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CANBERRA - The Australian Government's grand plan to tackle climate change - an emissions trading scheme - has been voted down by the Senate.

After a rowdy debate, all non-government senators voted against the scheme yesterday.

There was a resounding cry of "hear hear" from Opposition senators as Senate president John Hogg read out the result - 42 against, 30 for.

Attention is now turning to what will happen when the Government reintroduces its legislation in November.

If the scheme is rejected a second time, the Government could seek a dissolution of both houses of Parliament and an early election.

The scheme proposed placing a price on carbon pollution from 2011, in a bid to reduce greenhouse gas emissions. It would have led to higher prices for electricity, gas and petrol to encourage people to use less.

The scheme was a key election promise from the Rudd Government in 2007 but now it is in limbo for at least three months.

Shortly before the vote, Climate Change Minister Senator Penny Wong vowed to put the scheme before Parliament again before the end of the year. "This bill may be going down today but this is not the end," Wong said.

The Opposition, the Australian Greens and two other cross-bench senators voted against the legislation setting up the scheme.

The Coalition thinks it is too early to finalise emissions trading, saying the Government's model would cripple the economy. The Greens think the scheme is not green enough, while Family First's Steve Fielding is not convinced humans are affecting the climate, and Independent Nick Xenophon thinks the scheme will not work.

Wong focused squarely on the Coalition, exhorting them to change their minds and pass the scheme.

"Are you really doing what the Australian people want?" she asked them during debate, to which Opposition senators bellowed "yes".

The Opposition's Senate leader, Nick Minchin, released a statement calling on the Government to put the draft laws "in the deep freeze" until after United Nations climate talks in Copenhagen.

But Opposition Leader Malcolm Turnbull appeared more willing to negotiate with the Government.

"We have to deal in the real world," Turnbull told ABC Radio. "The reality is that if the Government comes back with their legislation in November, we've got to have an answer to it."

Turnbull said the Opposition would work on amendments in the coming weeks and months. He talked up an alternative model, developed by Frontier Economics, which imposes a lower cost on electricity generators.

Meanwhile, Australian authorities are also looking at re-defining terrorism to include psychological harm and to give police further emergency powers to search homes without warrants.

Attorney-General Robert McClelland said that the proposed reforms to counter-terrorism laws seek a balance between shielding the nation from potential terrorism and protecting civil liberties.