Mining is a key business in Australia
The Australian parliament has rejected government plans to introduce an ambitious carbon trading scheme to tackle global warming.
The measure was the centrepiece of the government's environment plans, and would have cut greenhouse gas emissions by 5% over the next 10 years.
But opposition senators who control the upper house feared the legislation would harm the country's mining sector.
The government can re-introduce the legislation after three months.
Climate Change Minister Penny Wong confirmed after the Senate defeat by 42 votes to 30 that the government would seek to do this.
However, if the government is defeated again it could trigger a general election.
Business groups said the scheme would delay economic recovery and lead to job losses. The environmental lobby, meanwhile, believed that the targets set by the legislation were not tough enough.
Australia has the highest per capita emissions in the developed world and coal is its biggest export.
Under the plan, due to be introduced in July 2011, a one-year fixed price period would be introduced for the first year, with carbon permits costing A$10 ($7, £5) per tonne, followed by a floating price until July 2013.
Prime Minister Kevin Rudd had earlier 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.