As widely expected, Australia’s carbon emissions trading scheme was defeated in the Senate (the parliament’s upper house) on Thursday.

Though Rudd has diluted the bill significantly from its initial introduction in March – the scheme will now be phased in from July 2011 (rather than 2010) and will not have a ‘cap’ on total emissions introduced until July 2012 – it has been subject to fierce criticism from opposition mindful of its effect on the cost of coal and other energy-intensive exports.

“The government should now put this damaging bill in the deep freeze and wait until after we see the outcome of the Copenhagen conference and the US Senate debate on emissions trading before resurrecting its discredited legislation," said Nick Minchin, leader of the Senate’s Liberal party which has the largest voting bloc in the chamber (FT).

In the end, the legislation went down 42 votes to 30. So Rudd needs to find a swing of seven votes to get the legislation passed. And his team have gone straight back on the offensive.

“This bill may be going down today, but this is not the end. We will bring this bill back before the end of the year because if we don’t, this nation goes to Copenhagen with no means to deliver our targets,” climate change minister Penny Wong told the senate (The Telegraph).

If the Senate fails the same bill (unaltered) twice, with a gap of three months between the two votes, Rudd knows he has the option of calling a snap general election under the Australian constitution. This he would likely win, as it would be fought on a climate change issue.

So the Conservative opposition won’t want to be defeating another vote in three months time. Instead, they may try to pass amendments and take an earlier vote. Reuters, providing further analysis, judges a deal with the opposition ‘unlikely’.

On the other side, five votes from the pro-environment Green party also went against Rudd, as they want more stringent emissions cuts than his plan (up to 40% below 2000 levels by 2020; Rudd has committed to a range of 5-25% cuts, depending on Copenhagen negotiations).

The Australian urges Rudd and Wong to separate renewable energy legislation from the more contentious Carbon Pollution Reduction Scheme, and pass that alone at least.