That was caused by carbon pollution and the best way to make the polluters pay was to put a price on carbon, she said. "Today we move from words to deeds," she told Parliament. The package of bills will establish a fixed $23-a-tonne price on carbon pollution from mid-2012. An emissions trading scheme with a floating price will begin three years later. There will be compensation for most households and big business to help them adjust.

A separate piece of legislation will support steel workers through a $300 million transformation plan. The government today will also refer its carbon price legislation to a joint parliamentary inquiry, which is scheduled to report back by early October. Labor expects both houses to have passed the bills by mid-November. The government received more than 300 submissions on its draft legislation. "I firmly believe that no stone remains unturned, no voice unheard, so this is the plan for Australia's carbon price," Ms Gillard said.

The government had taken "a modern policy approach with efficient allocation and incentive to innovate". It will start with a fixed price then move to "a well-designed market". Other features include assistance for emissions-intensive trade exposed industries, abatement at lowest economic costs and links to international markets. Ms Gillard said this was "all adding up to a new bottom line where polluters pay". She said about 500 polluters would pay carbon tax.

Those included entities that emitted 25,000 tonnes or more of carbon pollution a year and large users of natural gas. Ms Gillard said natural gas suppliers, such as retailers, would pay a carbon price on emissions that arose from the use of natural gas by smaller customers. "Around 500 entities will have mandatory liability under the carbon pricing mechanism, around 500 polluters will pay," she said. Ms Gillard said the fixed price, set out in legislation, provided business with certainty and allowed for a manageable transition to carbon pricing. After three years the scheme automatically moves to a fully flexible cap and trade emissions trading scheme.

"From this time on, a cap will be placed on national emissions and the carbon price will be determined by the market," she said. Ms Gillard said in the first three years of the floating price period there would be a price cap and a price floor to limit market volatility and reduce risk for business as they gain experience of the new regime. She reiterated that Australia aimed to reduce emissions by 5 per cent on 2000 levels by 2020 and 80 per cent by 2050. "Achieving this target will take more than 17 billion tonnes of carbon pollution out of the atmosphere between now and 2050," Ms Gillard said. That will mean in four decades' time nine out of 10 tonnes of pollution that would otherwise have been spewed into the atmosphere won't be produced.

Ms Gillard said Australia's carbon price regime would be linked to international schemes so businesses could more cheaply offset their liabilities overseas. But they'll be limited to using offshore credits for half their obligation. Ms Gillard said to determine liability under the carbon price mechanism, information would be drawn from the national greenhouse and energy reporting system. The greenhouse gas pollution measurement system was developed under the Howard government, and started in September 2007. The carbon pricing mechanism would not apply to agricultural emissions, legacy emissions from landfill facilities and emissions from landfill facilities that closed before July 1, 2011.

The legislation recognised the different ways businesses structured their affairs, and deals specifically with joint ventures that were a common feature of resources and energy projects. It also allowed businesses to transfer liability under the mechanism within their corporate group. Ms Gillard said the government would seek to close about 2000 megawatts of highly polluting generating capacity by 2020. "Closing down some of our high pollution coal-fired capacity makes room for investment in low pollution plant and starts the transformation of our energy sector in a responsible way," she said. The carbon pricing arrangements would be supported by robust and independent governance arrangements.

The Clean Energy Bill 2011 set out the core provisions, architecture and review arrangements. Consequential amendments will be made to a range of other laws dealing with climate change, economic regulation and taxation. Ms Gillard said the price impact of the carbon tax would be modest on families but she understood family budgets were tight. As a result, most of the money raised from the carbon tax would be used to fund tax cuts, pension increases and higher family payments. "Every older Australian who relies solely on the pension will be among the 4 million Australian households who get a buffer for the budget, with the extra payments being 20 per cent higher than their average extra costs," she said.

Tax reform was also on the agenda, with the tax-free threshold tripled. Ms Gillard said 450,000 people - earning between $16,000 and $20,500 a year - would pay no tax at all. "A tax reform which rewards work - which builds on our budget changes to lift workforce participation and spread the benefits and dignity of work to every Australian," she said. Ms Gillard threw down the gauntlet to the opposition, saying the Coalition would be judged by history if it voted against the legislation. "There is a reason these matters are decided in an open vote," she said.

"It is so every member in this place can be judged. "Judged on the decisions they make here, judged on where they stand on the great issues of our national debate." Ms Gillard said politicians would be judged by Australians now and in the future. The final test was not whether you were on the right side of the short-term politics or polls, she said. "The final test is this: are you on the right side of history?

"And in my experience the judgment of history has a way of speaking sooner than we expect." She finished by harking back to the "It's time" election campaign of former Labor great Gough Whitlam. "It's time to deliver the action on climate change we need," she said. "To do what is best for Australian families, what is best for future generations, what is best for this country. "I know we can get there."

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