Australia's Senate on Wednesday defeated the government's plan to implement a carbon pollution trading system to fight global warming, dashing hopes of setting an example for other nations at U.N. climate change talks next week.

The scuttled proposal would have placed Australia alongside the European Union and a handful of other places that have or are considering "cap-and-trade" systems to cut greenhouse gas emissions, and burnished Prime Minister Kevin Rudd's international reputation as a leader on the issue.

Instead, Rudd, a man who basked in a burst of applause from delegates at a U.N. conference two years ago for ending Australia's holdout status on the Kyoto Protocol, will attend the next one _ in Copenhagen starting Monday _ with a big setback on his hands.

The defeat does not have a direct bearing on the meetings in the Danish capital. But as a wealthy country with among the world's highest greenhouse pollution rates per person, Australia was being looked to for signs of how committed developed nations are to cutting emissions.

"It's not like the talks will stall because of the lack of an Australian emissions trading scheme," said Frank Jotzo, an Australian National University expert on international climate change negotiations. "But if the legislation had been passed, that would have sent a very positive signal internationally and, in particular, to developing countries."

The Senate, where Rudd's center-left government does not have a majority, voted 41-33 against a bill to install a system that would limit the amount of heat-trapping gases companies can pump into the air, and create pollution permits that could be bought and sold. The aim: Incentives for companies to lower emissions because they could sell excess permits for profit.

Wednesday's vote followed a tumultuous two-week debate, during which the main opposition party, the conservative Liberals, at first agreed to support a version of the government's bill, then on Tuesday dramatically dumped its leader and switched sides after bitter divisions erupted within the party.

"Today the climate change extremists and deniers in the Liberal party have stopped this nation from taking decisive action on climate change," acting Prime Minister Julia Gillard told reporters in the capital, Canberra.

Rudd was on his way home from a White House visit at the time of the vote, and did not immediately comment. Before he met President Barack Obama, Rudd said he expected their talks would focus on efforts to get a "robust Copenhagen agreement." He did not elaborate after the meeting.