WHEN Kevin Rudd unveiled his push for a world free of nuclear weapons, he was saying nothing unusual as leader of a party averse to almost all things nuclear.

However, eyebrows were certainly raised when a few days earlier his energy minister Martin Ferguson declared the Government would break an election promise by building a nuclear waste dump in the Northern Territory.

No one is suggesting a dramatic change is afoot but few people now doubt the world faces complex challenges brought on by global warming and energy prices spiking beyond levels imagined by policy makers just a few years ago.

Against this backdrop, a new debate over nuclear fuel and nuclear power is all but inevitable.

Labor's opposition to nuclear power in Australia and overseas has been a key plank of its platform since the 1950s.

However, Rudd and Ferguson clearly realise that Australia can no longer turn a blind eye to the surging global demand for uranium as a feedstock for nuclear power plants.

The decision to build a dump was unavoidable because Australia will be required, under emerging stewardship regimes, to carefully manage the uranium it exports at all stages of the fuel cycle, including waste storage.

Governments - some of dubious standing - in emerging economies have been crunching the numbers on their options for power generation over the next 100 years.

According to the International Atomic Energy Agency, about 30 countries, including Algeria, Tunisia, Egypt and Indonesia, have already chosen the nuclear path.

These countries know that heavy carbon-emitting fuels such as coal will become more expensive under greenhouse trading schemes.

In May, Italy announced plans to erect new nuclear power plants within five years to reduce the country's dependence on oil, gas and imported power.

Italy is the only G8 country without its own nuclear power and is the world's largest net importer of electricity. The price it pays for power is 45 per cent above the European average.

Italy's decision comes two decades after a national plebiscite led to a ban on nuclear power.

The change in national policies to go nuclear reflects increasing concern over rising oil prices and environmental effects of carbon emissions from fossil fuels.

Late last year Egypt said it was ready to embrace a nuclear program. But because it is an ally of the US, there is unlikely to be any diplomatic stand-off that Iran provoked in its pursuit of nuclear power.

India wants to buy uranium from Australia, but because it has a nuclear weapons program and has not signed the non-proliferation treaty it is largely excluded from trade in nuclear plant or materials.

The Howard Government intended to sell uranium to India but the new government has refused until India signs the non-proliferation treaty.

In the 1980s, Bob Hawke watered down the blanket ban on uranium mining but the debates were particularly divisive and the issue has remained sensitive.

Last year, Kevin Rudd only narrowly outflanked ALP delegates at the national conference who were opposed to his plan to remove all restrictions on uranium extraction.

This week the debate moved into fresh territory. Leading players in the uranium industry are now talking up the prospects of extending Australia's participation in the nuclear fuel cycle.

Jim Graham, the chief executive of US-based uranium conversion company, Converdyn, told a mining conference in Adelaide on Wednesday that "serious discussions" were occurring on establishing downstream uranium processing in Australia.

He said it was possible that Australia could begin converting yellowcake into uranium hexafluoride within 10 years, if the ban was lifted.

"The industry right now is working on a lot of stewardship issues and we're trying to figure out ways to try to ship better, ship cleaner and when you look at conversion facilities, how we clean the yellowcake up," Mr Graham said last week.

In an interview with BusinessDaily yesterday, one of the leading advocates of nuclear power, Ron Walker, said the government needed to reconsider its ban on nuclear generation in response to the sustained rise in oil prices.

"The government is against it, of course, but if oil continues to increase in price then industry is going to have to look towards alternative sources of fuel," says Mr Walker.

"Labor had a policy against nuclear mining at one stage and they changed their mind because they know it is a very positive source of energy. Whether they change their mind in the near future on nuclear plants to service capital cities, I can't say."

However, Mr Walker concedes that it would take at least 20 years for a reactor to be built in Australia because plant manufacturers such as GE and Mitsubishi have been inundated with orders.

Mr Walker and other high profile business identities Hugh Morgan and Robert Champion de Crespigny formed Australian Nuclear Energy in June 2006 with a view to building a reactor in Victoria.

"There is no future for ANE or any other plant under Labor policy, so little work is being done on it and in the meantime the demand by the world for nuclear plants puts Australia 20 years behind in terms of building a plant," he says.

"The Japanese are the major supplier of the hardware along with General Electric and the back-orders for nuclear plants today is so large the chance of even ordering the equipment to produce nuclear energy is remote now."

Labor's opposition to nuclear is based on concerns with the security of the nuclear fuel cycle, weapons proliferation and waste storage.

But if these risks are progressively reduced, then the Rudd Government or future Labor governments might be in a position to review the ban some time in the future.

Rudd's announcement in Kyoto that he was establishing a new international commission to promote non-proliferation and disarmament is an attempt to address the first and second of Labor's concerns.

The government seems to understand that it would be bad public relations for local miners and the country as a whole if Australian uranium was used to produce nuclear weapons.

The third problem will be partly addressed by the nuclear waste facility in the Northern Territory.

The proponents of nuclear power are also hoping that the next generation of reactors will generate less waste.

Rudd's anti-nuclear rhetoric was such a vote-winner at the 2007 election that the Coalition parties were forced to ditch John Howard's pro-nuclear energy policy in February.

Rudd, if he is elected for a second term, may be strategically positioned to loosen the levers on his party's nuclear policies a little further.

Meanwhile, the Prime Minister is hoping that renewable energy sources such as solar, wind or hot rocks can be harnessed to produce base-load electricity.

Prominent scientist Tim Flannery - a supporter of nuclear generation - believes Australia may not have to embrace the nuclear option.

"I am opposed to nuclear power generation in Australia on the basis we have enough renewable energy to do the job," he told BusinessDaily.

"I think we have got to develop an export industry in uranium because the world is going to need nuclear power."