The Greens have agreed to support a revamped safeguard mechanism, proposed by the government, in exchange for stopping new coal and gas projects opening.
The mechanism aims to cap the emissions of Australia's 215 biggest polluters and if parliament passes the measure, companies that breach the limit would be forced to buy carbon offset credits or trade their emissions with other companies.
Describing his party's position as an "offer not an ultimatum", Greens leader Adam Bandt remained firm on his condition that no more new coal and gas projects be approved.
"If the government wants the Greens' support in the Senate, then everyone's going to have to move a little," he said.
"Coal and gas are fuelling the fires, the droughts and floods that are hitting this country."
Climate Change Minister Chris Bowen said the Greens will need to decide if they want to vote "for or against 200 million tonnes of emissions reduction".
Opposition Leader Peter Dutton and the rest of the coalition had meanwhile made themselves irrelevant on the issue, he said, despite calls for bipartisan support from industry.
Resources Minister Madeleine King said the legacy of the Greens and coalition would be uncertainty for the sector and a lack of climate policy as Australia would not meet its legislated targets without gas, which would help process critical minerals used for clean technology.
Australian Workers' Union national secretary Daniel Walton said "pound for pound" the Greens had done more to worsen climate change than any other party or entity in the country.
"The Greens aren't actually interested in the long-term future of the planet, they're interested in grandstanding for their out of touch followers today," he said.
With the coalition opposing the measure, the government will need the support of the Greens and at least two crossbenchers to pass it through the Senate.
Treasurer Jim Chalmers said the government was determined to deliver a safeguard mechanism.
"So we can end the policy uncertainty, provide a credible pathway to net zero and give business and industry the confidence they tell us they need to invest," he told parliament.
Deputy Liberal leader Sussan Ley called the policy a tax on business.
"This Labor government must not trade away future jobs ... with dodgy deals with the Greens about its bad legislation," she said.
Independent senator David Pocock has already flagged his concerns with the scheme and said he needed further convincing the mechanism would make big polluters more efficient.
The government has previously resisted calls to stop new coal and gas projects but this month blocked Clive Palmer's proposed central Queensland mine on the grounds it posed an unacceptable risk to the Great Barrier Reef.
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