But the conservative prime minister, who is set to meet with his ally US President George W. Bush at the weekend to discuss issues including climate change, insisted that any such system should not hurt Australia's economy.

Howard signalled a major policy shift on carbon emissions trading in a speech late Monday, announcing his government, which was until very recently sceptical that climate change was a problem, is setting up a taskforce to find ways of reducing greenhouse gases that cause the phenomenon.

"The government will establish a joint government-business task group to examine in some detail the form that an emissions trading system here in Australia and globally might take in the years ahead," he told a Business Council of Australia dinner.

"I think the weight of scientific evidence suggests that there are significant and damaging growths in the levels of greenhouse gas emissions," he said, denying he was a climate change sceptic.

"And unless we lay the foundation over the years immediately ahead of us to deal with the problem, future generations will face significant penalties and will have cause to criticise our failure to do something substantial in response."

Howard's government, which has refused to sign the Kyoto Protocol on climate change on the grounds that the cost of limiting greenhouse gas emissions could damage Australia's booming economy, has in recent weeks begun pushing for a new Kyoto agreement.

Howard has repeatedly said that carbon trading is no silver bullet solution to reducing greenhouse gas emissions and has insisted that Australia would not join any such scheme unless Asia's booming economies also signed up.

But on Monday he acknowledged that countries such as India and China, which depend on Australia's vast fossil-based natural resources, would never agree to environmental controls that would hinder their "energy security".

Their economic growth was "very largely fuelled and supported and facilitated by cheap supplies of energy from countries such as Australia, but also from their own and from other sources," he said.

Carbon trading is the centrepiece of the United Nations' Kyoto pact, which Australia and the United States have refused to ratify, on curbing the greenhouse gases that are dangerously changing the world's climate system.

Under the system, rich countries are allotted caps for their pollution and if they come in under target they can sell any surplus to partners who are above their emissions goal.

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