The prime minister has announced a "cash for clunkers" program that will see a re-elected Labor government pay $2000 to anyone who trades in a car built before 1995 for a newer, more fuel-efficient vehicle.
Julia Gillard, campaigning in Brisbane's south, also unveiled on Saturday plans to force car manufacturers to meet new emissions standards from 2015.
The announcement came a day after the Labor leader's climate change policy launch was condemned by green groups and some business leaders.
Ms Gillard on Friday declared she would set up a citizens' assembly to examine the case for action on climate change. It would be guided by a climate commission of experts.
She also pledged $1 billion to ensure renewable energy could be fed into the power grid and $100 million for new renewable technologies.
The cash for clunkers program, which will start in 2011, is expected to reduce carbon emissions by one million tonnes during the next decade and save motorists $344 million on petrol over the same period.
The traded-in cars will be scrapped.
"Australians own a lot of old motorcars and those old cars guzzle a lot of petrol and they spew out a lot of pollution," Ms Gillard told reporters in the marginal Labor-held electorate of Forde.
"I want to help Australians to update their motor vehicles."
The cleaner car rebate will be available for 200,000 cars built before 1995. It's estimated there are two million such vehicles on the road.
It will cost $394 million over four years, with the money being "redirected" from the existing solar and carbon capture and storage programs and the renewable energy bonus scheme.
The new mandatory emission standards will involve a national fleet-wide target of average carbon dioxide emissions per kilometre.
The starting point will be 190g/km by 2015.
Each manufacturer will have to contribute to the target.
For example, Holden can still sell some gas guzzlers, but they'll need to be balanced by sales of more efficient vehicles.
Different manufacturers will have different targets.
"New legislation will require all car companies to reduce emission levels from vehicles they sell in Australia by introducing better technologies and changing the fleet mix," Ms Gillard said.
The rebate and emissions standards are "practical steps" to help reduce Australia's carbon output, the prime minister said.
But she denied Labor was adopting a similar approach to Opposition Leader Tony Abbott's "direct action" policy.
The difference was that the government believed in climate change and the need, eventually, for a price on carbon, while Mr Abbott didn't.
Ms Gillard also rejected suggestions the money could have been better spent on public transport.
"We're a government that has made major investments in public transport," she told reporters.
"But people are going to continue to use their cars and recognising that, we want to make sure that the Australian car fleet is greener."
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