Rookie senator Ricky Muir has hammered out a deal with the Palmer United Party senators that will save the Australian Renewable Energy Agency.
The $2.5 billion agency, which was set up to fund emerging renewable energy technology and research, was to be axed as part of the federal budget.
A bill to abolish the agency is due to go to the Parliament later this year.
But the PUP has agreed to back Senator Muir's call to retain the agency even as the carbon tax is dissolved.
The senators will vote against abolishing the agency, however funding cuts contained in the carbon tax repeal bills will go through.
''We have decided to support the government's plans to reschedule the agency's funding,'' Palmer United Party leader Clive Palmer said.
''The Palmer United Party will not vote for the government's other upcoming legislation that seeks to abolish ARENA altogether.
''I had extensive discussion with former United States vice-president Al Gore about ARENA and was convinced by his arguments in support of this important agency.''
Senator Muir had originally threatened amendments to block funding cuts contained in the carbon tax repeal bills.
But if that had been supported by the Senate the carbon tax repeal would have had to return to the House of Representatives, denying the government a vote on the repeal in the first week of the new Senate.
Senator Muir said on Wednesday that he would not proceed with those amendments.
As a result, the carbon tax repeal will cut the agency's budget by $435 million and will enact a previously announced deferral of $370 million in funding by the former Labor government
It will leave the ARENA with only about $100 million over the next four years for new projects, but blows a $1.3 billion dollar hole in the government's savings attempts with that money due to be committed to ARENA beyond the forward estimates.
"I have been a supporter of renewable energy for a long time and I am very pleased with this outcome," Senator Muir said on Wednesday.
"This is a win, win situation for the Australian Motoring Enthusiast Party, the Palmer United Party and the community.''
The deal comes during a chaotic day in the Senate where the government failed to force the carbon tax repeal to a vote having misread the numbers in the newly configured upper house.
The government was also dealt another budget blow, with new crossbench senator David Leyonhjelm joining with Labor and the Greens to block the repeal of tax cuts for low income earners associated with the carbon tax.
A final vote on abolishing the carbon tax itself is now not expected until Thursday.
The deal between Muir and PUP means the new Senate has saved much of the environmental infrastructure of the previous government.
As well as rescuing ARENA, Labor, the Greens and the Palmer United Party will use their numbers to preserve the Clean Energy Finance Corporation and the Climate Change Authority.
The PUP says it also plans to block any attempts to scrap or reduce the renewable energy target before the next election.