Australia will set a carbon price from July 1, 2012, as an interim measure, Prime Minister Julia Gillard has announced.
That is, she said, until a full emissions trading scheme can be introduced in three to five years.
But Ms Gillard said no decision had yet been made on what the price would be, or how much industry and households would be compensated for the new costs.
"This is an essential economic reform, and it is the right thing to do," Ms Gillard said at a news conference.
"Carbon pollution is a threat to our country, and a threat to our future prosperity."
Key Green and independent MPs in the lower house of Parliament have thrown their weight behind the new deal, but the clear movement through the upper house - where three earlier schemes have been defeated - could prove problematic.
"I do not believe that Australia needs to lead the world on climate change, but I also don't believe that we can afford to be left behind," Ms Gillard said.
"That is why the time is right and the time is now."
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