The proposed regime would set a A$23 per tonne price on carbon from July 2012, with an emissions trading scheme kicking-in three years later.

About 500 major polluters would pay the fixed cost for the first three years of the scheme, including those emitting 25,000 tonnes or more of carbon pollution a year and large users of natural gas.

Gillard told parliament the government hopes to shut about 2GW of the most polluting generating capacity by 2020.

"Closing