June 23 (Bloomberg) -- Australia’s upper house of parliament delayed a vote on the Labor government’s carbon- pollution reduction plan until August as opposition grew to its targets and economic modeling.

The opposition Liberal-National coalition, independent South Australian Senator Nick Xenophon and Family First Senator Steve Fielding tonight voted to debate other laws before the climate bill. That means they will probably run out of time for a vote on the carbon-reduction legislation this week, Climate Change Minister Penny Wong said.

“The Liberal Party has just combined with the crossbenches to ensure that this bill is delayed,” Wong told parliament tonight. “A range of other legislation will be discussed. If there is time, clearly the Government wants to debate this bill, but it is clear from the motion that has been passed today it will be very difficult to find the time to do that.”

Tonight’s vote cut short what was expected to be a week- long debate on the government’s laws, which would introduce carbon trading to help reduce greenhouse gases by 5 percent to 15 percent from their 2000 level by 2020. The Senate does not meet until Aug. 11 following a six-week winter break.

The opposition says a vote should be delayed until after the U.S. passes its own legislation and after world leaders meet to negotiate a climate treaty in Copenhagen later this year. The Greens party wants more ambitious targets; Fielding and Xenophon want more time to consider the 1,200 page-legislation.

Fake Email

Differences between the major parties were in focus this week over the government’s handling of the A$2 billion ($1.6 billion) OzCar fund to provide assistance to car dealers. Prime Minister Kevin Rudd called on opposition leader Malcolm Turnbull to resign over a fake email purportedly between Rudd’s aide and the Treasury Department calling for preferential treatment for one of the prime minister’s friends, car dealer John Grant.

The so-called ‘Utegate’ affair has emerged as the biggest political crisis of the two-year-old government. ‘Ute’ refers to a utility vehicle, similar to a pick-up truck, that Grant lent Rudd during the 2007 election campaign.

A police search yesterday found the e-mail to be fake. While the story has dominated newspaper headlines and talkback radio, it hasn’t forced any change to the government’s legislative agenda this week.

The government wants the climate laws passed before Wong travels to Copenhagen in December.

Carbon Trading

The government would have a case for calling an early general election if the laws are blocked twice in the Senate within a three-month interval. Australians are scheduled to go to the polls by the beginning of 2011.

Rudd last month delayed plans to start a carbon trading system by a year to 2011, citing weakness in the economy, while also saying he is open to a sharper reduction target. The system, which requires companies to pay for the carbon dioxide they emit, will cost jobs and act as a A$2.5 billion “de-stimulus package,” according to Graham Kraehe, chairman of Bluescope Steel Ltd., Australia’s largest steelmaker.

Rudd would increase the goal to cut emissions to 25 percent should a global deal be reached at the Copenhagen meeting, which will bring together 180 nations to negotiate a successor to the 1997 Kyoto Protocol.

The world’s biggest polluters, the U.S. and China, refused to sign the Kyoto pact, which expires in 2012. President Barack Obama supports carbon trading and has said the U.S. may sign a treaty even without China, while the Asian country wants rich nations to pay for projects to fight emissions in the developing world.

Australia, the world’s biggest coal and iron ore exporter, ranked 15th in carbon emissions from burning fossil fuels in 2006, according to U.S. Department of Energy figures.

The government has set a A$10 per metric ton carbon price for the first year of emissions trading. Rudd has offered support to emissions-intensive industries and coal producers, including extra free permits in the first year of trading.

To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net

Last Updated: June 23, 2009 07:01 EDT