Climate Minister Penny Wong on Wednesday introduced a "cap-and-trade" scheme to be introduced by 2010, which she said was the country's most significant economic reform in a generation.

Green groups and economists, however, immediately criticised the plan, saying it did not do enough to cut greenhouse gases blamed for global warming.

But Prime Minister Kevin Rudd hit back Thursday, saying the move would work. "The whole point of the system is to reduce emissions," he told national radio.

Australia is one of the highest per capita carbon polluters in the world and only signed up to the Kyoto Protocol on climate change last year, after Rudd's landslide defeat of former prime minister John Howard.