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THE Gillard government’s plans to put a price on carbon have suffered a body blow, with key unions demanding exemptions for industry that are unacceptable to the Greens.

With his own job under threat from a hostile membership, the national secretary of the Australian Workers Union, Paul Howes, demanded yesterday that the steel industry be given a complete exemption from the carbon scheme and that there be generous compensation for the aluminium, cement and glass sectors.

Mr Howes issued the demand after a fiery crisis meeting with nine union branch secretaries from across Australia. It is understood Mr Howes, who is up for re-election before the next federal election, faced being dumped if he did not issue the demands.

The AWU is influential in the Right faction of the ALP and was instrumental in Julia Gillard’s coup against Kevin Rudd last year.

Immediately after Mr Howes’s announcement, he was backed by the powerful Australian Manufacturing Workers Union, which influences the party’s Left.

The loss of support from the industrial wing of the party leaves the government stuck between the unions and the Greens, whose support is critical.

The government is negotiating with the Greens to put a price on carbon and one key sticking point is the level of compensation for trade-exposed industries. The other is the starting price for a tonne of carbon.

As a starting point, the government was proposing the same generous levels of industry assistance devised under the emissions trading scheme negotiated with Malcolm Turnbull.

The Greens derided this as ”backroom deals for rent seekers” and want less compensation this time.

As well as exempting steel altogether, Mr Howes wants the compensation for aluminium, cement and glass to be ”at least” as generous as that negotiated under the old scheme.

If the Greens vote for this, they would be signing on to a weaker scheme than the one they blocked in 2009 because, in part, they felt the compensation was too generous.

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