Kevin Rudd's hopes to pass the bill by Copenhagen are over
Australia's Senate has rejected a bill on the government's flagship climate change policy for a second time.
Two opposition senators crossed the floor but it was not enough to secure passage of the Emissions Trading Scheme (ETS) to reduce greenhouse gases.
The vote came a day after the opposition Liberal Party ousted leader Malcolm Turnbull, who had promised to back the bill.
Deputy PM Julia Gillard said the bill would be resubmitted next year.
Prime Minister Kevin Rudd had hoped to have the legislation passed by next week's Copenhagen summit on climate change.
He had secured opposition backing from Mr Turnbull, but his party revolted and replaced him with Tony Abbott on Tuesday.
The Liberals went on to oppose the bill and it was voted down by 41 votes to 33 in the Senate.
Mr Abbot said on Wednesday that it would be premature for Australia to adopt a carbon trading scheme before the rest of the world.
Analysts had suggested Mr Rudd could use the rejection of the bill as a legal trigger for a snap election - after which the bill could be passed at a special joint session of parliament.
But Ms Gillard - who is standing in for Mr Rudd while he is overseas - said that the government would resubmit the legislation to parliament early next year.
"We will come to parliament again, we will seek passage of the bill," she told journalists. "All options are on the table as to what happens next."
She said that she hoped the break would give "calmer heads" within the Liberal Party time to reconsider.
The ETS is part of a package aimed at reducing Australia's carbon emissions by up to 25% below 2000 levels by 2020.
Australia has the highest per-capita carbon emissions among developed nations and coal is its biggest export.
But some lawmakers question the scientific case for global warming and say that the ETS will damage Australia's economy.