CANBERRA - Australia's government will be asked to exempt farmers from carbon trading in order to pass landmark emissions laws through parliament under changes being pushed by opposition lawmakers on Wednesday.

Legislation to set up carbon trading from July 2011, the world's second domestic trading platform after the European Union's scheme, remain locked in parliament's upper house, where the government needs opposition support to pass the package.

Prime Minister Kevin Rudd could call an early election if the laws are rejected for a second time in November. Agriculture is shaping as a key sticking point.

You do everything in your power to turn the volume on this ridiculous tax down, so I suppose we'll support an amendment to take agriculture out, said Senator Barnaby Joyce, leader of the junior opposition National Party in the upper house.

The opposition Liberal and National Parties will hold a special meeting on Sunday to endorse changes they want to the carbon-trade laws in return for their support for the scheme, which would cover around 75 percent of Australian emissions.

The opposition also wants a Senate vote delayed until early 2010, but the government wants its laws passed by late November, ahead of global climate talks in Copenhagen in December.

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In the run-up to Copenhagen the Australian debate is being closely watched in other countries including the United States, where lawmakers are also crafting emissions trading laws.

Under the Australian scheme, the top 1,000 companies will need a permit for every ton of carbon emitted, putting a price on pollution and providing an incentive to clean up operations.

But the biggest polluting export companies will receive up to 95 percent of permits for free in the initial years of the scheme, with the carbon price at A$10 ($9.12) a ton for the first year.

Agriculture, which accounts for 16 percent of Australian emissions, will be exempt in the early years, with a decision to be taken in 2013 on whether farmers should be included from 2015.

The National Party, which traditionally represents rural Australia, and major farm lobby groups want farmers to be permanently exempt from the carbon trading system.

In Beijing, Climate Change Minister Penny Wong said the government was willing to negotiate amendments in good faith, but the opposition needed to consider the cost of changes.

They are going to have to be more responsible than to simply put forward the latest wishlist from some aspects of industry, Wong told reporters.

Australia, the world's biggest coal exporter, accounts for about 1.5 percent of global carbon emissions, but is one of the world's highest per capital emitters.

($1=A$1.097)
(Additional reporting by Emma Graham-Harrison in Beijing; Editing by Alex Richardson)

Australia Climate change