Australian Prime Minister Kevin Rudd has shelved the country’s Emissions Trading Scheme until 2013.

The ETS is a cap and trade scheme under which the government would calculate the total amount of pollution that could be emitted by businesses each year.

Each business would then be given a permit with a fixed amount of emissions. Companies that emit beyond their allocated numbers of carbon would be penalised by having to buy licenses to pollute from companies that had successfully reduced their greenhouse gas emissions below the fixed level.

By postponing the scheme, Rudd’s Labour administration will free up around $A2.5bn (£1.5bn) to be spent on the country’s national health service, which is shaping up to be the party’s election centrepiece.

The government has already invested heavily in the ETS. The Department of Climate Change, with a staff of 494, will have spent $215m by July, including $37m to design the ETS and $81m for a climate change regulatory authority to put the scheme in place.

In the past, Mr Rudd has called climate change “the great moral and economic issue challenge of our time”.

Despite being one of the more sparsely populated nations, Australia’s 22m inhabitants emit the third largest amount of carbon dioxide per capita in the world.

A survey last month revealed three quarters of Australians supported early action to stop climate change, but 33% said they wouldn’t pay higher power prices to bring this about.