Australia has become the latest country to unveil a nationwide cap-and-trade scheme for carbon, undertaking to cut emissions by up to 15 per cent over 2000 levels by 2020.

The scheme is one part of the country’s strategy for tackling climate change, which is a threat to coastal property, food production and the economy, according to the government.

The introduction of the so-called Carbon Pollution Reduction Scheme in 2010 will be the largest economic reform in Australia for decades, and is designed to put a cost on carbon pollution and force businesses and industries to consider climate change in their investment decisions.

Australia is the world’s fourth-highest per-capita emitter of greenhouse gases. It is also one of the hottest and driest land areas on earth and could be hard-hit by climate change.

The cap-and-trade scheme will cover around 75 per cent of Australia’s emissions and involve mandatory obligations for around 1000 entities. It will cover all six greenhouse gases included in the Kyoto Protocol.

The scheme has been criticised by environmental groups as being too weak as the government will only introduce a 15 per cent target for emission reductions if an international climate treaty is agreed at UN talks next year. Otherwise a five per cent target is more likely.

The Australian government, which has been under pressure from businesses to delay the scheme because of the financial crisis, has argued that the proposed cuts are ambitious on a per-capita level. Scientists and green groups want to see a 25 per cent target set in Australia.

The government has also been criticised for allowing unlimited imports of carbon credits from abroad into its domestic scheme. This will provide a link with similar schemes in Europe, boost demand for UN offsets and allow polluters to minimise the cost of making reductions.

The UN offset scheme – known as the Clean Development Mechanism –allows companies to invest in green energy schemes abroad and claim the carbon credits against their own emissions. Green groups have criticised the scheme as most of the projects would be built with or without the external funding and do not result in a reduction in emissions.

The Australian government says that polluters will have to pay for emission allowances under its proposed scheme, although it will also set an upper limit on the price of carbon permits. It has also proposed to provide coal-fired power plants with a portion of free allowances to help them adjust to the scheme.

The assistance given to coal-fired power plant operators will be subject to a “windfall gain” review to ensure that generators are not profiteering from free allowances.