The Australian Senate in November passed the Clean Energy Act, which not only sets a price on carbon but also expands Australia’s renewable energy target and creates a national renewable energy agency to oversee and support clean technology development.

Passage of the legislation comes after years of bitter debate between Australia’s coal-dependent industrial sector and the environmental lobby. The government believes that it will bring A$100B of investment in clean energy sources by 2050 and will transform the country’s power sector, leading it away from its reliance on coal.

“Australia has joined a growing list of countries taking national action to address climate change,” said Jennifer Morgan, director of WRI’s Climate and Energy Programme. “This law is a major step forward for this large and coal-dependent nation, demonstrating its commitment to a low-carbon economy.

“While Australia’s targets should eventually be strengthened, this is a solid down payment on its clean energy future.”

The law will force 500 of Australia’s most polluting companies to pay a tax on their carbon emissions from July 2012. In 2015, this will be replaced by an emissions trading scheme.

Companies in the mining, aviation and steel industries will be hardest hit. Domestic fuel bills are also expected to rise.

The carbon price will be fixed at A$23/ton and will create a “powerful economic incentive for further growth in renewable energy”, says the government. Commercial efforts to boost clean energy development will be underpinned with A$3.2B in government support administered by a new Australian Renewable Energy Agency (ARENA).

A new commercially-oriented Clean Energy Finance Corporation (CEFC) will also be established with A$10B in funds to invest in businesses active in clean technology development.

According to the government, the Australian renewable energy sector will be 18 times larger in 2050 than it is today as a result of government policies.