Howard said he was arranging a task force to look at carbon trading and would discuss with coal producers on Wednesday ways to clean up the industry.
Australia's Greens party said the prime minister's about face was politically motivated, an attempt to build support among voters before next year's election.
In August, Howard rejected a proposal by state governments advocating a national greenhouse gas trading plan, saying it would have a "devastating impact" on resource-exporting states.
Last month, he unveiled a $379 million plan to cut back on fossil fuel emissions through clean technology.
Al Gore, the former US vice-president, said he believed Howard's shift could put pressure on the US to change its stance on the environment.
"If Australia changed its position the pressure on the US to change would be overwhelming and irresistible," he said.
The US, the world's biggest polluter, also did not sign the Kyoto accord.