Today’s COAG meeting and the Murray Darling crisis have suddenly combined to provide a real test of the Prime Minister’s cooperative federalist model.

We bagged the Murray-Darling Basic package when COAG first agreed on it back in late March as perpetuating the dominant position of the states, who are directly responsible for the current state of the MDB. They have spent decades f-cking up our rivers, and the notion that they were about to change to a more responsible approach was, we thought, laughable.

What we didn’t know at the time was just how quickly the failings of the package would become apparent. Now we are seeing the unusual combination of a State Labor Government and the Nationals decrying Commonwealth and South Australian efforts to lift the cap on the amount of water that can be traded, in order to accelerate the process of establishing environmental flows.

Both Victorian Premier John Brumby and the Nationals are taking their marching orders from irrigators, the other guilty party in the destruction of our river systems. Their rationale is that the accelerated buyback of water would “destroy rural communities”.

Such a view is predicated on the rather peculiar notion that these communities are viable if the river system collapses, which is occurring right now. And anyway, let’s be blunt: in any terms you care to mention — economic, social, environmental — the death of some two-bit regional towns is a price well worth paying if its establishes a viable MDB system that strikes the right balance between agriculture and environmental flows.

This is a peculiarly Labor problem. Remember, John Howard’s approach was to take over state powers over the MDB and get the states out of the water allocation decision-making process. Rudd’s approach has been to bribe Victoria to get them to sign up to a framework that keeps the states in the box seat. That bribe — $1b of our money, thanks very much — now looks to have purchased not much of anything, and certainly not a future for the river. Liberal Senator Simon Birmingham — a South Australian, and therefore not unbiased — has correctly said today that the COAG agreement on the MDB is worthless if action isn’t taken immediately to save the river. In contrast to his dim-witted Nationals Coalition colleagues, he wants the trading caps lifted.

Rudd and Penny Wong are stuck with consequences of the dud deal they accepted back in March, which put John Brumby in control of the fate of the Murray-Darling. Let’s hope they and Mike Rann can change his mind today.

Meanwhile, Greg Hunt is further laying the groundwork for a complete retreat by the Coalition from an emissions trading scheme. In today’s Australian, he ostensibly details the Coalition’s policy on emissions trading, but in fact establishes a number of reasons why it won’t support it. Australia, Hunt says, should only proceed with an ETS when there is “a simultaneous push for action from the great emitters”, we can’t bring our exporters “to their knees” through an ETS, we can fix everything through new clean technology, and the whole scheme is just a “tax binge” by Kevin Rudd anyway.

And imagine the fun the Coalition will have once the Government releases its Green Paper. The Green Paper will have a range of options for emissions trading and invite public comment on them. Each one will be weaved into a nightmare scenario of job losses and sky-high petrol prices, from which Brendan Nelson will tearfully proclaim his intention to protect Australians. We deserve better, but we’re not going to get it while Nelson remains Opposition Leader.