By James Grubel

CANBERRA, April 13 (Reuters) - Defying Prime Minister John Howard, Australia's states vowed to make significant cuts in greenhouse gas emissions on Friday and to set up a national system of carbon trading by 2010 to combat global warming.

Howard, who faces a tough election battle later this year, refused to join the plan and said setting greenhouse targets would damage the economy and standing as the world's largest coal exporting country.

"The states told me of their views in relation to an emissions trading system," Howard told a media conference after meeting the leaders of country's six states and two territories on Friday.

"We were unwilling ... to commit to a particular target, because of the possible consequences of that to the economy, especially to jobs," Howard said.

Climate change is emerging as an election issue and Howard's conservative leadership has refused to set binding limits on greenhouse gas emissions or to ratify the Kyoto Protocol.

The leader of the centre-left opposition Labor Party, Kevin Rudd, has opened a strong lead over Howard in opinion polls, partly on promises to cut emissions.

Rudd has also promised to ratify the Kyoto Protocol, which commits developed nations to binding limits on carbon emissions, blamed for global warming. The United States and Australia have both refused to ratify the pact.

Australia's six states and two territories, all controlled by Labor Party leaders, stepped up pressure on Howard when they announced they would cut greenhouse gas emissions by 60 percent of 2000 levels by 2050.

They also promised to set up their own national carbon trading system by 2010.

Howard said he would wait for a report from his climate change task force, which is due to report next month on how to best price carbon pollution, before making any decisions on carbon trading.

He has said he accepts there is a case for putting a price on carbon emissions, while remaining against setting targets for lowering emissions. ((Editing by James Regan james.grubel@reuters.com; Reuters Messaging: james.grubel.reuters.com@reuters.net, +612 6273 2730))

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