Howard released a government-commissioned report that recommended establishing a carbon trading scheme in 2012, drawing criticism from green groups who want immediate action.

Howard, a long-time climate change sceptic who has resisted emissions trading proposals several times during his 11 years in power, said the delay will allow careful analysis to ensure minimum impact on the economy.

"This is a hugely burdensome and responsible decision," he said.

"If we get this wrong, if we embrace a target, we'll do crippling damage to our economy.

"If we embrace a target that will increase electricity prices more than they should go up, then we'll do enormous damage to Australian households and the broad economy."

Howard said the public had to realise that limiting greenhouse gas emissions would come at a cost.

"All of us are going to be affected," he said. "We can't cure greenhouse gas emissions over the years ahead without paying higher prices for electricity.

"Anybody in the next 12 months, five years, 10 years who tries to tell you otherwise is deluding you."

Howard's conservative government has adopted a cautious approach to climate change, joining the United States in refusing to sign the Kyoto Protocol on greenhouse gas emissions.

But as Australia experiences its worst drought in a century and scientific evidence linking global warming to human activity mounts, the prime minister has declared himself a "climate change realist" and embraced emissions trading.

The opposition Labor Party accused Howard of switching his position in response to opinion polls showing widespread public concern about climate change, saying he wanted to win over voters at an election due later this year.

"This has been a government that has been so inactive on climate change that anything it does now is explained by this year's election, rather than a change of heart," Labor deputy leader Julia Gillard told reporters.

The head of the government taskforce behind the report, Peter Shergold, said emissions trading could begin in Australia by 2012.

Shergold said work should begin immediately on setting targets, establishing emissions monitoring systems, creating legislation, setting up an independent regulator, allocating permits and engaging international partners.

"It's a huge reform and it's going to take time," he said.

"It would place Australia ahead of most other nations."

But World Wildlife Fund (WWF) Australia chief executive Greg Bourne said the government needed to act with greater urgency in setting up the scheme.

"It was done in Europe in two-and-a-half years, we can certainly do it before the end of 2010," he told Sky News.

The trading scheme would involve the government setting a cap on emissions then granting businesses permits to cover the amount of greenhouse gases they produce each year.

The permits could be traded between businesses, allowing companies that are not using all their allocation to sell them to those that will exceed their quota.

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