SYDNEY - Australia will force its 500 worst polluters to pay 23 Australian dollars ($25) for every ton of carbon dioxide they emit, with the government promising to compensate households hit with higher power bills under a plan to reduce greenhouse gas emissions unveiled Sunday.

Prime Minister Julia Gillard sought to reassure wary Australians that the deeply unpopular carbon tax will only cause a minority of households to pay more and insisted it is critical to helping the country lower its massive carbon emissions. Australia is one of the world's worst greenhouse gas polluters, due to its heavy reliance on coal for electricity.

Australia's Prime Minister Julia Gillard talks with financial sector worker Craig Cochrane and his family about the implications of the new carbon tax in west Sydney July 11, 2011. Australia unveiled its most sweeping economic reform in decades on Sunday with a plan to tax carbon emissions from the nation's worst polluters, reviving hopes of stronger global climate action with the largest emissions trade scheme outside Europe. [Photo/Agencies]

"We generate more carbon pollution per head than any other country in the developed world," Gillard told reporters in Canberra as she released details of the tax, which will go into effect on July 1, 2012. "We've got a lot of work to do to hold our place in the race that the world is running."

The government hopes businesses affected by the tax will seek out clean energy alternatives to reduce their bills. The affected companies will have to pay AU$23 per metric ton of carbon, with the price rising 2.5 percent a year until 2015, when the plan will move to a market-based emissions trading scheme.

The carbon tax is the government's main tool in meeting its pledge to reduce Australia's greenhouse gas emissions by the year 2020 to at least 5 percent below 2000 levels. By then, the tax will have helped reduce carbon pollution by 160 million metric tons - the equivalent of taking 45 million cars off the road, Gillard said.

Critics of the plan say Australian households will be unfairly burdened by higher costs passed onto them by the big polluters. To help compensate for the higher bills, nine out of 10 households will receive some kind of assistance in the form of income tax cuts and payments. Two-thirds of all households will receive enough assistance to cover the entire financial impact of the tax, Gillard said.

Under the plan, the average household will see its costs increase by AU$9.90 a week, which includes an additional AU$3.30 per week for electricity and another AU$1.50 a week for gas. But the government says on average, households will receive AU$10.10 a week in assistance.

Industries affected by the change will get AU$9.2 billion in compensation over the next three years, with the worst-hit businesses expected to be steel and aluminum manufacturers.

Greenpeace said the package was a good start, but believes the price per ton of carbon should be higher.

"The fact that we have any price at all is testament to all Australians who demanded the government take action on climate change," Greenpeace Australia Pacific CEO Linda Selvey said in a statement. "But equally, the fact it is such a low price, with such limited coverage is testament to the power of the big polluters to dominate Australia's political leadership."