Under the new scheme, companies will have to pay $23 for each tonne of Australian carbon produced - around $10 per tonne higher than equivalent prices in the EU's emissions trading scheme (ETS).
This will rise by 2.5% each year, in line with inflation, until the tax becomes a carbon trading price in three years' time.
"It's difficult to impose a fixed price and then let it float, because if the market sees the need for an adjustment then you can get a price shock either way," Andreas Arvanitakis, associate director of market analysts Point Carbon, told EurActiv.
"It could be a dangerous move," he added. "Any investor would want to see some certainty in the regulations."
Australia generates 80% of its electricity from coal and is the developed world's highest per-capita emitter of greenhouse gases.
It is also suffering from increasingly frequent heatwaves and droughts, while temperatures have risen by around 1°C since the middle of the 20th Century.
Carbon tax
The Labour government's decision to tax 500 firms, including coal, steel and airline companies, has delighted some environmentalists.
But others have been disappointed that sectors such as aluminium and zinc refining have been given free permits covering 94.5% of average industry emissions until 2015.
The carbon tax has also proved unpopular with voters, who now expect utility price rises, and markets, which fell by 1.5% on Monday (11 July) as investors steeled themselves for losses.
Speaking from a Hong Kong airport lounge on the way to talks in Canberra with government officials, Henry Derwent, president of the International Emissions Trading Association (IETA), said that CO2 trading should not have been postponed three years.
"To some extent it will perpetuate investor uncertainty about the longer term price of carbon," he told EurActiv.
"That's disappointing for the global market, reduces efficiency and increases the price that Australians will pay to reduce carbon."
But it was understandable given the problems that had affected the international carbon market, he added.
ETS battered
Since its launch in 2005, Europe's ETS has been battered by fraud, isolation, over-allocation of credits, and gas offsets that delivered windfalls to polluters.
But Brussels rejects this as the sole narrative of carbon trading. One EU official told EurActiv that he expected the new carbon trading scheme to give "further momentum" to the ETS.
He also said that Brussels had extensively advised Canberra about carbon market issues including: how to set an overall cap, allocate allowances, initiate benchmarking procedures, organise security, and design auctions for allowances.
"Of course there was an interest in getting together and sharing information and experience," he said. "Part of the motivation of those exchanges was the idea of eventually linking those markets."
"But that is not part of any of those conversations at this stage," he stated.
Linking the two markets would require "the mutual recognition of respective emissions allowances" so that they could be used inter-changeably in Australia or Europe.
"It's a bit like making the Australian dollar legal tender in Europe and vice versa," the official said.
New Zealand already has a carbon trading scheme, California is setting one up and last December, negotiations began on admitting Switzerland into the ETS.
China also plans to roll out an emissions trading scheme in 2015, India expects to start carbon trading in 2014, and countries including Japan, South Korea and Taiwan are considering similar moves.
Australia's move may encourage them and EU Climate Action Commissioner Connie Hedegaard welcomed it.
"Our experience in Europe is that our emissions trading system has led our most forward thinking industries to some very creative and innovative ways of working, that help reduce emissions and cut costs," she said in a statement.
"We look forward to Australia embarking on the same route and make a carbon market the core of its policy response to the climate challenge."
Arthur Neslen
