The Turnbull government faces a battle to let the nation's "green bank" fund carbon capture and storage projects, with Labor and the Greens both pledging to oppose the change.
Their position means the government must garner 10 of the 12 crossbench votes, including both the Nick Xenophon Team and One Nation blocs, to have its changes to Clean Energy Finance Corporation rules clear parliament.
Labor opted to oppose the change at its caucus meeting on Tuesday, with some MPs questioning the science and economic viability of the technology.
Carbon and capture storage proponents say it has the potential to cut emissions from coal and gas power plant by up to 90 per cent.
However, the technology is widely considered not yet commercially viable for use in energy generation.
Opposition energy spokesman Mark Butler told caucus CCS should be looked at for use in the manufacturing sector, to help industry cut emissions, but it was inappropriate for the Clean Energy Finance Corporation to fund it.
He also told MPs government cuts to research and development money for the technology meant it was not available as a large-scale commercial option at the moment.
Existing laws explicitly ban the Clean Energy Finance Corporation from funding CCS or nuclear energy projects.