A spokeswoman for Climate Change Minister Penny Wong says farmers will be allowed to generate carbon credits.
Negotiations are continuing between the Government and Coalition for amendments to the legislation as Parliament resumes on Monday and the Government pushes for a vote in late November.
Both sides say the talks are progressing but Senator Wong says an agreement will be “difficult”.
The Opposition are pushing for several changes but are likely to have some knocked back due to budget restraints.
“What I’ve made clear is we’re not able to accept the entirety of what they’ve put forward – it would be fiscally unsustainable,” Senator Wong said.
She says the Government made the backdown because it wants the scheme agreed to this year.
She told ABC 1’s Insiders program this shows the Government is serious about the scheme passing Parliament by the end of the year.
“We’re moving forward. We are absolutely committed on this side of the table to doing what we are able to, to get a deal,” she said.
“That’s why we announced this offer on agriculture, that’s why we’ll continue to move forward on these negotiations. This is in Australia’s national interest, we need to get this reform through.”
The Government had wanted to include farmers in the scheme from 2015.
Finance Minister Lindsay Tanner told Channel Ten negotiations are continuing to secure the Coalition’s support.
“We’ve prepared to accede to the Coalition’s request on this front,” he said. “I wouldn’t necessarily say now it’s a done deal.”
Opposition Leader Malcolm Turnbull welcomed the concession, but he says the Coalition will keep pushing for further changes before it decides if it will support the emissions trading scheme.
“There are a range of very important matters raised in the amendments,” he said.
“I’ve made a deliberate decision not to say what’s a deal breaker, what’s more important, what’s less important.
“The negotiations are being conducted constructively and I might say confidentially and they’ll reach a conclusion and then we will make a decision.”
‘Merely a gesture’
The National Farmers Federation lobbied for the amendments, putting it in conflict with the National Party and climate change sceptics within the Liberal Party.
The National’s Senate Leader Barnaby Joyce says the exemption of farmers from the emissions trading scheme (ETS) is merely a gesture.
“The ETS is still a massive tax and we’ve got the problem that once the ETS starts, there is nothing in the future to stop it including agriculture,” he said.
“It’s still a tenuous proposition and still means the only smart thing to do is block this massive new tax.”
Senator Joyce says the scheme will not change global temperatures.
“It’s like saying, ‘ah well, we’re only going to burn down a quarter of your house’. I don’t want you to burn down any of it,” he said.
“Why are we proceeding down this path of a massive new tax when the reason that’s put forward, to change the temperature of the earth, is not possible?”
The Opposition also wants more free permits for heavy polluters and more compensation for electricity generators.
Mr Turnbull and emissions trading spokesman Ian Macfarlane will also struggle to get any agreed changes through the party room, which has to approve them before the Coalition decides on its final position.
He has said that if the majority of amendments are accepted he would recommend the scheme be passed, but others such as Senator Nick Minchin say an agreement does not guarantee support for the scheme.
Mr Turnbull has staked his leadership on the issue after declaring he could not lead a party that would not act on climate change