JUST less than a year after she was elected as Australia's first female prime minister, Julia Gillard has announced a package of economic reforms linked to action against climate change. From next July, 500 of Australia's biggest polluters will have to start paying a tax of A$23 ($24) a tonne on their own carbon emissions; three years later, a market-based emissions trading scheme will replace a fixed tax. Ms Gillard now faces a battle to sell her plan on an issue that has rent stormy political divisions in Australia for almost a decade.

The prime minister announced the scheme on July 10th, after a committee of federal parliamentarians had spent months haggling over its finer details. The government will spend half the revenue from the carbon tax compensating households for higher electricity and other living costs that polluters pass on. Another 40% of revenue will help businesses and industry to adjust, and to switch to cleaner forms of energy.

Over the scheme's first four years, the government's projected spending on compensation measures and income tax cuts will be A$4.3 billion more than it raises. Nonetheless, it claims its promise to return the budget to surplus by 2013 will not suffer.

Ms Gillard says the plan will cut 120 million tonnes in Australia's carbon pollution by 2020; she likens this to taking 45 million cars off the road over that time.

Australia emits just 1.5% of the world's greenhouse gases. It may sound like little, but that figure puts Australia in a league with countries such as France, Britain and South Korea that have populations two to three times Australia's 22 million people. On a per capita basis, Australia's emissions are the largest of any rich country, largely because it generates about 80% of its electricity from coal, one of the dirtiest sources of energy as measured by greenhouse emissions.

Bids by previous governments to turn Australia into a cleaner country have all collapsed. Kevin Rudd, Ms Gillard's predecessor, staked his prime ministership on a plan to introduce a market-based, carbon-pollution reduction scheme. It failed twice in the federal parliament, after the conservative Liberal-National opposition and the Australian Greens formed an unholy alliance to reject it. Mr Rudd then appeared to drop the idea; somewhat perversely, that triggered a plunge in his opinion poll ratings, and a successful coup by Ms Gillard to overthrow him as Labor Party leader and prime minister.

Before last August's federal election, Ms Gillard had promised not to introduce a carbon tax. But the election result left her leading a minority government, depending on independents and Greens for survival. One of the Greens' conditions for their support obliged her to set up a multi-party parliamentary committee to forge a fresh climate plan (the opposition boycotted the committee). Several aspects of the scheme Ms Gillard has announced reflect the committee's high-stakes horse-trading.

The government has raised its target; Australia is now to cut its carbon emissions by 80% of their 2000 levels by 2050, compared with the 60% cut that had been proposed earlier. About A$10 billion will be invested over five years on renewable energy sources such as wind and solar, and on energy-efficiency technologies. There will be financial incentives to close about 2,000 megawatts-worth of Australia's highest-polluting power stations: many are based in the state of Victoria, which relies mostly on brown coal, an even dirtier source than the black coal that predominates elsewhere. After the market-based system starts in 2015, polluters will be allowed to buy up to half their permits through “credible” international carbon markets.

The plan has drawn a mixed initial response. Even before it was announced, some of Australia's biggest mining companies and banks had supported a carbon price. Other business leaders are more circumspect. Heather Ridout, head of the Australian Industry Group, whose members include big manufacturers, says the A$23-per-tonne price is too high, and that compensation for trade-exposed industries—those that stand to lose through competition from unhindered offshore competitors—is not high enough.

The Greens do not support the Gillard government's plans to compensate the steel industry, a big polluter whose fortunes are already being hit by the remarkable strength of the Australian dollar. But Christine Milne, a Green parliamentarian who steered her party's negotiations with the government, reckons the overall plan will offer some incentive to other countries that are exploring market-based mechanisms for tackling carbon emissions, such as China and South Korea.

Ms Gillard looked somewhat relieved as she announced the scheme. As well she might. The Greens and three independents have pledged support for it, giving her enough votes to ensure its passage when it comes before parliament later this year. Earlier plans, she said, had hit a brick wall: “I've knocked the brick wall down. This is going through, this is done. Full stop.”

Her bigger test will be to win over the Australian public. Ms Gillard's own opinion poll ratings are dismal, partly over her breaking the election promise not to have a carbon tax, and partly from public's waning enthusiasm for action against climate change. Tony Abbott, who leads the Liberal-National opposition, has promised to repeal the package if the coalition wins government. He says the next election, due in 2013, will be “a referendum on a carbon tax.” The stormy divisions look set to continue.