that a line in the terms of reference for the review that says it would look at "opportunities and challenges of reducing emissions on a sector-by-sector basis" was a reference to an emissions intensity-style scheme.
He later explicitly told ABC radio that the government would look at an emissions intensity scheme for electricity.
"We know that there's been a large number of bodies that have recommended an emissions intensity scheme, which is effectively a baseline and credit scheme. We'll look at that," he said.
But in an interview with 3AW radio on Tuesday afternoon, Mr Frydenberg said the Fairfax Media report was incorrect.
"The Turnbull Government is not contemplating such a scheme, we're not advocating for such a scheme. What we are focused on is to drive down electricity prices and to increase energy security," he said.
On Fairfax Media, he said: "They've got the wrong end of the stick because they've speculated that that is the Government's policy, which it's not."
Fairfax Media did not, in fact, speculate it was government policy.
The about-face follows a furious backlash from Coalition backbench, much of which has held opposition to any form of carbon price as an article of faith since Tony Abbott became opposition leader in 2009. Several MPs questioned the timing, scope and tactics of next year's departmental review.
The Turnbull government is not contemplating such a scheme, we're not advocating for such a scheme.
Josh Frydenberg
Further stoking Coalition pressure, Mr Abbott declared on Tuesday night that "we're against anything that's a carbon tax or an ETS by stealth".
Bodies to have recommended an emissions intensity scheme include the Climate Change Authority, which has a majority of its board appointed by the Coalition, groups representing energy generators and energy distribution networks, and the CSIRO.
Several business leaders have also backed it as a means to give the electricity sector some certainty to allow it to plan investments for cleaner power stations as Australia's ageing coal infrastructure closes in coming year.
An emissions intensity scheme would set a baseline figure for how much carbon dioxide a power station could emit for every unit of power generated, penalising those that breached their limit and rewarding cleaner models that emitted less with free credits.
The limit would be reduced incrementally over time to make dirtier plants less commercial and encourage investment in cleaner power stations. Experts believe it would be more likely to keep a lid on inevitable price rises. Labor backed this sort of scheme before the election this year.
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