Australia unveiled plans on Sunday to slap a carbon tax of A$23 a tonne on its 500 worst polluters from 2012, sweetened by tax cuts for voters fearing higher power bills, and paved the way to adopt the largest emissions-trading scheme outside Europe.

Prime Minister Julia Gillard said the worst polluting companies would have to pay a A$23 ($24.70) price that would rise by 2.5 percent a year, before the minority government moved to a controversial market-based emissions scheme in mid-2015.

"Australians want to do the right thing by the environment," said Gillard, whose country is the rich world's worst per capita greenhouse gas emitter due to a heavy reliance on ageing coal-fired power stations for electricity.

Gillard, whose popularity has slumped to record lows over plans to price carbon and drive up household energy costs, said the plan would cut 159 million tonnes of carbon pollution in 2020, reducing emissions by 5 percent over 2000 levels.

"That is why the Gillard government is implementing a comprehensive plan for a clean energy future for our nation. It's time to get on with this, we are going to get this done," she told reporters.

The stakes are high for Gillard's government, which has just a one-seat lower house majority, but the package already has the support of the Greens and key independents, giving her the numbers she needs to pass it through parliament. Two previous attempts in 2009 were defeated.

But the danger is that a vigorous campaign by the conservative opposition and business groups opposed to the tax, expected to begin within days, could erode public support below already catastrophic levels and frighten political backers.

Australia's scheme will cover 60 percent of carbon pollution apart from exempted agricultural and light vehicle emissions, with Treasury department models showing it would boost the consumer price index by 0.7 percent in the first year of the tax, in 2012-13 (July-June).     

It could also aid global efforts to fight carbon pollution, which have largely stalled since US President Barack Obama last year ruled out a federal climate bill this term. Outside the EU, only New Zealand has a national scheme in operation.

"This is a transparent carbon pricing framework for the long term and we welcome it. The addition of the independent Climate Change Authority to recommend targets will ensure the science and economics get a fair hearing in future," said Nathan Fabian, CEO of the Investor Group on Climate Change.     

Australia said it hoped to link its scheme, which would cost A$4.4 billion to implement after household and industry compensation to avoid a political backlash, to other international carbon markets and land abatement schemes when its emissions-trading market was up and running. - Reuters