The announcement follows the surprise turn-about by Treasurer Wayne Swan last week. Just days after ordering a House of Representatives inquiry into emissions trading, Swan backtracked and announced the inquiry had been scrapped.

In response, Turnbull said yesterday that he would move a motion in the next senate sitting to establish a senate inquiry with the same terms of reference as the scrapped government inquiry.

Speaking to the ABC's Lyndal Curtis, Turnbull said that an emissions trading scheme could be "a useful tool in the climate policy toolbox" but that the particular scheme proposed by the government was "ineffectual". He said that his proposed inquiry would also consider the merits of a carbon tax.

Turnbull described the government's proposed scheme as "incredibly cumbersome and economically damaging" which would result in emissions cuts that are too low.

The government's proposed scheme has also come under heavy fire from green groups, who argue that the proposed cuts - 5 to 15 per cent on 1990 levels by 2020 - are inadequate. Turnbull claimed he could achieve an additional 150-million-tonnes cut by 2020 "very, very realistically without rocket science technology".

- By Zoe Lyon