But some trading could already be in place before that date, as the states have said they will set up a carbon market by 2010 if Canberra has failed to act by then.

Howard’s emissions trading task group will meet early next week to finalise a landmark report that will form the basis of a significant rethink by the government on environment policies.

The task group's main focus has switched since its formation at the end of last year.

Instead of examining how Australia might fit into an international emissions trading system, the group has concentrated on how to set up a domestic market.

According to reports in the Age, experts expect the government will include sectors that rely heavily on relatively low-cost energy, such as alumina refining, in the trading system, and these industries will be given some assistance in making the shift.

Australian National University economist and Reserve Bank board member Warwick McKibbin told the newspaper that the task group was likely to ensure that any cap imposed on emissions does not impose too high a price on carbon in the short term.