By Stian Reklev, Pointcarbon

Australia is to introduce a fixed price on carbon from July 2012, with an emissions trading scheme to follow three to five years later.

A multi-party climate change committee has agreed the basics of a carbon pricing mechanism, but has not yet decided what the price will be or how industry is to be compensated, Prime Minister Julia Gillard said Thursday.

"A carbon price mechanism could commence with a fixed price (through the issuance of fixed price units within an emissions trading scheme) before converting to a cap-and-trade emissions trading scheme," said the committee's proposal.

If parliament approves the proposal, Australian companies would be able to start trading emission permits at or below the fixed price from next year, although it remains unclear which incentives they would have to do so.

Australian firms will not have access to international offset credits such as certified emissions reductions (CERs) during the fixed price period, but they will be allowed after the country moves to a cap-and-trade scheme.

The proposition is the result of a deal between the ruling Labor party and the Greens and calls for the fixed price to increase annually at a set rate.

"The Greens' agreement with the government sets out elements of a transition to emissions trading down the track once the parliament can agree on emission reduction targets," said Christine Milne, a Greens senator and member of the committee.

The proposal calls for the government to move to a carbon trading scheme within three to five years.

A review one year ahead of the planned date for the transition will evaluate whether Australia should make the switch to carbon trading.

The energy sector, transport, industrial emissions and waste will be covered by the carbon price, but agriculture and forestry are excluded.

"There is agreement to support change in the land-use and forestry sectors but details are still under consideration," Milne said