The Australian Government has passed a law to ensure that one-fifth of the nation's power is derived from renewable sources by 2020.
The law is likely to trigger a $22bn investment and a potential emissions trade agreement in November.
Following days of negotiations, Australia's conservative opposition agreed to the law proposed by the Australia’s Climate Minister Penny Wong.
The Senate will officially vote on the deal today and there are hopes that in November a controversial emissions trade law will be approved even though it was vetoed last week by the Senate.
The emissions trade proposal – which set a target of a 5% to 25% reduction in carbon emissions by the year 2020 – was rejected due to concerns it could have a negative effect on the environment, economy and employment.
Currently renewable power sources such as hydro, solar, wind and geothermal represent 5% of the country's total energy consumption.
Wong said that emissions scheme buffers would be applicable to renewables and compensation would be provided for power intensive exporters.
The makeshift arrangement would be relevant until carbon emissions trade regulations and related compensation proposals were approved or vetoed by the parliament after mid-November.
Wong also revealed that Australia and New Zealand are in talks to harmonise their efforts to cut carbon emissions.
Australia's Government plans to start imposing costs on carbon emissions from 2011 through a carbon-trading scheme, while New Zealand is reviewing its emissions-trading laws and is expected to announce the details of the scheme by the end of 2010.