Australia has backed away from setting up a domestic carbon trading system following protests from energy intensive users that such a system will drive investment offshore. The decision comes after industry bodies, led by Malcolm Broomhead of chemical giant Orica, claimed the system was "punitive" and would distort investment choices and jeopardise Australia's key export industries. Under the carbon trading system, polluting industries would have been required to buy permits to produce carbon dioxide. If they reduced their emissions they would be able to sell their excess permits. If they did not they would have to buy more. The decision to bin the system is a rebuff to the federal treasury and environmental departments, which had pushed the proposal. Don Henry of the Australian Conservation Foundation condemns the decision. "A minority of big dirty polluters have won the day and put Australia's national interest at risk," he says. Next month, Prime Minister John Howard is expected to announce that the government will focus on technological solutions to greenhouse gas abatement, such as greater deployment of wind power and, more controversially, the use of carbon sinks.