Driven by New South Wales premier Bob Carr and Victorian premier Steve Bracks, the proposed scheme would set a cap on the total volume of industrial greenhouse gases allowed and then divide it into one-tonne carbon dioxide permits that can be traded between companies.

The goal of the scheme is to significantly cut greenhouse emissions, possibly by up to 60%, by penalising companies that do not manage to cut their emissions output.

The plan encountered a lack of support from Queensland, with the Beattie Government doubting the chance of success for a scheme without federal backing. Last minute talks between premiers Carr and Beattie allayed concerns, with the Queensland Government apparently signalling its full support.

The Australian Conservation Foundation (ACF) applauded the move in the face of the Federal Government's refusal to join other nations in signing the Kyoto Protocol.

"We applaud the efforts of premiers Carr, Bracks, Beattie and other state leaders in showing the courage and leadership required to tackle one of the greatest challenges facing Australia today. Of course, in an ideal world, it would be good to see the commonwealth and states moving together as this is an issue requiring a unified national approach," said ACF executive director Don Henry.

"A well designed emissions trading scheme will help reduce greenhouse pollution by encouraging industry to reduce emissions and invest in clean technologies such as solar and wind power. It will also help unlock Australia's innovative spirit and create thousands of jobs in new clean industries."

No time frame has been set for the introduction of the scheme or the exact limits that would be set but the premiers have committed to a report that would lay out the plan in detail later this year.

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