The Prime Minister Julia Gillard outlined the Government's plan to cut pollution, tackle climate change and deliver the economic reform Australia needs to move to a clean energy future.

Watch press annoucement here

The two-stage plan for a carbon price mechanism will start with a fixed price period for three to five years before transitioning to an emissions trading scheme.

The Government proposes that the carbon price commences on 1 July 2012, subject to the ability to negotiate agreement with a majority in both houses of Parliament and pass legislation this year.

A carbon price is a price on pollution. It's the best way to stop businesses polluting and get them to invest in clean energy.

The businesses with the highest levels of pollution will have a very strongest incentive to reduce their pollution.

The  money raised will be used to:

• Assist families with household bills
• Help businesses make the transition to a clean energy economy
• Tackle climate change

An initial fixed carbon price will provide businesses with a stable and predictable platform to transition to a ‘cap and trade' emissions trading scheme that will be linked to international carbon markets.

This will give business time to understand their carbon liability and begin the transformation.

The framework has been agreed by Government and Greens members of the Multi-Party Climate Change Committee (MPCCC). The other members, Mr Tony Windsor and Mr Robert Oakeshott, have agreed that the proposal should be released for community consultation.

The Committee will continue to discuss other important elements of the proposal including the starting level of the fixed price, any phasing in of sectors of the economy, and assistance for both households and industry.