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Big polluters must pay if limits broken

Polluters who emit above prescribed levels will have to buy excess permits from other companies under amendments to the coalition's Direct Action climate policy secured by Senator Nick Xenophon.

Confirmation of the regime is in legislative changes accepted by the Government in return for passage of the $2.55 billion policy through the Senate.

Senator Xenophon has insisted on a "safeguard mechanism" under which polluters would be required to keep their emissions beneath baseline levels.

Under his amendments, polluters cannot gain financial advantage by emitting more pollution than allowed.

In setting regulations that enforce this regime, the Environment Minister must have regard to "the principle that a responsible emitter must not be allowed to benefit from non-compliance", under Senator Xenophon's amendments.

This benefit would be calculated by "having regard to the financial advantage the responsible emitter could reasonably be expected to derive from an excess emissions situation".

Under Direct Action, which was expected to pass the Senate last night, the safeguard mechanism would begin on July 1, 2016. The baseline levels for pollution would be set in October next year.

Excess polluters would likely be expected to buy pollution permits from those who had managed to reduce their emissions.

Labor's leapt on a report by pollution market expert Reputex that the centrepiece Emissions Reduction Fund would at best deliver 30 per cent of what was required to reach the bipartisan 5 per cent cut by 2020 on 2000 levels.

"What it means is that in order to get to the 5 per cent target, Tony Abbott is going to have to spend . . . $4 (billion) to $5 billion per year between now and 2020 just to get to the 5 per cent reduction," Labor's shadow minister for the environment Mark Butler said.

"A meaningful safeguards mechanism will involve a substantial price on carbon pollution and Tony Abbott has made it clear he's not interested in that."

The Prime Minister said Labor's alternative to Direct Action was a $9 billion-a-year "handbrake" on the economy.

"We do not support carbon taxes whether they are fixed taxes or floating taxes by way of an emissions trading scheme, we do not support carbon taxes," Mr Abbott told Parliament.