Australia's biggest polluters would not face any defined penalty even if they dramatically increased emissions under the Abbott Government's alternative to the carbon tax.

Environment Minister Greg Hunt, who yesterday released the White Paper for the coalition's emissions reduction fund - the centrepiece of its Direct Action policy - confirmed he was yet to define a compliance regime for heavy polluters.

And when those "flexible" compliance arrangements are up and running, they will affect only 130 companies, down from nearly 500 caught by the carbon tax regime.

But the policy document released yesterday shows the Government's objective is "not to raise revenue" from companies that exceed their historical emissions.

The Government will budget $2.55 billion over four years to pay for successful projects.

It is understood the Government expects the bids to be well below the current carbon price of $24.15 a tonne, but Mr Hunt yesterday refused to speculate on the benchmark price "because it's a commercial auction process".

He said he was confident the ERF would be enacted, despite Clive Palmer signalling his balance of power senators would block the scheme because it was "a waste of money".

The minister said funding would be in the Budget appropriation Bills. He would soon release legislation for the other mechanics.

But on the key issue of penalties for companies that increase emissions - a so-called safeguard mechanism - details remain vague.

Australia's 130 heaviest emitters such as power stations, refineries and smelters that emit more than 100,000 tonnes a year of carbon dioxide would face restrictions on how much they could emit.

With the safeguard mechanisms not starting until July next year, Mr Hunt said he would use the next 12 months to negotiate with business over the design of the regime.

Worldwide Fund for Nature Australia climate change policy manager Owen Pascoe said the ERF was not a credible replacement for the carbon tax, which should stay until at the very least the safeguard mechanisms were known.

The Australian Petroleum Production and Exploration Association said further consultation was needed on setting emissions baselines and compliance.

The Business Council of Australia and Australian Industry Group both urged the Government to relent and allow polluters to buy cheaper overseas permits.

The West Australian

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