The Senate has voted 39-32 to scrap the carbon tax following a marathon debate lasting more than 50 hours.
The Greens were quick to slam the Senate decision calling it a tragic day for Australia.
"This is a tragic day for Australia and the planet but the Greens will lead the campaign to make the big polluters pay for global warming," Greens Leader Christine Milne tweeted just minutes after the vote.
There was confusion in the upper house when government leader Eric Abetz missed an opportunity to give notice of a time for the vote.
He asked Senate President Stephen Parry to "bear with him" while he spoke to Labor leader in the Senate Penny Wong and Greens whip Rachel Siewert.
But after a few minutes, Senator Parry lost patience and ordered the Senate's business be brought on.
As a result senators resumed debate on Labor and Greens amendments to the bills.
Labor senator Sue Lines tweeted from the chamber: "Govt in complete disarray minutes into the opening of the Senate. They have no idea what they're doing."
The Senate has voted 39-32 to scrap the carbon tax following a marathon debate lasting more than 50 hours. Photo: AAP
Life for Abbott after tax axe falls
What's next for Tony Abbott?
The prime minister has delivered on his key election promise to abolish the carbon tax following a fight he has pursued like a zealot since seizing the Liberal leadership from Malcolm Turnbull in December 2009.
That win was based on his promise to renege on the deal with the then-Rudd Labor government to create an internationally-linked emissions trading scheme (ETS) with generous compensation for affected industries.
In the aftermath, Turnbull urged the Liberals to adopt a coherent policy to tackle climate change and avoid irrelevance at future elections.
"The Liberal Party has to be a party of today and tomorrow," the embittered ex-leader said.
Few voters have any expectation the coalition will offer more than a fig-leaf approach to climate change, which will have its political positives and negatives.
Now that Abbott has laid waste to the legacies of Rudd and Julia Gillard - who he says destroyed jobs and left Australians with record debt - he must set a new agenda.
There's plenty of work to do.
The prime minister and his immigration minister Scott Morrison say they are delivering on another election promise - stopping the boats.
But they are hyper-aware that taking their eye off the ball could re-energise the people-smuggling trade.
That's why they're not claiming "mission accomplished".
One of Abbott's next challenges will be maintaining his "strong on borders" message while not allowing Operation Sovereign Borders to turn into Operation Blow the Budget.
This raises another issue on the PM's to-do list - balancing the federal budget.
Labor, the Greens and crossbench senators have shown an unwillingness to cooperate, leaving a raft of budget measures yet to be legislated.
The Medicare co-payment, deregulated university fees, tightening of welfare and pension access and a slowing of spending on hospitals and schools are all blocked.
Abbott has a Herculean task to convince the Senate to let these measures through.
His argument that government debt and deficit is hurting average families is not resonating with voters and he will may have to start a serious round of horse-trading.
A related issue is that of job creation.
What's next for Tony Abbott? The PM delivers on his key election promise to abolish the carbon tax following a fight he has pursued like a zealot since seizing the Liberal leadership from Malcolm Turnbull in December 2009.
The budget papers show unemployment flat-lining at 6.25 per cent over the next two financial years, before easing slightly to six per cent.
Abbott has promised to create two million new jobs over a decade, but as yet it is unclear how this will be achieved as baby boomers retire, manufacturing heads overseas and the mining industry switches from construction to production.
The signing of free trade deals with Japan and South Korea, with the prospect of a China agreement, have been trumpeted as job boosters.
The prime minister is also hopeful of new spending on roads, rail and ports funded by state privatisations keeping the economy ticking over.
A raft of inquiries and reviews - from child care to federalism - will also help the government show it has its eye on vital issues for voters and give food for thought when it comes to the coalition's 2016 election platform.
In setting out the rest of his agenda, Abbott will have to balance what is palatable to voters with what is possible to get through parliament and what is in accord with Liberal principles.