CANBERRA - Australia has dumped plans for a greenhouse emissions trading scheme.

It appears Prime Minister Kevin Rudd has given up trying to force ETS legislation through a Senate that has twice rejected it through an alliance of conservatives, Greens and independents.

The decision to delay the scheme for three years surfaced after ABC Radio discovered funding had been removed from next month's Budget, and has been confirmed reluctantly.

The decision means the Government has lost climate change as a potential trigger for an early election, and places Rudd under fire from the Opposition - which accused him of "cowardice" - and environmentalists.

It also adds to the list of first-term policies Rudd had promised to introduce after winning power in 2007 but has failed to deliver, and has undermined his repeated determination to attack climate change.

But it does release A$2.5 billion ($3 billion) earmarked for compensation under the scheme in the May Budget, easing Treasurer Wayne Swan's job of finding an extra A$5 billion ($6.17 billion) to pay the sweeteners Rudd last week gave the states to push through health reforms.

Politically, the deferral could cause Rudd problems as polls narrow his two-party preferred lead, albeit still strong enough to ensure re-election.

Two new polls reported that voters still considered climate change to be among the most important challenges facing the nation, and that Australians wanted strong leadership on the issue.

An Auspoll survey made for a group led by the Climate Institute yesterday said while voters saw Labor as a better climate manager than the Opposition, trust in Rudd was slipping.

Institute chairman John Connor said that with 68 per cent of Australians concerned about climate change, 35 per cent of voters would be more likely to vote for Labor if Rudd took stronger action.

A Lowy Institute for International Affairs poll said 72 per cent of Australians agreed that Australia needed to take action to reduce carbon emissions before a global agreement was reached.

But it also found one-third were not prepared to pay any more for their electricity to help solve climate change.

The deferral of the Government's ETS means climate change will be a blurred issue at the election, with both major parties locked into positions that now stand little chance of being put into action for at least three years.

Both support a minimum reduction in carbon emissions to 5 per cent of 2000 levels and a target for renewable energy of 20 per cent of total power generation by 2020.

But while Labor is sticking to its compromise package of an ETS involving compensation of up to 95 per cent of the cost of trading permits for vulnerable industries, plus assistance for the coal miners and electricity generators, the Opposition wants a range of what it calls "direct action" measures.

These include the planting of millions of trees, storing carbon dioxide and rebates for household solar panels and hot water systems.

Yesterday's revelation of the decision to defer the ETS caught the Government off guard, with Climate Change Minister Penny Wong initially saying only that the blockage of the scheme's legislation in the Senate had caused delays that would affect the Budget, but that the Government remained committed to the scheme.

Rudd said the Opposition's backflip on its support for an ETS, and delays in "appropriate action" by the rest of the world, meant the Government had no option but to defer the scheme.

"It's very plain that the correct course of action is to extend the implementation date," he said.

Rudd said the delay would allow the Government time to consider what action would be taken internationally beyond the expiry of the Kyoto protocol on climate change in 2013.

But the Opposition described the move as "policy cowardice," and Liberal Leader Tony Abbot said Rudd had abandoned the ETS because the public was frightened of what it realised was a great big new tax on everything.

"He's running away from it because he seems scared," he said.

The Greens welcomed the move away from a "fatally flawed" scheme and said the decision increased the pressure on Rudd to negotiate their proposal for a carbon levy on polluters.

"Anyone who still thinks the [ETS] would have been a step in the right direction should read a report by the Grattan Institute [think-tank] which concluded it would have actually delayed the transformation of the economy and been a A$20 billion waste of taxpayers' money," Greens deputy leader Christine Milne said.