Australian parliament on Tuesday passed a landmark carbon pricing law that would impose a price on carbon emissions.
After months of discussions and debate, the government with the support of Greens finally voted for it, according to local media.
Labor government finally got its carbon price plan through the Senate - on a vote of 36 to 32.
The carbon price begins with a tax, starting next July and will move later to a trading scheme.
"This history-making vote turns years of discussion into a reality," Prime Minister Julia Gillard said.
She said from Tuesday Australia would address the problems of climate change including "extreme weather" such as big floods and storms.
Gillard said it was the right thing for the nation's future and would provide jobs for our children.
Finance Minister Penny Wong said: "(This is) a reform long overdue, a reform which represents a clear (divide) in politics in this country between those who look to the future and those who are mired in the fear campaigns of today."
"It's a 'green letter day' but one which will echo down the ages... there's a celebration going on in this nation today," Greens leader Bob Brown said.
"People 50 or 500 years from now will thank us for the passage of this legislation."
Australia accounts for just 1.5 per cent of global emissions and is the developed world's highest emitter per capita due to a reliance on coal to generate electricity.
\Opposition Leader Tony Abbott, who is in Londong, dubbed the passing of the legislation "a betrayal of the Australian people".
"This new tax is a blow to the future of Australian manufacturing and a new burden for families struggling under cost of living increases," he said.
Coalition Senate leader Eric Abetz attacked the Government and the Greens for cutting short debate.
"They know they have betrayed their electoral mandate," he said.