Carbon dioxide emission
Smoke rises from a chimney of a steel plant next to residential buildings on a hazy day in Fengnan district of Tangshan, Hebei province in this February 18, 2014 file photo. Reuters/Petar Kujundzic/Files
Smoke rises from a chimney of a steel plant next to residential buildings on a hazy day in Fengnan district of Tangshan, Hebei province in this February 18, 2014 file photo. China's war on pollution is only a few weeks old, but the battle lines are already being drawn between Beijing and Hebei, the province most synonymous with dirty air. Picture taken February 18, 2014. REUTERS/Petar Kujundzic/Files (CHINA - Tags: BUSINESS ENVIRONMENT POLITICS)

In the last Labor-led government, industries had to pay $24 per tonne carbon tax to reduce carbon emissions in the atmosphere. Under Abbott administration, the government would instead pay Australia's heavy industries $2.5 billion to reduce their carbon emissions to meet the federal government's target of 5 per cent reduction or 421 million tonnes of carbon dioxide by 2020.

The plan actually is the centerpiece of the Coalition's direct action plan released by Environment Minister Greg Hunt on Thursday through a white paper. It would involve securing contracts from businesses with proposals to cut their emissions in government auctions every three months.

But some large projects would be allowed to secured funds outside the auctions.

The white paper said those eligible to access the funds are state government, landfill operators, coal and seam gas operators, electricity suppliers and abatement activities that are land-based.

The funds would also open to consortium of businesses and households that offer larger reductions.

Hunt said the funds would have a safeguard mechanism which would not operate until July 2015 to address the potential for some businesses not to meet their commitments. The safeguards would limit the number of covered businesses to 130 which would be Australia's heaviest emitters of CO2.

He estimated the price would be in the vicinity of $6 for every tonne of carbon abatement.

The plan would be hinged on the government repealing the carbon tax, but the Palmer United Party of mining billionaire Clive Palmer has threatened not to support the planned repeal.