Australian Climate Change Minister Penny Wong said power producers and households will be compensated for an emissions trading system starting in mid-2010, which will let markets decide the price of carbon, Bloomberg reports.

An Electricity Sector Adjustment Scheme and a Climate Action Fund will be established to assist businesses adapting to the new trading system. A proposed cent-for-cent cut in gasoline taxes to compensate drivers will cost the Fund around $1.7 billion annually.

The emissions trading system will also raise the average price of goods by 0.9 percent in the first year, including a 16 percent increase in energy prices, at a rate of around $20 a ton, according to Wong.

One thousand businesses producing more than 25,000 tons of carbon dioxide a year will be affected by the emissions trading system. Agriculture will be excluded, but will be reassessed in 2013 and included in 2015 at the earliest.

The government hopes the trading system will cover 75 percent of Australia’s greenhouse gas output.

Wong said that after consulting with utilities, free permits or one-time cash bonus may be issued by the government to coal-powered electricity generators. To help households cope with the system, the government plans to increase welfare payment and reduce taxes, especially for low-income families.