Mr Hunt told The Standard the south-west would be the most adversely affected region in Australia under proposed legislation set to be introduced in six years' time.

"Whether or not you believe in climate change, each country will have to make a decision on how best to reduce their carbon emissions," he said.

"By slapping on a per head methane tax of what is being speculated at $40 to $70 per cow and similar for sheep, the Federal Government will force a lot of farmers out of business who are already struggling.

"The Western District will suffer more than any other region in Australia if that type of tax goes ahead because of its reliance on livestock-based industry.

"I'd expect about 20 per cent of livestock farmers selling up within a couple of years of compulsory methane charges being introduced."

A spokeswoman for the Climate Change and Water Department claimed Mr Hunt's comments were factually inaccurate but did not comment on the issue further.

A vote on the Government's ETS has been delayed until next month, after Coalition and crossbench senators refused to support the bill in June. If the ETS bill is passed, agriculture will not be included under the scheme until 2015.

Dairy Australia trade and strategy general manager Chris Phillips said indirect costs would be relayed to dairy farmers before 2015.

"2015 is a while away yet, but what is certain is that dairy farmers will face significant upfront costs because of the carbon output of dairy processors," he said.

"Powdered milk is a very electricity-intensive process and factories in Warrnambool and Koroit will not be exempted from both heightened electricity charges and costs associated with carbon output.

"The risk is that Australia takes on overly restrictive ETS measures that put us at a distinct disadvantage to countries like New Zealand, that have a more lenient approach towards farming, or developing nations that have no ETS at all."