Leading business groups have welcomed the agreement to pass the safeguard mechanism, but admitted more work was needed in the longer term.
The mechanism, which will cap the emissions of the country's biggest 215 emitters, will pass the parliament after the Greens agreed to back the proposal as part of a deal with the government.
Under the deal, a ceiling will be placed on gross greenhouse gas emissions, which won't be allowed to exceed current pollution levels of 140 million tonnes a year.
A pollution trigger will also be included for new coal or gas projects.
AI Group chief executive Innes Willox said the deal was a good step forward, but could be expanded in the future.
"It's not a deal for the ages, but it's a good deal for today," he said.
"Industry will view the announced deal with some relief that pragmatism and reasonable compromise have prevailed. Now business and government have to get on with the large task of implementing this reform."
Business Council of Australia chief executive Jennifer Westacott said the mechanism was much-needed progress.
"Businesses agree that we can't make the same mistakes as the past by letting ambiguity and uncertainty undermine progress," she said.
"Australia needs a credible, durable framework to reach its climate targets and grow the economy.
"Decarbonisation is a huge challenge for Australia but it's also an opportunity but only if we have a workable plan in place to drive the monumental investment needed."
Gas industry groups said the safeguard could restrict supply needed for the renewables transition.
Australian Pipelines and Gas Association chief executive Steve Davies said certainty of the safeguard was welcomed, but warned the measures could restrict future gas supply.
"While we welcome the certainty of the safeguard mechanism, there are questions over whether the flow-on effects of any additional restrictions on gas supply will be borne by Australian households and businesses," he said.
"Just last week, (the energy market operator) warned about gas shortages and the vital role gas plays in reducing emissions and ensuring electricity reliability."
The Australian Petroleum Production and Exploration Association said the safeguard ignored the role of gas to meet climate targets.
Its chief executive Samantha McCulloch said the deal would add further regulatory challenges to the sector.
"New gas supply investment needs policy and regulatory certainty but instead the Labor-Greens deal creates additional barriers to investment, further diminishing the investment environment," she said.
The Carbon Market Institute said the safeguard was a stepping stone for progress, but further improvements would need to be made.
"It must scale over time to ensure it continues to drive the transition of Australia's industrial sector and broader economy," chief executive John Connor said.
"This must be viewed as a starting point for a scheme that must be regularly reviewed to meet the significant challenges of achieving net zero then negative emissions."
