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Safeguard mechanism a 'Trojan horse' for a carbon tax

Labor's plan to lower the emissions produced by the country's biggest polluters has been branded a "Trojan horse" for another carbon tax.

The government's proposed safeguard mechanism changes would mean the biggest 215 polluters were forced to cap their emissions, with companies breaching limits able to buy carbon offsets or trade emissions with other companies.

During debate about the mechanism in the lower house on Wednesday night, the coalition lashed the scheme.

Opposition energy spokesman Ted O'Brien said the plan was a "Trojan horse for the carbon tax that Labor has longed for for many, many years".

"Labor doesn't do detail very well, it never has ... Labor will sell the dream even if that dream turns into a nightmare."

A carbon tax came into effect in 2012 under the Gillard-led Labor government, but it was repealed in 2014 after the coalition took power.

The government does not have enough support to pass the safeguard mechanism changes through the upper house as negotiations between Labor and the Greens continue over the scheme.

Greens leader Adam Bandt said the mechanism as it stood would not lead to lower emissions as fresh coal and gas projects could be included.

He has urged the government to stop new fossil fuel projects in return for the party's support for the safeguard mechanism.

The government will need the support of the Greens and at least two crossbenchers to pass the mechanism through parliament.

Labor ministers have repeatedly urged the Greens not to oppose the mechanism and leave Australia without a climate policy.

A Senate inquiry report into the scheme was handed down on Monday.

The report recommended the bill should pass, but the Greens said in a dissenting report that pollution would go up.

Prime Minister Anthony Albanese has ruled out a ban on new coal and gas projects, arguing they were still needed during the transition to an energy grid largely powered by renewable sources.

The government has said the safeguard is critical to meet its emissions reduction target of 43 per cent by 2030 and net-zero emissions by 2050.