Companies are lining up for taxpayer money to cut carbon emissions under the government's Direct Action scheme, Environment Minister Greg Hunt says.
The scheme, which parliament passed on Friday with the support of the Palmer United Party and crossbench senators, provides financial incentives for big polluters to reduce emissions.
Mr Hunt said the first projects to win funds from the $2.55 billion funding pool through a reverse auction will be known in the first quarter of 2015.
The government is adamant the scheme will reach the five per cent emissions reduction target by 2020, despite doubts raised by independent analysts.
The level of interest and pipeline of projects have been greater than expected.
"These groups are already seeking to participate," he told Sky News on Sunday.
"So my message to business, to farmers and households is very clear: the emissions reduction fund is open for business."
Firms opting into the scheme will compete for government money by devising projects that can reduce emissions cheaply.
However, he said more money will not be fed into the pool even if interest grew.
"We'll achieve it within our budget," Mr Hunt said.
The government is adamant the scheme will reach the five per cent emissions reduction target by 2020, despite doubts raised by independent analysts.
Asked if it was "all carrot and no stick" given emitters may not be penalised, Mr Hunt said safeguard mechanisms were in place which would "act as an important guideline" against rogue emitters.
The minister was cautious on whether an inquiry into an emissions trading scheme, promised as part of its deal with the PUP, would be redundant given the government had already ruled out an ETS.
"We were happy to have a review, but we'll not be implementing a carbon tax on our watch or an ETS," Mr Hunt said.
Labor's environment spokesman, Mark Butler, labelled Direct Action a "colossal waste of taxpayer funds".
It would only achieve about a quarter of the pollution reductions needed to meet the five per cent target, he said.
"Tony Abbott and Greg Hunt stand up, put their hands on their hearts and say `We are going to achieve the five per cent reduction'," he told ABC Television.
"No one else believes it. No one else has said we have a chance under this policy to achieve a five per cent reduction, let alone the more ambitious discussions that will be the subject at international negotiations next year."
The Australian Conservation Foundation president Geoff Cousins was scathing of the scheme, which he said would do nothing to compel polluters to cut emissions.
Instead, companies could be getting money for projects they were already planning to do.
Mr Cousins was also critical of PUP leader Clive Palmer's agreement to drop his demand for an ETS in exchange for an inquiry.
"If you want to stop something, why don't we set up an inquiry?" he said on ABC TV.
