Scientists and green groups wanted cuts of at least 25 per cent.

Carbon permits

The plan allows for prices to be set by the market, first under auctions to be held in the first half of 2010, abandoning an earlier idea of a fixed price.

The government expects a price of about $16.70 a tonne, below the European emission allowances, which are trading around 15 euros a tonne.

By allowing polluters to import carbon permits from green projects abroad but barring potential exports from Australia, participants will have their choice of the cheapest price.

Damien Lawson, a climate campaigner with Friends of the Earth, said the targets were too low.

"We're very disappointed with the announcement today," he told Al Jazeera.

"The structure of the scheme is too easy for the big polluters, and we believe it will do little to reduce the enormous carbon pollution that Australia puts out every year into the atmosphere."

Sensitive time

The carbon scheme comes at a politically sensitive time for the Rudd government, with the mid-2010 start date set only months before it is due to hold elections to seek a second term.

Penny Wong, the climate change minister, said the scheme was vital for Australia.

The country has the fourth-highest per-capita greenhouse gas emissions in the world, and five times more per person than China, due to the country's reliance on coal for electricity.

"These are hard targets for Australia," Wong told the Reuters news agency.

She said the policy is designed to ease the economic impact of the scheme in light of the global financial crisis.

"Our economy, including food production, agriculture and water supplies, is under threat. If we don't act now, we will be hit hard and fast. We will lose key industries and Australian jobs," Wong said.