Australia has passed legislation that would impose a tax on the nation's 500 largest polluters, a deeply unpopular measure that the government defended as necessary to control climate change.

Prime Minister Julia Gillard had promised not to push for a carbon tax during elections last year, but has since said it is Australia's best option. Australia is one of the world's worst greenhouse gas emitters per capita because of its heavy reliance on abundant reserves of coal to generate electricity.

"This reform is right for our country's future, it's the right thing to do," Gillard told reporters Tuesday.   

Beginning July 1, Australia's largest polluters will pay $24.20 Cdn for every tonne of carbon gases they produce.   

Members of the public applauded when the Australian Senate approved the carbon-tax bills with support from Gillard's Labor Party minority government and the minor Greens party, but opinion polls show the tax is unpopular.   

Critics argue that Australian businesses will become uncompetitive because the carbon tax is too high.

The Australian Financial Review newspaper reported Tuesday that in Europe, where a system of trading carbon credits is in place, businesses will pay between $9.15 and $13.25 a tonne because carbon prices have crashed to four-year lows.   

Gillard, whose government faces elections in two years, is hoping that the tax does not prove as unpopular as the polls suggest. The government is also hoping that many people will even consider themselves better off under the tax because many will get assistance to offset higher utility bills.   

"I understand this has been a bitter debate and there are Australians who still view carbon pricing with a great deal of anxiety," she said.   

The tax will be the government's main tool to achieve its target of reducing Australia's carbon emissions by five per cent below 2000 levels by 2020.