The Prime Minister has again signalled his support for some form of carbon pricing system to help reduce greenhouse gas emissions.

A Government task force is conducting an inquiry into emissions trading and is scheduled to report to John Howard by the end of next month.

Mr Howard has told Sky News the wrong decision could do enormous damage to the coal industry.

"A carbon pricing signal is the best way of allowing a proper selection of available energy alternatives, you can impose, you can mandate uses, you can tell companies they've got to do this or that, that of course is very heavy handed," he said.