Funding for the so-called Renewable Energy Future Fund -- to be spread out over four years -- will come from the deferred carbon-trading plan.
Calling it "the most substantial renewable energy plan this country has seen," Australian Treasurer Wayne Swan, in his budget address, said the fund would be used to support renewable energy projects such as wind and solar power as well as to encourage households to reduce their energy usage.
The plan is in line with Australia's goal to increase its renewable energy target to 20 percent by 2020, Swan said, and the new fund will be part of an expanded $4.6 billion Clean Energy Initiative.
Swan said the Australian government remains committed to its controversial carbon-trading plan, maintaining that it was "the cheapest and most effective way of tackling climate change."
Prime Minister Kevin Rudd's carbon-trading plan, aimed at cutting Australia's emissions by 5 percent of 2000 levels by 2020, would have taxed high emission-producing companies -- such as energy, steel and cement makers -- and offset the charges with free emissions permits and financial compensation.
The country's budget papers state that it would be not be reintroduced to Parliament before the end of 2012 and only if "there is sufficient international action" from major world economies like the United States, China and India.
Rudd, who hopes for re-election this year, has seen his approval ratings fall since he scrapped the legislation April 27. Action on climate change was a pillar of his 2007 election campaign.
In presenting the budget Tuesday, Swan maintained that climate change remained ''a core challenge for the future'' and reaffirmed Australia's target of cutting greenhouse emissions by 5-25 percent by 2020.
While the Australian Conservation Foundation welcomed the renewable energy fund, it said the new budget didn't deliver the scale of action needed on climate and the environment.
"This budget has not changed the fact that Australia's big miners and big polluters are not paying for their pollution -- which is destroying our climate -- and they are not paying a fair price for fuel," said ACF Executive Director Don Henry in a statement.
Australia, the world's largest exporter of coal, has the highest per capita of carbon emissions among developed nations. Total production of raw black coal in Australia in the fiscal year 2007-08 was 421 million tons.
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