The aim is to induce sweeping technological change over the next decade by rewarding businesses that make the shift to cleaner energy sources and lower pollution industries.
The federal government will allocate $12 billion from carbon price revenue to industry assistance and job protection as part of the transition process.
More than a billion dollars will be allocated to the Clean Technology Program to improve energy efficiency in manufacturing and to support research and development in low-pollution industries.
The Clean Energy Finance Corporation will invest $10 billion in businesses seeking funds to get innovative clean energy proposals and technologies off the ground.
It is all part of a mandate to purchase 20 per cent of Australia’s electricity from renewable sources by 2020.
Carbon price revenue will also be used to leverage around $100 billion in private sector investment over the next four decades.
The government has set ambitious targets at a time when the global economic outlook remains grim.
However, parliamentary secretary for climate change and energy efficiency, Mark Dreyfus, believes that despite the downturn Australia has no choice but to act.
“The transition needs to take place over a number of years, not overnight,” he said.
“Holding off until 2015 or 2018 would do untold damage to the economy; it could be a costly mistake.”
Dreyfus said there are already 32 countries with an emissions trading scheme in place including the UK and New Zealand.
Speaking at the Australian Industry Group’s 12th annual economic forum, Dreyfus said China is about to pilot emissions trading schemes in seven provinces covering 200 million people.
“Australia is in no danger of going it alone,” he said. “We are, after all, the highest emitter of carbon pollution per person in the developed world.”
The carbon price will initially be set at $23 per tonne, rising to $24.15 per tonne in 2013 and $25.40 per tonne in 2014.