The Senate has, for now, rejected legislation to scrap the carbon tax.

Here are the key events in the tortuous history of one of the most divisive issues in Australia's contemporary politics.

1997

Australia refuses to ratify Kyoto Protocol

Australia and the United States are the only major industrialised nations not to ratify the Kyoto Protocol, a landmark treaty requiring cuts in greenhouse gas emissions.

2002

Britain adopts ETS

Britain becomes first country to adopt emissions trading scheme in 2002, then joins the European Union scheme in 2005.

In 2002, Britain became the first country to adopt an ETS ( AFP: Philippe Huguen )

July 17, 2007

Liberal prime minister John Howard announces a carbon trading scheme will be set up if he wins the 2007 federal election.

"Implementing an emissions trading scheme and setting a long-term goal for reducing emissions will be the most momentous economic decision Australia will take in the next decade," he tells ABC's AM program.

December 3, 2007

After Labor wins the November 2007 federal election, prime minister Kevin Rudd ratifies the Kyoto Protocol.

One of Kevin Rudd's first acts as Prime Minister is to ratify the Kyoto Protocol. ( Jewel Samad: AFP )

Late 2008

Labor commits to a (CPRS) cap-and-trade scheme which it wants to start by July 2010.

Mr Rudd says Australia will cut its greenhouse gas emissions by at least 5 per cent of 2000 levels by 2020.

August 2009

Emissions trading legislation voted down in Parliament for the first time.

November 24, 2009

The Federal Government revises its emissions trading scheme.

But industry groups - particularly the Minerals Council - mount a forceful campaign against it, warning the scheme will cause massive job losses.

November-December 2009

Rudd reaches deal with Turnbull, Abbott replaces Turnbull

Prime minister Kevin Rudd negotiates a deal with opposition leader Malcolm Turnbull on amendments to the CPRS. Mr Turnbull urges Coalition MPs to support the revised scheme.

But on December 1, Tony Abbott replaces Mr Turnbull as leader and withdraws Coalition support for the scheme.

The CPRS is voted down in Parliament for a second time.

Tony Abbott's rise spells the end of cooperation with the Labor government. ( Alan Porritt: AAP )

December 2009

Two weeks of United Nations talks in Copenhagen fail to achieve a binding commitment to limit global warming.

Environment ministers reject a draft proposal circulated at the summit because it does not commit the developing world to cuts in greenhouse gas emissions.

February 2, 2010

Opposition leader Tony Abbott announces a policy for a fund, now worth $2.5 billion, to provide incentives to farmers and industries to reduce emissions.

"Our policy will deliver the same emissions reductions as the Government's, but without the Government's great big new tax," he said.

He says the Coalition's policy is vastly cheaper than the ETS, which he says will cost $40 billion over the same period.

April 27, 2010

Prime minister Kevin Rudd puts its emissions trading scheme on hold until at least 2013, after accepting the Senate is unlikely to pass the legislation any time soon.

Support for Labor drops in opinion polls.

June 24, 2010

Julia Gillard replaces Kevin Rudd as prime minister.

Within days, she indicates she will revise Labor's policy on emissions trading before the federal election.

Greens leader Bob Brown says if Labor is re-elected, his party will help the Government pass a carbon tax through the Senate within three months of polling day.

Turmoil at the top ... Kevin Rudd and Julia Gillard ( Alan Porritt: AAP )

July 8, 2010

Prime minister Julia Gillard rules out a carbon tax as an interim measure.

She says the Government will review global progress at the end of 2012 before deciding whether to proceed with an emissions trading scheme.

"The pricing of carbon I think is best done through a market-based mechanism, that is the carbon pollution reduction scheme, and the 2012 timeframe stands there," she tells ABC TV's Lateline.

July 18, 2010

Opposition leader Tony Abbott says there will not be a price on carbon in Australia if the Coalition wins government.

"We won't have an ETS ... and we won't be having a tax as part of our policy going to the next election," he said.

"The right time, if ever, to have an ETS is if and when it becomes part of the international trading system and that is not going to happen prior to its adoption in America."

February 24, 2011

Prime minister Julia Gillard unveils plans for a carbon tax from July 2012.

Opposition leader Tony Abbott describes it as a "historic betrayal", given Ms Gillard's promise before the election that her Government would not implement a carbon tax.

He predicts the public will respond in a "people's revolt".

Later in the month he confirms the Coalition will repeal the carbon tax if it wins the next election.

"If the Coalition wins the next election you can be absolutely confident there will be no mining tax and no carbon tax," he said.

November 8, 2011

The carbon tax passes the Senate 36-32.

Prime minister Julia Gillard hails the passage of her controversial carbon pricing regime as "a win for Australia's children".

European businesses are paying between $8 and $13 for a tonne of carbon while Australia's carbon price will start at $23 per tonne.

Greens leader Bob Brown and his deputy Christine Milne celebrate the passage of the carbon tax legislation. ( AAP: Alan Porritt )

July 1, 2012

The carbon tax begins on July 1, 2012 and raises $3.8 billion in its first six months, according to a budget update in February 2013.

April-May 2013

In April, the carbon price in Europe collapses to as low as $3.34 a tonne, due to slowing economic output, compared to the fixed rate of $23 a tonne in Australia.

In May, the Treasury says it now expects carbon price revenue to drop by $6 billion over the next four years.

As a result, the Government defers $2.8 billion in tax cuts it planned for 2015, which were linked to a prediction that the carbon price would rise.

July 14, 2013

After returning to the prime ministership in June, Kevin Rudd again changes the Government's stance on carbon emissions, announcing it will "terminate" the carbon tax and move to an emissions trading scheme (ETS) in 2014 - a year earlier than planned.

It plans to remove the fixed carbon price of $24.15 a tonne, replacing it with a floating price of possibly $6-12 a tonne. Later in July, Mr Rudd says it will cost the budget $3.8 billion over the next four years.

Opposition leader Tony Abbott says the Government is not really abolishing the tax but merely changing its name.

He says the election will be a referendum on the carbon tax.

September 7, 2013

Tony Abbott says legislation to abolish the carbon tax will be before Parliament within 100 days of his victory.

He says ditching the tax will save households $550 per year.

The Coalition plans to replace the carbon tax with its Direct Action policy, with the same goal to reduce emissions by 5 per cent by 2020.

The plan involves paying companies to increase their energy efficiency and funding for schemes to replenish soil carbons and plant 20 million trees.

According to a 2010 policy document, it is slated to cost $3.2 billion over four years.

Tony Abbott sweeps to power having promised to repeal the carbon tax. ( ABC: John Donegan )

September 9, 2013

Prime Minister Tony Abbott wants the carbon tax to be repealed by Christmas 2013.

However, Labor and the Greens say they will not support moves to dump the carbon pricing scheme.

November 1, 2013

Labor's frontbench team votes to oppose the repeal of the carbon tax, unless it includes a move to an emission trading scheme.

Opposition Leader Bill Shorten says he is confident the Labor Caucus will endorse the position.

November 13, 2013

Prime Minister Tony Abbott introduces legislation to axe the carbon pricing scheme into Federal Parliament.

The bill to repeal the tax passes the Lower House of Parliament on November 21 but is headed for defeat in the Senate.

March 20, 2014

Labor and the Greens combine to vote against the carbon tax repeal laws 33 votes to 29 in the Upper House.

Labor says the Coalition's alternative policy to tackle climate change, called Direct Action, will be ineffective and too expensive.

Greens leader Christine Milne says the current law should stand because Prime Minister Tony Abbott has a "do-nothing approach on global warming".

June 25, 2014

Clive Palmer says his political party PUP will back the repeal of the carbon tax only if lower power prices for consumers are guaranteed "by law".

Making his announcement with former US vice-president and climate change campaigner Al Gore, Mr Palmer also reveals he wants an emissions trading scheme similar to the one proposed by former Labor prime minister Kevin Rudd.

However, this would "only become effective once Australia's main trading partners also take action to establish such a scheme," he said.

The next day Prime Minister Tony Abbott says he is receptive to Mr Palmer's suggestions.

Al Gore was in Canberra to endorse Clive Palmer's emissions trading policy. ( AAP: Alan Porritt )

July 1, 2014

If Labor and the Greens oppose legislation the Coalition will need the support of six of the eight crossbench senators.

July 10, 2014

The Senate rejects legislation to scrap the carbon tax 37 votes to 35, after a last-minute intervention from the Palmer United Party.

The vote caps off a chaotic few hours, after crossbench MP Clive Palmer accuses the Government of double-crossing his party over amendments to the legislation.

July 17, 2014

After a lengthy debate, the Senate votes to get rid of the price on carbon, with 39 senators voting for and 32 voting against.

The legislation passes with the support of all of the micro-party crossbench, dominated by the Palmer United Party.