Kevin Rudd faced criticism when he shelved his emissions trading scheme in 2010. Photo: Glenn Hunt
Labor's internal recriminations about decisions in 2010 that paved the way for its current crisis have spilt over into the fateful decision to abandon the emissions trading scheme.
Ministerial sources have told the Herald Julia Gillard made implied threats during Labor's long and bitter internal arguments as she stridently advocated abandoning the ETS and opposed taking the policy to a double dissolution election.
As the Rudd government's inner cabinet agonised for months over what to do with the defeated scheme, Gillard insisted that ''under no circumstances'' could she or would she support retaining it as Labor policy, they said. Her comments were interpreted by some as a threat to distance herself from the policy if the government decided to maintain it.
But other senior government sources insist that, while Gillard doubted Labor's - and specifically Rudd's - capacity to fight an election on the issue and had strongly argued a decision could no longer be left to drift, she had never said anything that implied a threat to government unity.
''I distinctly remember her saying, if we are going to fight it out on this policy then let's get our stack hats on and fight it out,'' one source said.
Rudd, whose credibility was battered and whose popularity plummeted after he decided in April 2010 to shelve the ETS for at least three years, later said the decision had been wrong, but given the bitter divisions in his cabinet he had been partly motivated by a desire to ''preserve the unity of the government''.
The decision not to go to a double dissolution - discussed with Gillard, then party secretary Karl Bitar, factional powerbroker Mark Arbib and others just before Christmas 2009 - was Rudd's alone. His failure to do so was later used by opponents as an example of his chronic indecisiveness.
The Herald has previously reported that in early 2010, after Tony Abbott began his ''great big new tax'' campaign against the ETS, Gillard and the Treasurer, Wayne Swan, argued strongly that the policy should be abandoned, supported by Bitar and Arbib.
The then climate change minister, Penny Wong, then finance minister, Lindsay Tanner, and then assistant climate change minister, Greg Combet, argued equally strenuously that both good policy and the government's credibility demanded it be retained.
Gillard wrote a paper for the ''gang of four'' Strategic Priorities and Budget Committee recommending the government not advocate a trading scheme except in the unlikely event it could get bipartisan support from Abbott.
The allegation Gillard made implied threats during the talks has not been publicly aired, and is being presented as an important factor in Rudd's decision to drop the scheme, which helped precipitate Labor's political troubles and his own demise.
The sources were clear Gillard did not make explicit threats, but said her statements could be interpreted as threatening to distance herself from the policy if Labor stuck with it.
Asked about the decision on the ABC's Q and A program last April, Rudd said: ''You had some folk who wanted to get rid of it altogether. That is kill the ETS as a future proposition for the country. I couldn't abide that. There were others who said we should stick to the existing timetable, apart from the fact that the Senate couldn't deliver it. So I tried to find a way up the middle of all that. Preserve the unity of the government. On balance it was the wrong call because we should have simply tried to sail straight ahead. But you make mistakes in public life.
''That was a big one. I made it and I'm responsible for it.''
Gillard eventually presided over the passage of an ETS when that became possible with the support of the Greens and independents.
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