U.S. coal giant Peabody Energy Corp. said Australia's planned carbon trade scheme would hurt investment in coal mines and could force mine closures as Australia's parliament prepares to vote down the scheme.

Parliament's Senate on Thursday is almost certain to reject the government's plan, which is being closely watched around the world in the lead up to global climate talks in Copenhagen in December.

Prime Minister Kevin Rudd, who remains well ahead in opinion polls, could have the option of calling a snap election on climate policy if the laws are rejected a second time later in the year.

Peabody (BTU.N: Quote, Profile, Research, Stock Buzz) chief executive Greg Boyce said imposing a carbon price on coal would affect all 10 of the company's Australian operations, hurt future investment and possibly force some mines to close.

Every one of these operations has to be competitive, Boyce told reporters in Canberra, where he is meeting lawmakers ahead of the ETS vote.

Australia is the world's leading coal exporting nation, but the coal industry is angry that the government's emissions trading scheme (ETS) offers only A$750 million ($615 million) in compensation, rather than ongoing free carbon permits.

Rudd wants carbon trading to start in July 2011, setting a price on carbon to give industry a financial incentive to clean up its pollution.

The scheme would cover 1,000 of Australia's biggest companies, but the government would give major exporting companies the bulk of carbon permits for free to make sure they could compete in international markets.

The coal industry wants the same level of compensation as the aluminium industry, which is set to receive 66 percent of carbon permits for free under the current scheme.

CHANGES LIKELY

The government wants its ETS laws passed ahead of December's climate talks in Copenhagen.

The laws commit Australia to cut emissions by a minimum of 5 percent, or up to 25 percent if there is international agreement to take strong action against global warming.

But the government needs an extra seven votes to pass the laws through a hostile Senate, where the opposition, Greens and independents have all promised to vote against the current scheme.

Opposition leader Malcolm Turnbull, who is struggling in opinion polls and leads a party divided over climate policy, has said he wants to negotiate amendments to help pass the laws later in the year to avoid triggering an election on climate policy.

Boyce urged the government to reconsider how it treats the coal industry under the ETS, saying the current plan needed to be changed. From a coal perspective, we would say it is inadequate to produce a healthy industry going forward, Boyce said.

Every operation in Australia is going to have an impact, depending on where they sit on the cost curve. We'll just have to see where the final numbers come out.

Australia accounts for 1.5 percent of global emissions, but is one of the largest per-capita emitters due to a reliance on coal for 80 percent of electricity generation.

Australia Climate change