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Carbon tax plan divides Australians

Australia's leader faces her toughest political test to date as she tries to sell the nation on a carbon tax that would lead to higher power prices while reducing greenhouse gas emissions.

An increasingly vociferous debate on the issue is dominating headlines and talk radio and could make or break the centre-left government of prime minister Julia Gillard, who ruled out putting a price on pollution during her campaign and has slumped in opinion polls since she floated the proposal in February.

The conservative opposition has relentlessly attacked the proposal in parliament in recent weeks.

Supporters hit back in the past week with a one million US dollars advertising campaign featuring Oscar-winning actress Cate Blanchett and other celebrities endorsing a carbon tax.

Backers demonstrated in major cities across Australia on Sunday, which was World Environment Day.

The government has struggled to fend off criticism, even as it negotiates with various interest groups and independents to try to hammer out the details of the plan by early July.

The proposal is complex. It would make major polluters pay for every ton of carbon dioxide that they emit from July next year.

The revenues would be used to help businesses convert to cleaner energy and to give pension increases and income tax cuts to low- and middle-income households to help offset anticipated higher costs - both for electricity and for groceries and other goods that would become more expensive to produce.

Opposition leader Tony Abbott's portrayal of the plan as "a great big tax on everything" that would cost coal miners and steel workers their jobs has proved easier for the public to grasp and won favour with most of Australia's highest-rated radio talk show hosts.

Business groups have warned they could not withstand a carbon tax higher than 10 Australian dollars a metric ton. The Greens, whose support is essential to the tax being endorsed by the Senate, argue for a rate four times higher.

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