The Federal Government has backed away from a plan to hand environmental approval powers to the states, frustrating business and state leaders, but delighting green groups who fiercely opposed the idea from the outset.
The Business Council of Australia (BCA) on Thursday said the Gillard government had delivered a "frustrating reversal" on its commitment to cut "green tape" burdens for major projects.
The backdown comes after Prime Minister Julia Gillard met with business leaders in Canberra, although the issue will still feature high on the agenda of Friday's Council of Australian Governments (COAG) meeting with state and territory leaders.
"There has been failure to make meaningful progress on the critical reform of eliminating costly double handling of environmental assessments and approvals," BCA president Tony Shepherd said in a statement.
COAG in April agreed to shift some federal powers to give state and territory governments responsibility over their own environmental approval and assessment processes.
Ms Gillard was on Thursday offered an agreement by the premiers of NSW and Victoria, but she apparently turned it down, saying she wanted a uniform national approach.
Mr Shepherd urged her to take up the offer so the changes could come into effect by the original deadline of March 2013.
Queensland Premier Campbell Newman said he thought there was real determination in April to do something, but that no longer seemed to be the case.
"I sense there's been a change of position quite significantly," he said.
WA Premier Colin Barnett said federal biodiversity laws had been "misused and used far too widely" and states should have the responsibility for the environment.
"There is no doubt the delays in approvals, through lack of decision-making, is primarily due to an overlay of commonwealth law," Mr Barnett told reporters in Canberra.
SA Premier Jay Weatherill said he believed it was still possible to get improvements to "speed and certainty" in the process, but not all of the options had been explored.
Australian Industry Group chief Innes Willcox said any agreement would have been better than none.
"It would be very disappointing if concerns of the Greens and others on the Left have trumped the needs of industry to have some investment certainty," Mr Willcox told AAP.
The Australian Greens said the move was not a victory, but a "short reprieve".
The minor party said Ms Gillard had now left the decision making up to the state premiers, who had a reputation for favouring mining interests.
"We've got a temporary pause on that proposal, which we welcome, because it will give the community time to continue to register its concern about this proposal," Greens senator Larissa Waters told reporters.
Environment Minister Tony Burke could not immediately be reached for comment.
Australian Conservation Foundation director of strategic ideas, Charles Berger, said the news was a "pleasant surprise", but he'd be watching carefully to see what came out of COAG.
"Ultimately, the proof's in the pudding," Mr Berger said.
It won't be the only thorny issue on the agenda at Friday's meeting.
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