Australia's lower house of parliament passed a contentious new tax on carbon pollution to combat climate change on Wednesday, culminating years of heated debate.

The deeply divisive levy will mean the nation's biggest producers of carbon emissions will be forced to pay to pollute from July 1, 2012 -- initially at a fixed price before moving to a market-based trading scheme.

Government ministers embraced and clapped following the vote, which must now go to the upper house Senate for final approval.

"Today is a significant day for Australians and the Australians of the future who want to see a better environment," Prime Minister Julia Gillard said ahead of the vote.

Australia, one of the world's worst per capita polluters and a major exporter of coal, has long grappled with how to combat climate change and previous bills to introduce emissions trading schemes have been defeated.

While Gillard managed to get her Clean Energy Bill 2011 through parliament, it is bitterly opposed by the conservative opposition which argues it will be ineffective, impact on jobs and increase the cost of living.

The row over climate change has brought down one prime minister (Kevin Rudd) and two leaders of the opposition in the last two years and made Gillard extremely unpopular with voters.

Thousands have protested at rallies nationwide against the levy, accusing Gillard of lying when she said ahead of her narrow August 2010 election win there would be no carbon tax under a government she led.

The prime minister defended the government's selling of its carbon tax, which opinion polls show is opposed by a majority of voters.

"When there is a significant change like this one, we have to keep explaining it," she said.