Prime Minister Kevin Rudd: 'This is a hard piece of policy'
The Australian government says it will push back a planned carbon emissions trading scheme (ETS) by a year.
Prime Minister Kevin Rudd said the delay was necessary because of the poor economic climate.
But he also suggested that Australia could pursue tougher emissions reductions targets if an international deal was reached.
The ETS, which has been criticised by both industrial and environment groups, was due to launch in July 2010.
Business say the scheme will delay economic recovery and lead to job losses. The environmental lobby, meanwhile, says that the targets are not tough enough.
Australia has the highest per capita emissions in the developed world and coal is its biggest export.
In a speech in Canberra, Mr Rudd said that the carbon trading scheme - requiring industrial polluters to buy licences to emit carbon - would be pushed back until July 2011.
"The worst global recession since the great depression means we must adapt our climate change measures but not abandon them," he said.
A one-year fixed price period would be introduced for the first year, he said, with carbon permits costing A$10 ($7, £5) per tonne, followed by a floating price until July 2013.
"This, we believe represents an appropriate response to current uncertainty," he said.
But - in a move aimed at the environment lobby - Mr Rudd said that the range of the emissions reduction target could be increased up to 25% of 2000 levels if other nations agreed similar targets.
The previous target was to reduce emissions by between 5 and 15% of 2000 levels by 2020.
Mr Rudd needs the support of Greens senators to pass the carbon trading legislation.
He admitted that he had been under pressure from industry and the resources sector to delay the scheme, reports the BBC's Nick Bryant, in Sydney.
He also conceded that there had been international pressure on Australia to make deeper cuts in emissions.
The policy changes reflect the difficulties of reconciling the needs of the domestic economy against global expectations, our correspondent says.